BONDS AND TREASURY BILLS
Most mutual funds have a significant investment allocation in Uganda Government bonds, constituting over 60% of their portfolios. The remainder is distributed in the following order, from highest to lowest: Government bonds in the rest of East Africa, equities in the rest of East Africa, fixed deposits, collective investment schemes, cash, and real estate, among other Assets.
This article primarily focuses on several Unit Trusts, namely Sanlam, ICEA Lion, UAP Old Mutual, Xeno, and Britam. These Unit Trusts are regulated by the Capital Markets Authority in Uganda (CMA). It's important to note that these should not be confused with licensed stockbrokers such as Crested Capital, SBG Securities, Old Mutual Financial Services Ltd, Equity Stock Brokers Ltd, and others.
For individuals new to investing or those lacking the time or knowledge to research and select individual stocks, Mutual Funds present an attractive option. Mutual Funds offer diversification, Professional Management, Affordability, and Liquidity, allowing investors to withdraw their funds at any time.
However, if one possesses the time and expertise to research and select individual stocks, investing through a stockbroker may be a more suitable choice. This avenue provides flexibility, enabling one to choose their investments and potentially achieve higher returns.
As of September 2023, the best-performing Mutual funds were Stanbic Equity Fund with returns of 35.2%, ICEA Lion with 33.1%, UAP with 30.9%, and Sanlam with 30.2%. It is however worth noting that past performance does not guarantee future results. While ICEA Lion performed exceptionally well at about 33%, following closely were UAP, Sanlam, Britam, and then Xeno.
It is essential to understand that past performance does not assure future results. When selecting a Mutual Fund, one must carefully consider their investment objectives and risk tolerance. Additionally, there is a need to review the Fund's Prospectus and Performance history before making any investment decisions.
Lastly, bear in mind that Mutual Funds are a long-term investment. Avoid investing in a Mutual Fund if you need access to your funds in the short term, as you may not realize the full growth potential indicated by the posted returns of the Mutual Fund.
An example of UGX 10,000,000 investment (15Year Government Bond)
15 YEAR BOND
| Maturity Date | 14-May-37 |
Coupon/Fixed interest rate | 16% |
Face/maturity value | 10,000,000 |
| Investment date | 30-October-23 |
| Investment amount | 11,384,546 |
Investment Premium; 1,384,546.58
Cash Flows
# | Dates | Gross Income | Days to Cash flow | Net Income |
1. | 14-May-37 | 10,800,000 | 4,945 | 720,000 |
2. | 13-Nov-36 | 800,000 | 4,763 | 720,000 |
3. | 15-May-36 | 800,000 | 4,581 | 720,000 |
4. | 15-Nov-35 | 800,000 | 4,399 | 720,000 |
5. | 17-May-35 | 800,000 | 4,217 | 720,000 |
6. | 16-Nov-34 | 800,000 | 4,035 | 720,000 |
7. | 18-May-34 | 800,000 | 3,853 | 720,000 |
8. | 17-Nov-33 | 800,000 | 3,671 | 720,000 |
9. | 19-May-33 | 800,000 | 3,489 | 720,000 |
10. | 18-Nov-32 | 800,000 | 3,307 | 720,000 |
11. | 20-May-32 | 800,000 | 3,125 | 720,000 |
12. | 20-Nov-31 | 800,000 | 2,943 | 720,000 |
13. | 22-May-31 | 800,000 | 2,761 | 720,000 |
14. | 21-Nov-30 | 800,000 | 2,579 | 720,000 |
15. | 23-May-30 | 800,000 | 2,397 | 720,000 |
16. | 22-Nov-29 | 800,000 | 2,215 | 720,000 |
17. | 24-May-29 | 800,000 | 2,033 | 720,000 |
18. | 23-Nov-28 | 800,000 | 1,851 | 720,000 |
19. | 23-May-28 | 800,000 | 1,669 | 720,000 |
20. | 25-Nov-27 | 800,000 | 1,487 | 720,000 |
21. | 27-May-27 | 800,000 | 1,305 | 720,000 |
22. | 26-Nov-26 | 800,000 | 1,123 | 720,000 |
23. | 28-May-26 | 800,000 | 941 | 720,000 |
24. | 27-Nov-25 | 800,000 | 759 | 720,000 |
25. | 29-May-25 | 800,000 | 577 | 720,000 |
26. | 28-Nov-24 | 800,000 | 395 | 720,000 |
27. | 30-May-24 | 800,000 | 213 | 720,000 |
28. | 30-Nov-23 | 800,000 | 31 | 720,000 |
| Total Income Net of Tax | 20,160,000 | |||
Notes:
The Bond attracts an Interest of 16% paid twice to the Investor in a year (May and November). The table above shows that an Investment of UGX 10,000,000 would fetch a total of 20,160,000 (10,160,000 in interest) in a period of 15 Years.
Conclusion:
For details and reliable investment advice on Mutual Funds and more, contact;
investments@radixivestor.com