NOTICE OF 2002
FINANCIAL SERVICES BOARD
NOTICE UNDER THE COLLECTIVE INVESTMENT SCHEMES
CONTROL ACT, 2002
1. Under section 88(1) of the Collective Investment Schemes Control Act, 2001 (Act No ….. of 2002), I, Jeffrey van Rooyen, Registrar of Collective Investment Schemes hereby determine that the capital to be maintained by a manager of a collective investment scheme in securities as contemplated under Part IV of the Act, for the matters and risks as set out in subparagraph (4) hereunder, must be calculated as follows:
(1) Eligible capital:
The total of:
(a) Issued ordinary share capital
(b) Issued preference share capital
(If not redeemable within one year and not redeemable at the option of the holder)
(c) Share premium account
(d) Non-distributable reserves
(e) Retained income:
If audited, 100 per cent may be included;
If not audited, 50 per cent may be included.
(f) Loans
(Only if properly subordinated in favour of (manager))
(g) Guarantees
(Only from a third party and only if exercisable on demand by (manager))
(h) Total
(2) Less adjustment for non-liquid assets
(a) All liabilities, including loans not included under 1(1)(f) above
(b) All fixed assets including intangibles
(c) Contingent liabilities
 
(d) Debtors and other current assets which are not convertible into cash within 14 business days
(e) Guarantees provided by manager
(f) Amount of investment in other business
(g) Total
(3) Adjusted liquid capital [1.(1)h minus 1.(2)g]
(4) Less required capital to be maintained:
(a) A basic capital which must be the greater of an amount of R600 000 or a sum equivalent of 13 weeks= of fixed expenditure for the whole of the collective investment scheme business of a manager or such other amount as the Registrar may determine in a particular case as provided for under note 9 of paragraph 2; plus
(b) seed capital of R1 million to be invested by the manager in each portfolio administered by the manager:
Provided that -
(i) the prescribed amount may be reduced by 10 per cent for every R1 000 000 invested by investors in a portfolio which investors may not be connected to but must be independent from the manager; and
(ii) if the sum of R1 000 000 has been reduced to nil in terms of subparagraph (i) and disinvestment from a portfolio causes the investment in the portfolio to reduce to less than R10 000 000, a manager need not reinvest any further sum in terms of this paragraph; plus
(c) position risk capital of -
(i) a sum equivalent to a percentage of the amount paid for participatory interests in a portfolio as determined hereunder in respect of each type of portfolio:
* Money market portfolio 10 per cent;
* income portfolio 15 per cent; and
* all other portfolios 25 per cent;
and
 
(ii) a sum equivalent to three times the margin requirement for listed futures or option contracts traded on a licenced exchange.
(d) Total
(5) Liquid resources [1.(3) minus 1.(4)(d)]
2.(1) For the purposes of paragraph 1(4)(a) fixed cost amounts must be determined as follows:

 
COMPUTATION OF FIXED EXPENDITURE BASE REQUIREMENT

Expense Category

Treat as Fixed Cost Amounts

Treat as Trading Costs and Anon-cash@ items

Expenses per Income Statement

Accounting and secretarial or other services, charges, etc.

X

 

 
 

 
Auditors= remuneration

X

 

 
 

 
Depreciation

 

 
X (a)

 

 
Insurance

X

 

 
 

 
Interest paid other than to Directors
Bank overdraft
Other Finance

 
X
X

 
X (f)
X (f)

 

 
Charges and fees

X

X (b)

 

 
Motor vehicle expenses

X

 

 
 

 
Net loss on realisation of fixed assets

 

 
X (a)

 

 
Office rental

X

 

 
 

 
Machine and other leasing charges/rentals

X

 

 
 

 
Printing and Stationery

X

 

 
 

 
Salaries and wages

X

X (c)

 

 
Telephone, telex and postages

X

 

 
 

 
Other expenses

X

X (d)+(g)

 

 
Salaries and Directors= Fees
Interest

X
X

X (e)
X (e)

 

 
 

 
 

 
 

 
TOTAL

 
In determining fixed cost amounts, the following principles will apply:
Notes: (a) Depreciation and profits or losses on sales of fixed assets are non-cash items and must not be taken into account.
(b) Charges relating to active trading must be excluded. Fixed charges must be included.
(c) Non-contractual payments by way of profit shares or performance related bonuses must be excluded.
(d) Exceptional or extraordinary items may be excluded.
(e) Payments to directors must only be included to the extent that they are made irrespective of profitability.
(f) Interest paid to counter parties which is trade related may be excluded.
(g) Loss arising from the conversion of foreign currency balances may be excluded.
(2) The thirteen weeks= fixed expenditure shall be calculated as the previous financial year=s divided by four or if no financial year was completed, this amount shall be budgeted for to the satisfaction of the registrar.
(3) The registrar shall have the right, where he has reason to believe that the size of the operations of a manager has been or is likely to be expanded during any financial period, to call upon a manager to submit a budget based on the expanded operations. Where a manager has reason to believe that its operations in any financial period will decline from that of the previous year, it shall be entitled to submit a revised budget for approval by the registrar.
3. The calculation of the capital position by a manager must be submitted to the registrar as at the last business day of each calendar month, within 14 days after the end of such calendar month, in the form determined by the registrar.