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					BRITISH-AMERICAN MONEY MARKET FUND

REPORT TO THE UNIT HOLDERS

FOR THE YEAR ENDED 31 DECEMBER 2006

British-American Money Market Fund Annual Report and Financial Statements For the year ended 31 December 2006 TABLE OF CONTENTS Trustee and Advisors to the Fund Trustee’s Report Statement of Trustee’s Responsibilities Fund Manager’s Report Asset Allocation Report of the Custodian Report of the Independent Auditors Financial Statements: Income Statement Balance Sheet Cash Flow Statement Summary of Significant Accounting Policies Notes 9 10 11 12 - 13 14 - 16 Page No 1 2 3 4-5 6 7 8

British-American Money Market Fund Trustee and Advisors to the Fund For the year ended 31 December 2006 TRUSTEE Kenya Commercial Bank Limited Kencom House, Head Office P.O. Box 48400 Nairobi, Kenya FUND & INVESTMENT MANAGERS British-American Asset Managers th Britak Centre,8 Floor Junction of Mara and Ragati Roads Upper Hill P.O. Box 30375 ,00100 Nairobi, Kenya CUSTODIAN Kenya Commercial Bank Limited Kencom House, Head Office P.O. Box 48400 Nairobi, Kenya AUDITORS PricewaterhouseCoopers The Rahimtullah Tower P.O. Box 43963, 00100 Nairobi, Kenya LAWYERS Daly & Figgis Advocates Lonrho House, 8th Floor Standard Street P.O. Box 40034, 00100 Nairobi, Kenya

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British-American Money Market Fund Trustee’s Report For the year ended 31 December 2006 The Trustee submits its report together with the audited financial statements For the 12 month period ended 31 December 2006 that disclose the state of affairs of the fund. INVESTMENT OBJECTIVES The investment objective of the British-American Money Market Fund is to achieve a high level of yield while protecting investor’s capital. To achieve this, the portfolio will be invested in fixed income securities of various durations at attractive yields to ensure the return on the Fund is maximised. CHANGES TO INCORPORATION DOCUMENTS There were no changes made to the incorporation documents (Prospectus, Trust Deed and Rules of the fund) during the period. FUND PERFORMANCE The highest lowest and average absolute yields during the period were 9.33% (2005: Shs , 8.97%), 5.41% (2005: Shs 3.07% ) and 7.75% (2005: Shs 8.19%) respectively. INCOME DISTRIBUTION The total net income of Shs 24,959,363 (2005: Shs 1,745,139 ) has been distributed to the unit holders by reinvestment in the Fund. TOTAL VALUE OF THE FUND The market value of the fund as at 31 December 2006 was Shs 566,726,048 (2005: Shs 96,004,965). AUDITORS The fund’s auditors, PricewaterhouseCoopers , continue in office in accordance with Section 159(2) of the Companies Act. By order of the Trustee Kenya Commercial Bank Limited

2007

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British-American Money Market Fund Statement of Trustee’s Responsibilities For the year ended 31 December 2006 The Capital Markets Act requires the Trustee to prepare financial statements for each financial year that gives a true and fair view of the state of affairs of the fund as at the end of the year and of the results of its operations. It also requires the Trustee to ensure that the fund manager keeps proper accounting records that disclose, with reasonable accuracy, the financial position of the fund. The Trustee is also responsible for safeguarding the assets of the fund. The Trustee accepts responsibility for the annual financial statements, which have been prepared using appropriate accounting policies in conformity with International Financial Reporting Standards and the requirements of the Capital Markets Act. The Trustee is of the opinion that the financial statements give a true and fair view of the state of the financial affairs of the fund and of its operating results. The Trustees further accept responsibility for the maintenance of accounting records that may be relied upon in the preparation of financial statements, as well as designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement. DECLARATION STATEMENT • • • The British-American Money Market Fund is an approved Unit Trust within the meaning of the Capital Markets Act; The unit-holders are not liable for the debts of the Unit Trust; The British-American Money Market Fund is a securities fund investing in fixed income securities of various durations at attractive yields to ensure the return on the Fund is maximised.

Nothing has come to the attention of the Trustee to indicate that the fund will not remain a going concern for at least the twelve months from the date of this statement.

By order of the Trustee Kenya Commercial Bank Limited

2006

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British-American Money Market Fund Fund Manager’s Report For the year ended 31 December 2006 Dear Unit Holder, During 2006, the British-American Money Market experienced good growth in new fund sales. The fundamental investment objective of the British-American Money Market is to achieve a high level of current income consistent with the preservation of capital, together with the ability of to create some capital appreciation by investing primarily in fixed income securities of various terms issued by the Kenyan government and corporations with strong credit quality. The Manager adopts an investmen t philosophy which ensures that the return on the Fund is maximised. The strategy to achieve this objective is two-pronged: First, the average term and duration of the portfolio will be adjusted or managed according to the current trend in general interest rates. In the event the interest rate is rising, the average term and duration of the portfolio will be shortened while when interest rates are near its peak or falling the duration and average term will be extended. Secondly, a credit spread strategy will be adopted. At various times during the economic cycle, corporate bonds which are valued at a spread over the Treasury bill rates will be added or deleted from the portfolio, with the strategy being to add bonds when the spreads are at their widest p oints and reduce holdings when these bonds’ spread are at their narrowest point in relation to the underling Government bonds. To protect against credit risk, the Fund invests only in high-quality investments. The strong economic growth momentum experienc ed in 2005 continued in 2006, with estimated growth in the economy of 6%. This growth was underpinned by a stable macroeconomic environment and strong performance in the following sectors: agricultural and forestry, wholesale and retail trade, tourism and hotels, and transport and communication sectors and building and construction . Short term interest rates declined in 2006 with the 91-day Treasury Bill rate reducing from 8.1% in 2005 to 5.8%. The yields also tightened on the longer-end with the yields on 10year Treasury bonds decreasing from 14.5% to 13% reflecting a stronger appetite from investors. Central Bank of Kenya successfully issued a 11 and 12 year bond on behalf of the Government of Kenya which assisted in lengthening the yield curve. The British-American Money Market performed in line with expectations . The Fund maintained a balanced spread of fixed income securities with an overweight allocation to Treasury Bonds. The Fund generated absolute returns of 11.1% during the year compared to the benchmark yield of 7%, the average yield on 91-day Treasury Bill. The net return generated by the Fund during the year was 8.5%. Going forward, the Manager will maintain a cautious stance in the management of the portfolio’s average term and duration in order to maximize yields. The current duration of the portfolio will be extended by investing in high-yielding short to medium term treasury bonds in order to boost returns. Cash balances will be invested with approved banks at competitive rates to enhance the overall return. The disciplined strategy adopted by the Manager coupled with the philosophy of investing in high-quality fixed income investments with attractive yields will benefit investors who invest in the Fund in the medium term. We thank you for your choice of investing in British-American Money Market to achieve maximum stability of the capital invested. The team at British-American Asset Managers Ltd looks forward to working closely with you in assisting to meet and exceed your financial and investment objectives.

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We wish you the very best for 2007 . Yours sincerely,

______________________ Director

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British-American Money Market Fund Asset Allocation As at 31 December 2006

Asset Allocation - British-American Money Market Fund

Cash and bank balances

16%

2%

11%

Deposits with financial institutions Government bonds Corporate bond

71%

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British-American Money Market Fund Report of the Custodian For the year ended 31 December 2006 a) In accordance with the Capital Markets (Collective Investments Schemes) Regulations, 2001 (the regulations) and the Custody Agreement between Kenya Commercial Bank Limited as the Custodian and British-American Asset Managers as the Fund Manager, we confirm that we have discharged the duties prescribed for a Custodian under Regulation 35 of the regulations to British-American Balanced Fund. For the 1 2 month period ended 31 December 2006, we have held the assets for the British-American Money Market Fund, including title deeds, securities and income that accrue thereof, to the order of the Fund Manager and facilitated the transfer, exchange or delivery in accordance with the instructions received from the Fund Manager. b) We confirm having effected the sale, redemption and cancellation of units in accordance with the creation/liquidation instructions received from the Fund Manager.

By order of the Custodian Kenya Commercial Bank Limited

2007

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REPORT OF THE INDEPENDENT AUDITORS TO THE UNIT HOLDERS OF BRITISHAMERICAN MONEY MARKET FUND Report on the financial statements We have audited the financial statements of the British-American Money Market Fund for the 12 month period ended 31 December 2006 set out o n pages 9 to 16. These financial statements comprise the balance sheet at 31 December 2006, the income statement, cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. Trustee’s responsibility for the financial statements The trustee is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and with the requirements of the Capital Markets Act. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circum stances. Auditor’s responsibility Our responsibility is to express an independent opinion on the financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform our audit to obtain reasonable assurance that the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the trust funds’ internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the trustee, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Opinion In our opinion the accompanying financial statements give a true and fair view of the state of the respective unit trust portfolios’ financial affairs at 31 December 2006 and of their profit and cash flows for the year then ended in accordance with International Financial Reporting Standards and the Capital Markets Authority Collective Investment Schemes Regulations, 2001.

Certified Public Accountants Nairobi

2007

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British-American Money Market Fund Annual Report and Financial Statements For the year ended 31 December 2006 INCOME STATEMENT Notes INCOME Interest income 33,340,492 2,372,535 200 6 Shs 2005 Shs.

EXPENSES Service fees 3 7,987,566 317,935

PROFIT BEFORE INCOME TAX Income tax expense

25,352,926 (393,563)

2,054,600 (309,461)

PROFIT AFTER TAX DISTRIBUTION

24,959,363 (24,959,363)

1,745,139 (1,745,139)

Undistributed profit

-

-

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British-American Money Market Fund Annual Report and Financial Statements For the year ended 31 December 2006 BALANCE SHEET Notes ASSETS Corporate bond Government bonds Deposits with financial institutions Interest receivable Other receivables Bank and cash balances 5 5 5 91,500,000 399,411,685 63,140,959 8,029,966 350 11,376,62 1 10,817,586 42,862,426 33,234,708 1,409,878 970,904 7,774,054 200 6 Shs 2005 Shs

TOTAL ASSETS

573,459,581

97,069,556

LIABILITIES

Unit holder liabilities Unsettled investment transactions

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566,726,048 6,733,533

96,004,965 1,064,591

TOTAL LIABILITIES

573,459,581

97,069,556

The financial statements on pages 9 to 16 were approved for issue by the Trustee on _____________2007 and signed on its behalf by:

___________________ Trustee

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British-American Money Market Fund Annual Report and Financial Statements For the year ended 31 December 2006 CASH FLOW STATEMENT Notes Operating activities Cash generated from operations 2006 Shs (8,361,721) 2005 Shs (1,634,126)

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Investing activities Investment in government securities Purchase of corporate bonds Interest received Interest paid Proceeds from sale of investments

(485,309,795) (230,091,145) 26,720,404 278,000,000

(150,410,947) (10,817,586) 1,918,986 (187,275) 72,900,037

Net cash used in investing activities

(410,680,536)

(86,596,785)

Financing activities Net contribution from unit holders

485,785,783

96,004,965

Increase in cash and cash equivalents

66,743,526

7,774,054

Movement in cash and cash equivalents At start of year Increase

7,774,054 66,743,526

7,774,054

At end of year

74,517,580

7,774,054

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British-American Money Market Fund Annual Report and Financial Statements For the year ended 31 December 2006 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied during the period, unless otherwise stated. (a) Basis of preparation The financial statements are prepared in accordance with and comply with International Financial Reporting Standards (IFRS). The financial statements are presented in the functional currency, Kenya Shillings (Shs), and prepared under the historical cost convention as modified by the carrying of investments at fair values. The preparation of financial statements in conformity with International Financial Reporting Standards requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on the Trustee’s best knowledge of current events and actions, actual results ultimately may differ from those estimates (b) Revenue recognition Interest income is recognised on a time proportion basis that takes into account the effective yield on the asset. Dividends are recognised as income in the period in which the right to receive payment is established.

(c)

Investments The fund classifies its investments depending on the purpose for which the investments were acquired. The appropriate classification of the fund’s investments is determined at the time of the purchase and re-evaluated on a regular basis as follows: i) Financial assets at fair value through profit and loss Investments intended to be held for an indefinite period of time, but which may be sold in response to needs for liquidity or changes in interest rates, are classified at fair value with adjustments going through profit and loss. These are included in non-current assets unless management has the express intention of holding the investment for less than 12 months from the balance sheet date or unless they will need to be sold to raise operating capital. Government securities are classified under this category ii) Held-to-maturity investments Held-to-maturity investments are non derivative financial assets with fixed determinable payment and fixed maturities that the group has positive intention and ability to hold to maturity. Corporate bonds are classified under this category. Purchases and sales of investments are recognised on the trade date, which is the date the fund commits to purchase or sell the asset. The cost of purchase includes transaction costs. Realised and unrealised gains and losses arising from changes in the fair value are recorded in the profit and loss account in the period in which they arise.

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British-American Money Market Fund Annual Report and Financial Statements For the year ended 31 December 2006 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (d) Distribution All income arising from receipts of investment income is distributed to unit holders after provision or expenses and taxes. All distributions including unclaimed distributions are reinvested in the unit holders’ account. (e) Unit holder liabilities Unit holder liabilities are redeemable on demand at an amount equal to a proportionate share of the unit portfolio’s net asset value. The liabilities are carried at the redemption amount that is payable at the balance sheet date if the holder exercised their right to redeem the liabilities.

(f)

Cash and cash equivalents Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand and deposits held at call with banks.

(g) Risk management objectives and policies The fund’s activities expose it to a variety of financial risks like the effects of changes in debt and equity market prices, and interest rates. The fund’s overall risk management programme focuses on the identification and management of risks and the unpredictability of financial markets and seeks to minimise potential adverse effects on its financial performance. There is no significant concentration of risk at the year end. The company’s risk management policies include the use of guidelines governing the acceptance of clients and investment policies are in place which help manage liquidity and seek to maximise return within an acceptable level of interest rate risk.

(h) Critical accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including experience of future events that are believed to be reasonable under the circumstances. (i) Critical judgements in applying the entity’s accounting policies In the process of applying the company’s accounting policies , management made judgements in determining the classification and the impairment of financial assets.

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British-American Money Market Fund Annual Report and Financial Statements For the year ended 31 December 2006 NOTES 1) General information The fund started operations on 1 July 2005, is registered under the Capital Markets Authority Act and is domiciled in Kenya. The address of its registered office is: Britak Centre Junction of Mara and Ragati Roads Upper Hill Nairobi 2) Financial risk management objectives and policies

The fund’s activities expose it to a variety of financial risks, including credit risk and the effects of changes in market prices and interest rates. The fund’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on its financial performance. There is no concentration of risk at year end. Risk management is carried out by the Investment Manager, British-American Asset Managers (BAAM). BAAM identifies, evaluates and manages financial risks, with emphasis on specific areas such as int rest rate risk, credit risk e and investing excess liquidity. The fund has policies in place to ensure compliance with international best practice in corporate governance.

3)

Service fees The expense relates to service fees paid to British-American Asset Managers Limited for the professional management of the fund. This is charged at 2% per annum, computed on the daily fund balances.

4)

Taxation The unit trust is registered under the Income Tax Act (Collective Investment Scheme Rules 2002), and is exempt from income tax including the payment of the withholding tax on investment income per exemption certificate obtained from Kenya Revenue Authority in February 2006. The income tax expense reported in the income statement relates to the period before the exemption.

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British-American Money Market Fund Annual Report and Financial Statements For the year ended 31 December 2006

NOTES (CONTINUED) 5) (i) Investments Maturity profile of investments in the money market

Due within 3 months Fixed Deposits 63,140,959 Government Securities Corporate Bonds TOTAL 155,561,685 91,500,000 310,202,644

Due within 6 6 months& 12 m onths 19,700,000 19,700,000

Due within 1 & 5 years

Due after 5 years

TOTALS 2006 Shs 63,140,959 399,411,685 91,500,000 554,052,644

TOTALS 2005 Shs

109,900,000 109,900,000

114,250,000 114,250,000

33,234,708 42,862,426 10,817,586 86,914,720

6)

Unit holder funds No. of units At start of year Creations Liquidation Distributions 96,004,965 1,016,899,143 (546,178,060) -

200 6 Value Shs 96,004,965 991,939,780 (546,178,060) 24,959,363

No. of units 108,154,965 (12,150,000) -

2005 Value Shs 108,039,469 (12,150,000) 115,496

At close of the year

566,726,048

566,726,048

96,004,965

96,004,965

7)

Cash generated from operations 2006 Shs Amounts available for distribution Adjustments for : Fair value gains Investment income Changes in working capital - increase in other receivables - increase in current liabilities 24,959,363 (33,340,492 ) (5,649,534) 5,668,942 2005 Shs 1,745,139 (215,868) (1,847,206) (2,380,782) 1,064,591

Cash generated from operations

(8,361,721)

(1,634,126)

8)

Related party transactions British-American Asset Managers Money Market Fund is managed by BritishAmerican Asset Managers (BAAM). BAAM is controlled by British-American Investment Company (Kenya) Limited (BICL) incorporated in Kenya . The ultimate parent of BICL is British American Investment Company (Mtius) Limited. There are other companies that are related to BAAM through common shareholdings or common directorship. 15

British-American Money Market Fund Annual Report and Financial Statements For the year ended 31 December 2006

NOTES (CONTINUED) 8) a) Related party transactions (continued) Unit holder balance 2006 Shs Units purchased by British-American Insurance Company (K) Limited 2005 Shs

11,857,812

10,987,234

b)

Service fees

British-American Asset Managers

7,987,566

317,935

--0 00--

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