1. Investment Opportunities for the Non Profit
African Alliance Kenya Management Company
Investment Opportunities for the Non Profit

2. Agenda
Global Crisis in perspective
Defining Your Objective.
Managing Your Risk.
Investment Options.
Social Responsible Investing.
Q & A

3. Source: Value Square Asset Management, Yale University
S & P Index
Source: Value Square Asset Management, Yale University

4. Global Crisis in Perspective4

5. Global Crisis in Perspective5

6. Defining the Investment Objective
Short Term v/s Long Term.
Capital Preservation v/s Inflation Protection.
Growth v/s Income.
Maximising return on Investment.
Creating Certainty of Income flows.
Managing your foreign Currency Exposure. 6

7. Managing Exchange Rate Risk
Define your objective and matching your Asset & Liability.
Conflict between report requirement & the Objective
Hedging / Diversify across currencies. 7

8. Short Term v/s Long Term

9. Impact of Inflation
238
117 93 1

10. Investment Options Bank Deposits Government Treasury Bills
Government Treasury Bonds
Property
Investing Offshore
Unit Trust 10

11. Short Term Money Market (Cash)
Bank Deposits. Commercial Paper. Treasury Bills
Provides mainly income though interests
Lowest risk asset class, but …
… Returns are lower on a long term basis than those of other asset classes to the extent that …
…. Does not provide protection against inflation
Their combination with other assets classes provides stability to returns
Long term average returns of 7.5% per annum
Standard Deviation of 9.79% (low risk) 11

12. Bond / Fixed Income Investment
Provides mainly income though interests
Lowest to Medium risk asset class, but …
… Returns are lower on a long term basis than those of other asset classes to the extent that …
…. Does not provide protection against inflation
Their combination with other assets classes provides stability to returns
average returns of 13% per annum
Standard Deviation of 12.79% (low risk)
Immunize your portfolio & march your asset and your liability 12

13. Stock Exchange Investment
Returns derived mainly from capital gains
Returns are better on a long term basis than those of interest bearing assets, but ….
… Higher risk measured by volatility of returns
Low correlation with Offshore / T-bills
Higher long term return and correlation suggests a hedge against inflation
Diversification (combination with other asset classes) can reduce portfolio risk and provide increased returns
Long term average return of around 20% per annum
Standard Deviation of 57% (high risk) 13

14. Percentage Total Return
Impact on the Nairobi Stock Exchange
2004
2007
1998
2002
1997
1990
2000
1996
1991
1985
1992
2003
1999
1989
1984
1983
1988
1994
2008 YTD
2001
1995
1981
1982
1980
1986
2005
2006
1987
1993
-40 to -30
-30 to -20
-20 to -10
-10 to 0
0 to 10
10 to 20
20 to 30
30 to 40
40 to 50
50 to 60
60 <
NSE 20 Index 1980 – to 2008
Percentage Total Return

15. Impact on the Nairobi Stock Exchange
The Global Crisis happened on background of .
Post Election Violence
Inflation Pressure
Safaricom IPO
the valuations on the stock market were expensive and were ripe for a correction.
fall in Diaspora flows to the stock market,
a sell off by foreign institutional investors
increased correlations of markets in times of widespread market crisis’s.
Increased Volatility as Kenya becomes an important destination for International Investor. Liquidity constraints on Africa Funds putting sell pressure on the Market.

16. Property Investment Provides both income and capital gains
Returns are better, on a long term basis, than those of interest bearing assets (though credible long term data is difficult to find for East Africa) ..
.. But higher risk (like offshore and local equities) though volatility may be different to these other asset classes
Management is very involving
The combination with other asset classes again reduces portfolio risk, provides stability and enhanced returns
Provides a natural hedge against inflation.
Current Rental Yield 6%-14% depending on type; Residential, Retail, or Commercial

17. Money Funds -Capital Preservation
Investment Universe
Banks
T-Bills
Bonds
Kes 100,000
Investor
Units
Kes 60,000
Kes 20,000
Kes 20,000
T-Bills/ CP
Bank Call
Account
Short-term
Bonds

18. RETURNS TO UNITHOLDERS (after all costs) AS AT 31 October 2008
Money Market Fund
RETURNS TO UNITHOLDERS (after all costs) AS AT 31 October 2008
Average annualized interest rate (KES) Shilling Fund Bank Deposit
Month %
Three Months % %
Year-to-date (YTD) % %
1 Year % %
3 Years % %

19. The Fixed Income Fund Investor Kes 100,000 Units Investment Universe
Banks
T-Bills
Bonds
Kes 100,000
Investor
Units
Kes 85,000
Kes 5,000
Kes 10,000
T-Bills/CP
Bank Call
Account
Long-term
Bonds

20. Fixed Income Fund Quarter 2.88% 1.12% Year-to-date (YTD) 2.88% 3.36%
RETURNS TO UNITHOLDERS (after all costs) AS AT 30 SEPTEMBER 2008
Fixed Income Fund Deposit Account
Quarter % %
Year-to-date (YTD) 2.88% %
1 Year % %
3 Years (Annualised) % %

21. The Balanced Approach to investing
Investment Universe
Banks
T-Bills
Shares
Bonds
Property
Off-shore
Kes 100,000
Investor
Units
Kes 15,000
Kes 40,000
Kes 30,000
Kes 5,000
Kes 10,000
Bank Call
Account
T-Bills
Shares
Bonds
Off-shore

22. Managed Fund Retunes Managed Fund Bank Deposit Quarter 3.35% 0.37%
RETURNS TO UNITHOLDERS (after all costs) AS AT 30 SEPTEMBER 2008
Managed Fund Bank Deposit
Quarter 3.35% %
YTD % %
1 Year 0.96% %
3 Years (annualized) 15.46% %

23. Equity Fund Investor Kes 100,000 Units Investment Universe Banks
T-Bills
Bonds
Kes 100,000
Investor
Units
Kes 80,000
Kes 10,000
Kes 10,000
T-Bills/ CP
Bank Call
Account
Nairobi Stock
Exchange

24. Equity Fund Quarter -8.57% -19% YTD -5.29% -23% 1 Year 1.87% -20%
RETURNS TO UNITHOLDERS (after all costs) AS AT 30 SEPTEMBER 2008
Equity Fund Nse 20 Index
Quarter % %
YTD % %
1 Year % %

25. Why Invest in Unit Trusts?
Pooling money
A unit trust has more negotiating strength than an individual investor.
Safety
A unit trust offers the investor unprecedented protection through the separate legal capacity of the unit trust. This is backed up by the separation of functions and oversight duties of the service providers, in particular the custodian and the auditor.
Value for money
Unit trusts are cheap. The charges are self-regulating and ‘wananchi’ are offered the same level of fund management service that the biggest investors are offered.
Liquidity
Instant access to your investment. This is an obligation under the law.

26. Asante Sana Paul Wachira Mwai African Alliance Kenya Management Company Ground Floor, Kenya Re Towers - Upper Hill Tel: , Fax: