4.7.3. Permission
The fund may enter into securities lending agreements provided
that:
i) the loans are secured by cash, readily marketable
securities or securities that are convertible immediately into the security
lent (the «collateral») having a market value which is appropriate
relative to the market value of the loan based on prevailing market conditions
(normal lending practices of each local market),
ii) the level of collateral is maintained daily, and
iii) Under no circumstance would securities be lent without
agreeable collateral.
iv) It has a substantial shareholding in the company with
substantial Board representation in case of a shareholder loan and such a loan
shall be at appropriate value
v) No single loan be it shareholder loan or normal market loan
shall exceed more than USD 10 million.
4.7.4. Controls
Where the fund engages the custodian to implement the
securities lending program, management will satisfy itself that:
i) the custodian indemnities to the fund are appropriate,
ii) Reporting is timely and accurate'
iii) The lending practices are sound and sufficient security
is provided for the loans, and
iv)Where cash collateral is invested, the investments, either
on a pooled or segregated basis is made on a sound basis reflecting the desired
level of risk (SSFR, investment Policy guide, 2003)
4.7.5. SSFR investment
restrictions
The investments of the Fund must be in compliance and
recognized as qualified investments under the legislative provisions as shall
be amended from time to time.
4.7.6 Holding limits
The following limits are placed on the Fund's holdings:
-Total Fund Limit on Single Equity Issue:
Management will manage the Fund such that, on either an actual or policy basis,
the total value of a single equity issue will not exceed 50% of the total value
of an asset class (e.g. no single equity issued to exceed 50% of the Fund's
Rwanda Equity holdings). Should such a situation arise, the Fund is required to
reduce its holding to within the required limits within a period of 2 years.
- Fixed Income Securities: Except for
Government of Rwanda securities, investments in a single issuer that is not
100% guaranteed shall not exceed 20% of the total value of the fixed income
holdings. Other than government guaranteed securities, investment in a single
fixed income security shall not exceed more than USD 5 million.
- Public Common Shares: The Fund shall hold
no more than 50% of the outstanding voting shares of a company. Should such a
situation arise, the Fund is required to reduce its holding to within the
required limits within a period of two years.
- Private Equity/Joint Ventures: The Fund
shall hold no more than 30% of the outstanding voting shares of a private
company or joint venture. Should such a situation arise, the Fund
is required to reduce its holding to within the required
limits within a period of 2 years. Exceptions are given for social impact
investments where the limit should not exceed 40% and the Fund is required to
reduce its holding to no more than 35% within 2 years. Investments other than
in the priority areas given below shall not exceed the percentage shareholding
and should not be more than US$ 5 million. For the priority areas, the
investment in a given sector should not be more than 15% of the entire
portfolio. Priority Private Equity/Joint Venture Areas Sector:
1 Mortgage (Primary and Secondary)
2 Housing Development and related products
3 Industrial Development
4 Electricity
5 Water
6 Education
7 Tourism
-Structured Investments, Foreign equity:
Investment in a pooled fund that invests through the use of structured
investments reflecting the total return performance of the major global equity
markets is limited to 10% of the Fund's total market value. These investments
shall not, in combination with the fund's foreign holdings, exceed the policy
range for foreign holdings that will not exceed 15%.
-Cash and Short-term Deposits: These
should be government guaranteed or in Banks that meet the National Bank of
Rwanda minimum capital requirements.
- The Total short-term deposits held by a
bank will depend on the management's assessment of the bank's financial
stability (going concern issues) in the system. Here management could look at
the Capital Adequacy, Asset quality, Management, Reputation, Earnings,
liquidity among others if the bank is not affiliated to an internationally or
globally rated bank.
- For internationally affiliated banks the
total deposit holds should not exceed more than 2 times its share capital.
- Bonds: These must be tradable in the
country to create an exit mechanism for the Fund or in case of restricted
institutional investor offering, the company must be of sound caliber or the
bonds must be guaranteed at time of purchase. Investment in a
single Bond issue should not exceed more than US$ 5 million or equivalent
- Underwriting commitments: The Fund does
realize the role it has to play in developing capital markets in the country;
however it should also reduce its exposure. Therefore in case of underwriting,
the limit for a share issue should be such that if the firm is to buy the
shares, its holding will not exceed the limit of 40% in company or US$ 5
million whichever is lower. The
Underwriting of corporate bonds or related securities shall
not exceed US$ 7 million or the percentage holding limits of such a security,
the lowest of the guidelines shall always prevail.
Optimizing returns on investments is one of the key goals of
the Fund and is the main focus of the current investment policy. The major
guideline underscored in the existing policy is the preservation of the real
value of members' savings without exposing the funds to excessive risk. As
shown in the table 3 below, the new investments roleed in 2008 include;
purchase of former USA embassy building, purchase of BCR corporate bond,
construction of 18 floors building in the city center. It is in 2008 when the
Fund crossed the Border to tap offshore investment opportunities. The Fund made
equity investments in SAFARICOM, a Kenyan telecommunications company and RWANDA
Foreign investment company. The value of shares in these companies is Rwf
10.9 bn. Owing to these new investments made, the investment
portfolio increased from Frw 113 bn in 2007 to Frw
128 bn in 2008-an increase of 30%. The Fund's
portfolio structure as of 31st December 2008 is shown in table 3
below.
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