1. In this Schedule Athe Act@ means the Collective Investment Schemes Control Act, 2002 (Act No. ....... of 2002), and any word or expression to which a meaning has been assigned in the Act bears the meaning so assigned thereto.

1. a participatory interest in a money market portfolio as defined in Chapter III;
2. any money market instrument, determined under Chapter III and IV.

4.(1) Subject to subparagraphs (e) and (f), no manager shall include in a

1. securities of any one class issued by any one concern to an

amount in excess of five per cent, or in the case of a concern with a market capitalization of R2 billion or more, 10 per cent, or, in the case of securities in any investment company, 10 per cent, of the aggregate amount of the issued securities of any one class in such concern or company, subject to –

1. a maximum of 20 per cent of the market value of all the assets comprising the portfolio in respect of a benchmark other than a Specialist Index;
2. a maximum of 35 per cent of the market value of all the assets comprising the portfolio in respect of a benchmark in a Specialist Index;
3. an overall limit of 15 per cent, across all portfolios in a scheme, per class of security issued by a concern within the same group as the manager; an
4. an overall of 24 per cent, across all portfolios in a scheme, per class of security issued By concern, other than a concern within the same group as the manager.

2. The limits determined under subparagraph (b) shall not apply in so

far as the excess is due to an amalgamation, cession, transfer or

take-over in terms of section 99, but subject to the conditions

that – (i) the manager shall not make any further investments in

securities of the class in question as long as the said five or

ten per cent, as the case may be, is exceeded;(ii) the manager shall within 12 months after the date on which

such amalgamation, cession, transfer or take-over becomes effective or within such further period as the registrar may determine from time to time, reduce the securities of the class in question to at least the said five or ten per cent, as the case may be.

3. A manager shall include assets in a portfolio which consist of at least 90 per cent of market value, of-(i) exchange securities;(ii) subject to the provisions of subparagraph (e), instruments

contemplated in that paragraph; or(iii) securities (other than exchange securities) acquired by the

manager pursuant to the exercise of rights attaching to any exchange securities included in the portfolio,

or any combination thereof;

4. shall include in the portfolio instruments financial instrument in the manner and on the conditions as in Chapter II; or
5. shall not include participatory interests in other portfolios in excess of 20 per cent of the market value of the portfolio.

(2) The limit prescribed in subparagraph (1)(f) may be exceeded only if

1. A portfolio, other than a fund of funds, must ensure that its investment
   policy is suitably amended to empower it to include participatory interests
   in such portfolio.
2. A portfolio, other than a fund of funds, may not invest in a fund of funds or any other portfolio that is invested in participatory interests issued by the f first-mentioned portfolio.
3. If a manager contravenes subparagraph (5) through no fault of its own, the
   manager concerned must, within 30 days of the date on which it becomes
   aware of the contravention, submit a detailed plan for approval to the
   Registrar setting out measures to rectify the position.
4. A manager may include in any index tracking portfolio securities
   equivalent to that securities free float weighting in the relevant Headline,
   Economic Group, Specialist or Industrial Sector Index to be replicated, of
   the market value of all the assets comprised in the portfolio, subject to a
   maximum of 35 per cent of such assets.
5. A manager may not include in its gold portfolio securities issued by any
   one concern to an amount excess of a percentage equal to the concern’s
   weighting in the FTSE/JSE Gold Index, plus 5%, subject to a maximum of
   60%, of the market value of all the assets comprised in the gold portfolio.
6. If a security, other than a security referred to in subparagraph 4(1)(d),
   does not become an exchange security within a period of one year from
   the date of its inclusion in a portfolio, or within such further period as the
   registrar may allow where he or she is satisfied that the security is likely to
   become an exchange security within a reasonable period, the manager
   concerned must substitute exchange securities for such securities at
   either the value at which they were included in the portfolio or the price
   which can be obtained for them, whichever is the higher: Provided that for
   the inclusion of an unlisted security in a portfolio, such security shall be
   valued at cost price, failing availability of such price, the provision of the
   Act apply.

1. any security;
2. an index as determined by an exchange;
3. a group of securities which is the subject matter of the financial instrument whether such group of securities is represented by an index or not; or
4. in the case of a warrant, option contract or futures contract, any underlying asset referred to in paragraphs (1), (2) and (3).

1. A management company may include financial instruments in a portfolio, subject to these Regulations and the trust deed and supplemental trust deeds.
2. In the application of condition (1) a manager company may only sell option contracts, which have previously been bought.

1. sells future contracts, sells call options or call warrants, or buys put options or put warrants, based on specific underlying assets which are not indices, shall maintain in the relevant portfolio a market value of such underlying assets with positive nominal exposures to the same underlying assets;
2. sells futures contracts, sells call options or call warrants, or buys put options or put warrants, based on index futures or group of securities, shall maintain an exposure to appropriate underlying assets or other financial instruments with positive exposures to similar underlying assets, in the relevant portfolio which is at least equal to the nominal exposure of such financial instruments;

 

3. buys futures contracts, buys call options or call warrants, or sells put options or put warrants based on any underlying asset, shall maintain an exposure to liquid instruments in line with nominal exposure prescribed in condition 3(1);
4. sells put options or put warrants may maintain a bought put option or bought put warrant only if the strike price of the bought put options or bought put warrants are not lower than the sold put option or put warrant in place of liquid instruments as required in regulation 4(c);
5. sells call options or call warrants may maintain a bought call option or bought call warrant only if the strike price of the bought call options or call warrants are lower than the sold call option or call warrant in place of underlying assets as required in condition 4(a) or (b);
   
6. sells or buys multiple options or multiple warrants based on the same underlying assets and requiring nominal exposure to liquid instruments per condition 4(c), may maintain liquid instruments as needed for only one such option or warrant transaction; and
7. sells or buys multiple options or multiple warrants based on the same underlying assets and requiring nominal exposure to underlying assets per regulation 4(a) or (b), may maintain such instruments as needed for only one such option or warrant transaction.

5. CALCULATION OF NOMINAL EXPOSURE TO UNDERLYING ASSETS IN PORTFOLIO

1. The number of contracts.
2. The relevant contract size.
3. The current market value of the underlying asset, group of underlying assets or an index.

1. The number of option or warrant contracts.
2. The relevant contract size.
3. The current market value of one relevant underlying asset, one group of the underlying assets, an index or index future.
4. The delta factor being one.

1. The exposure, calculated in accordance with condition 5(1) or 5(2).
2. The transaction sign.

1. The nominal exposure to liquid instruments for the portfolio shall be calculated as the sum of all the liquid instruments’ nominal exposures calculated for all financial instruments in the portfolio in accordance with condition 6(1).

We have audited the system of internal control regarding .................…………...... (NAME OF PORTFOLIO), designed to ensure compliance by ............................................ (NAME OF MANAGER COMPANY) with this Chapter.

Compliance with the Conditions and the maintenance of an effective system of internal control is the responsibility of the directors of the manager company. Our responsibility is to express an opinion as to whether or not –

– internal controls were suitably designed to provide reasonable assurance that they
would, if operating as designed, prevent of detect any non-compliance with the
Conditions;

– the internal controls operated as designed throughout the quarter ended ....................

Because of inherent limitations in any system of internal control, errors or irregularities may occur and not be detected. Also, projections of any evaluation of the internal controls to future periods are subject to the risk that the system of internal control may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

We conducted our audit in accordance with generally accepted auditing standards. These standards require that we adopt procedures to obtain an understanding of the system of internal control designed to ensure compliance with the Conditions, to evaluate the adequacy of the controls and to test the operating effectiveness of those controls. We consider that our auditing procedures were appropriate in the circumstances to express our opinion presented below.

In our opinion –

– the system of internal control over compliance with the relevant Conditions was
suitability designed to provide reasonable assurance that the controls would, if
operating as designed, have prevented or detected non-compliance with the
Conditions;

– the system of internal control designed to ensure compliance with the Conditions,
operated as designed throughout the quarter ended ………………………............ ........................................................................................................................................

Without qualifying our opinion above, we draw attention to the following instances of non-compliance with the Conditions which were/were not subsequently corrected:

Auditor CA (SA)

Address

Date

1. A manager shall not include money market instruments in a money market portfolio if the value thereof exceeds the percentage of the value of the money market portfolio as indicated in the table below against the applicable rating.

NOTE: Where more than one rating exist, the lower of the ratings apply.

* Note: If an institutional rating is not available, the instrument rating should be applied and if a short-term rating is not available, the applicable long-term rating should be applied.

1. borrowing is limited to 10 per cent of the value of a portfolio and such borrowing is only permitted for purposes of the redemption of participatory interests;
2. the inclusion in a portfolio of unlisted derivatives instruments or any uncovered exposures is not allowed;
3. any form of gearing leveraging by a portfolio is not permitted.

1. The limit prescribed in subparagraph (a) may be exceeded only if the excess is due to appreciation or depreciation of the value of the underlying participatory interests constituting the portfolio: Provided that a manager may not, for as long as the excess continues, purchase any further participatory interests.

CHAPTER vi: FEEDER FUND PORTFOLIOS

14. For the purpose of this Chapter, a "feeder fund" means a portfolio that, apart from assets in liquid form, consists solely of units or other form of participatory in a single portfolio or fund in a collective investment scheme.

15. The manner in which and the conditions and limits subject to which participatory interests in a portfolio of a collective investment scheme or other similar scheme, may be included in a portfolio, are as follows:

(a) In liquid form means any asset which can be converted to cash within seven days.

1. borrowing is limited to 10 per cent of the value of a portfolio and such borrowing is only permitted for purposes of the redemption of participatory interests;

 

2. the inclusion in a portfolio of unlisted derivatives instruments or any uncovered exposures is not allowed;
3. any form of gearing leveraging by a portfolio is not permitted.