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Collective Investment Schemes Control Act, 2002 (Act No. 45 of 2002)

Board Notices

Determination of Securities, Class of Securities, Assets or Classes of Assets that may be included in a portfolio of a Collective Investment Scheme in Securities and the manner in which and the limits and conditions subject to which Securities or Assets may be so included

Chapter lV : Feeder Fund Portfolio

12. Conditions and limits of inclusion

 

The conditions and limits subject to which participatory interests in a portfolio of a collective investment scheme in securities may be included in a feeder fund are as follows—

 

(a) A feeder fund may invest in participatory interests issued by a fund of funds only where the fund of funds is domiciled and regulated outside the Republic and where the fund of funds is not invested in another fund of funds or in a feeder fund;

 

(b) Where a manager is unable to comply with the provisions of subparagraph 12(a) through no fault of its own, the manager concerned must, within 30 days of the date on which it becomes aware of the noncompliance, submit a detailed plan to the registrar for consideration for approval, setting out measures to rectify the position;

 

(c) Where a manager of a feeder fund includes in the feeder fund participatory interests of a foreign registered fund ("underlying portfolio"), the underlying portfolio must—
(i) have been approved in terms of section 65 of the Act, and be subject to an annual review by the manager to ensure that it continues to comply with the requirements of section 65; or
(ii) where the underlying portfolio has not been approved in terms of 65 of the Act, the manager must conduct a due diligence investigation to the satisfaction of the trustee to ascertain if such portfolio would qualify for approval in terms of the conditions under section 65(1)(c) of the Act and that such portfolio is available for investment and is not otherwise prohibited in its domicile of registration;

 

(d) When an underlying portfolio is managed, directly or by delegation, by the same manager as the manager of the portfolio investing in the underlying portfolio or by any other company with which the manager is linked by common management or control, or by a substantial direct or indirect holding, such manager or other company may not charge any form of manager's charge (including initial fees or redemption fees) on the underlying portfolio;

 

(e) For the purposes of this Chapter, the value of a participatory interest held by one portfolio in another must be calculated by reference to the lower of the repurchase price or the net asset value of the relevant participatory interest, at the close of business on the day before the day a repurchase price was calculated;

 

(f) To the extent that assets in a portfolio are exposed to exchange rate risk, a manager may enter into financial transactions for the exclusive purpose of hedging such exchange rate risk subject to the conditions and the limits stipulated in Chapter V, provided that a portfolio's investment policy provides for it to include financial instruments for the exclusive purpose of hedging exchange rate risks;

 

(g) A feeder fund may not consist only of participatory interests in a money market portfolio.