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Collective Investment Schemes

What is a unit trust?

A unit trust is a collective investment that enables you to pool your money with other investors who have similar investment objectives. Experienced investment managers invest this pool of money in different assets in financial markets. This includes a wide range of local and international shares or equities (companies listed on a stock exchange), bonds, property, money market instruments and their derivatives.
 
The total value of the pool of invested money is split into equal portions called participatory interests of units. When you invest in unit trusts, you buy a share of the units of the total fund. The unit price (also known as the net asset value (NAV)) is dependent on the market value of the instruments in which the pool of money is invested and therefore rises and falls. It is calculated daily.
 
There is a wide range of collective investment funds offered in South Africa. These are both rand and foreign currency based, catering for a myriad of investor needs. This includes funds that generate income to those that offer capital growth in the medium to long term (three to five years and longer). Units should be held for these periods to reap the full benefit of the investment and to minimise the effects of any market ups and downs.
 
Collective investments such as unit trusts are the most accessible, flexible, protected, regulated and transparent long-term savings vehicles.
 

 

Why invest in unit trusts?
Unit trusts have a range of benefits: 
  
 ·  They reduce investment risk 

Unit trusts invest in a range of underlying assets. This means that all your eggs are not in one basket. Your risk is spread amongst many assets, rather than amongst one or only a few. If any assets perform poorly, your overall investment won't necessarily perform poorly as there are other assets that may have done very well.
 
 ·  They are easy and accessible 

Units trusts are a very convenient way of investing in markets which you otherwise would find difficult to access. Although the minimum investment amounts may differ, you can invest in them in South Africa with as little as R500.00 per month (monthly debit order) or R2000.00 lump sum.
 
 ·  They offer good returns 

History has shown that average unit trust returns compare very favourably with returns from more traditional investment products. The longer you leave your money invested in most unit trusts, the greater the opportunity for growth.
 
 ·  They benefit from expert decision-making 

Unit trusts are managed by highly qualified investment managers, whose full-time job it is to make investment decisions. Few people have the necessary time, skills or experience to actively manage their own investments on a day-to-day basis.
 
 ·   They offer value for money 

Unit trusts are designed to give you good value. The pooling of money increases buying power, enabling investment managers to buy assets the small investor normally cannot afford. Fees are competitive and clearly set out. They comprise an annual management fee of 1% (excl. VAT) of the fund's market value and a performance fee of 20% of the our performance of the benchmark capped at 2% p.a of your investment. Unit trust fees are deregulated and investors should familiarize themselves with all fees applicable to any investment as these may differ from fund to fund.


          
 ·   Schedule of Fees


Fee TypeFinancial AdvisorAdministrator
Investment Manager
InitialMaximum 3% deducted prior to each investment being made. Where ongoing fee is greater than 0.5% then initial fee is limited to 1.5%. No charge No charge
OngoingMaximum 1% per annum of the investment account. Where the initial fee is more than 1.5% then the maximum ongoing fee is 0.5%. 0%  1% to 3%
Based on portfolio performance relative to benchmark*

* In the case of the Oasis Crescent Income Fund and the Oasis Money Market Fund there is no performance fee applicable. A maximum fixed fee of 0.5% per annum may be charged and is calculated and accrued daily based on the daily market value of the investment portfolio and paid to the investment manager on a monthly basis.
 
 ·    You always know how much you own 

The NAV prices of units are quoted daily in the national press and can also be obtained directly from the unit trust company. You can calculate the value of your investment at any time by multiplying the number of units you own by the NAV price of your fund.
 
 ·    Your investments are protected 

Your money is held separately from the managing company's assets in a trust. If anything goes wrong with the company, your money is safe. The local industry is also strictly regulated by the Registrar of Collective Investment Schemes, the Association for Savings & Investment SA (ASISA) and each unit trust company's trustees to protect your investment. Similar institutions, such as the Irish Financial Services Regulatory Authority, perform comparable functions in their respective jurisdictions. A vigilant financial press and analysts who continuously monitor the performance of the industry also protect you. In addition, you receive optional quarterly reports and an annual report listing all the assets in which your unit trust invests.
 
 ·    They offer flexible investment options 

You can either invest a lump sum amount so that your entire investment immediately benefits from the growth and income potential of the chosen unit trust. Or you can make a regular monthly investment, an easier way of building up capital. The latter smoothes your investment into the market over time (this is called rand cost averaging), rather than being affected by a market movement at a particular time. Unit trusts are also transferable and you can invest in somebody else's name.
 
·    They are easy to access, buy and sell  

Unit trusts are liquid, so you can cash in all or part of your investment at any time and have ready access to your money, within 3 - 4 business days provided that all the completed documentation is received. (Subject to the main trust deed of the Oasis Crescent Equity Fund Unit Trust Scheme.)



What are the tax implications of investing in unit trust?


·  Income Tax  
 
The income tax legislation for each country often differs significantly. Therefore, you should consult your local tax advisor to ascertain the income tax permutations that pertain to your prospective investment.

In South Africa, all dividends earned in a South African registered fund are exempt from income tax under Section 10(1)(i)(xv) & (xvi) of the Income Tax Act No 58. of 1962. A portion of all interest earned is exempt from income tax under section 10(1)(i) of the Income Tax Act. An amount of R18 000, if the client is under the age of 65, and R26 000, if he or she is 65 years and over, is exempt. Remember that this deduction takes all interest earned across all investments and savings into account: it does not only apply to the client’s collective investment scheme/s.
 
 ·  Capital Gains Tax  
 
Capital Gains taxation is applied to individuals from different countries in different ways. Therefore, you should consult your local tax advisor to ascertain the capital gain taxation that may pertain to your prospective investment.

In South Africa, Capital Gains Tax came into effect from 01 October 2001. The proceeds from the sale of unit trusts is taxed in the hands of the investor at his or her marginal tax rate. Remember that only 25% of the gain is taxable and there is an exemption of R15 000 if the investment was made by a natural person. If, however, the investment was made by a trust or company, 50% of the gain is taxed at a rate of 40% for a trust and 29% for a company.

Compared to other investment vehicles, unit trusts are tax-efficient in terms of Capital Gains Tax (CGT). Unit trust investors only incur CGT when they sell their units in a unit trust. This allows investors to defer tax and to plan their investments appropriately. Secondly, the applicable CGT rate can be as low as 4.5%, depending on the investor's marginal tax rate, or as high as 10.5%, which is on par with shares. Relief measures such as the R15 000 exemption and the offsetting of losses against gains can also be used.


 ·  Dividends Tax 


Dividends Tax is applicable to all South African resident companies as well as non-resident companies listed on the JSE. Dividends Tax is borne by the shareholder at a rate of 20% (previously 15%), subject to any reduction in terms of a double taxation agreement (DTA). Tax on dividends in specie remains the liability of the company declaring the dividend.


When investing in unit trusts or any of the retirement products, is my initial capital guaranteed?
  
No. Any product where money is guaranteed is usually invested in an interest-bearing investment which is not Shari’ah compliant. In those insurance-backed guaranteed policies, one pays for those guarantees, which could be very expensive. Effectively one pays a premium to receive less! 


What is the time period one should consider for investing money in unit trust funds?

Unit trust products require a medium to long term investment period. The recommended time period is 3 to 5 years or longer.


Can I access my money if I invest in a unit trust fund?

Funds in unit trusts are not tied up for a predetermined time period other than the recommended time period above. If at any stage you require to draw part or all of your funds, you can do so by completing a redemption form. Note that in the case of a debit order or lump sums invested for less than 40 days, the funds first need to clear before payment can be made. 


What is the process for funds to be paid in the event that I decide to redeem all or part of my unit trust investment?

Any portion of the investment can be redeemed / disinvested at any time during the period of investment. Investors should however be aware that this will result in a CGT event. Oasis reserves the right to require the investor to redeem unit in a CIS should the value fall below a prescribed minimum  determined by the Management Company from time to time. The Investor may select a “Cash Flow Plan” where regular withdrawals are scheduled.

Can one have a joint account, for example with my spouse, and can both or either of us be signatories on this account?  
One can indeed have a joint account and both signatories or either of the signatories may transact on the account, depending on what the initial instructions by both parties were. 


In the event of my death, will my spouse/children receive the money in my unit trust?

Upon death the proceeds of the units trust will form part of the deceased estate. Please ensure that you have an updated will.


Can I nominate a beneficiary for my unit trust investment?   
No, you cannot. On your death, the executor of your estate will advise Oasis of your death. The executor of your Estate will instruct Oasis how to deal with your investments. The options would be either to transfer the funds to your beneficiaries or pay it into the Estate’s bank account. 


What are the minimum debit order and lump sum contributions in the Unit Trust funds?

The minimum investment amounts differ for each of the regions and amongst funds. Please consult the Terms and Conditions document as well as the relevant Key Investor Information Document (Minimum Disclosure Document).


Is the debit order amount flexible in terms of stopping the contribution in the event of the client being unemployed?

You can stop, reinstate, increase and decrease the debit order with a written signed instruction sent to our Administration Department.

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