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Learn a little more about investing in a unit trust.
Here are some of the frequently asked questions (and the answers) pertaining to Old Mutual unit trusts.
Unit trusts offer an easy, convenient way to invest. Simply put, a pool of investors’ money is used to invest in financial instruments such as equities (shares) and bonds.
This pool is then divided into equal units where each unit contains the same proportion of assets in the fund. Investors then share in the fund's gains, losses, income and expenses.
The wide variety of unit trusts means that they are an ideal way to build up a well-diversified investment portfolio tailored to meet your specific needs, risk profile and investment requirements.
There are various retirement products available from Old Mutual, including the Old Mutual Retirement Annuity, Preservation Funds and Linked Retirement Income. These different products have rules, requirements and tax treatment that are specific to each product.
Our unit trust portfolios can be bought within these “product wrappers”. Unit trusts are an affordable and a simple way to save (and preserve) for your retirement or from which to draw an income in retirement as they offer you the choice and flexibility to invest in portfolios that are suited to your life stage. An example of this is to invest into portfolios with high equity content when you are young and volatility is less important than significantly outperforming inflation over the long term, and start to moderate the equity exposure by switching to more stable funds as you near retirement and can afford dealing with a significant market correction.
Unit trusts portfolios bought within a retirement product wrapper incur no extra costs as would be charged in a standard unit trust portfolio, in other words, there is no cost that a client pays for the “product wrapper”.
Depending on your personal situation, there generally are significant tax benefits to investing or preserving money for your retirement in one of the above-mentioned vehicles. These include that money invested into retirement annuities (up to certain limits) are tax efficient as the amount invested is deducted from your income before tax due on your income is calculated. Capital growth on these investments and dividend and interest earnings are also tax free within these retirement products.
There are four easy options for you to choose from:
The Financial Intelligence Centre Act of 2002 (FICA) requires all accountable institutions – i.e. financial institutions – to identify, verify and keep records of all clients with whom they establish a business relationship or conclude a single transaction. This is to combat money laundering activities and fraud in South Africa, and to protect the interests of legitimate investors.
Financial services and credit providers who fail to comply with the requirements of FICA face strict penalties. According to this legislation, Old Mutual Unit Trusts may not process transactions that are subject to FICA if these are not accompanied by the required documentation.
For details please download the supporting document requirements
Yes. You can open a unit trust investment in a minor's name for a Standard Unit Trust portfolio or a Tax-Free Investment portfolio. As the parent or legal guardian, you will be required to sign all documentation until the minor reaches the age of 18 years. The unit trusts are legally the property of the minor. An alternative is you may open the unit trust investment in your own name and manage it on behalf of the child. Investors who choose to do this can reference the ‘name’ of the unit trust account with the child’s name by using the account descriptor facility available.
A dividend is the portion of a company’s earnings that is paid out to shareholders in the form of cash or other assets (referred to as an ‘in specie dividend’). A company is under no obligation to pay a dividend.
Note: This is a simplified explanation of how distributions impact fund prices. It does not detail the impact on funds that do not declare distributions, nor does it take any tax implications into account.
The underlying assets held by a unit trust fund may earn income – this is generally made up of interest and/or dividend income. Combined, this is referred to as distributable income. Operating expenses* are deducted off this income before it becomes part of the fund’s asset value. This means that the fund’s daily unit price** is based on the current value of all the assets plus the income earned (minus the operating expenses) divided by the number of units in issue.
As you can see, income generated by the fund is factored into the unit price on a daily basis.
*The annual service fee (also referred to as a service charge) covers on-going portfolio management and administration expenses (i.e. operating expenses).
**Daily unit price is also referred to as the NAV (net asset value) price.
Our funds pay out distributions after a predetermined period of time – generally quarterly, six-monthly or annually. The exceptions are the Old Mutual Interest Plus Fund, which pays out monthly, and the Old Mutual Money Market Fund, which declares income daily and pays out a monthly income. As a result, income does not form part of this fund’s unit price.
Funds generally declare their income on the last day of a predetermined period and pay it out a few days later. Investors can then choose to have it reinvested to buy more units or to have it paid into their bank account.
See the Declaration page on our website for more information.
As mentioned above, income generated by the fund is factored into its daily unit price. When this happens the price is referred to as being cum div. This stock market term has been applied to unit trust prices and means "with" dividends (and other income, as is the case with unit trusts). Buying units at a cum div price means you are entitled to partake in the future income payout (at the end of that distribution period).
As soon as an income is declared it is removed from the fund’s asset base – the unit price falls and becomes ex div (i.e. "without" or excluding dividends). When you buy ex div units you are not entitled to any income that has been accrued by the fund within the previous distribution period.
When the unit price goes ex div it drops by the amount of the distribution declared (excluding, of course, any market activity impacting the value of the underlying investments). If you reinvest your distributions (to buy additional units) you will find that even though the unit price dropped, your overall investment value remains similar. The time between the declaration and distribution dates may cause a discrepancy in your investment value – as a result of market movements.
Note: Our Trust Deed requires that the income be paid out within two months of the declaration date. Old Mutual Unit Trusts generally distributes income by the first weekend after the declaration date.
To see how this works in practice click here and select chart icon for the Old Mutual Income Fund’s price history. As this fund’s primary aim is to deliver an income, you will see how sharply the price falls once the income is declared.
It may appear that ex div units are "cheaper" than cum div units. However, the higher unit price comes with the imminent benefit of an income payment. If, on the other hand, you are selling units, any accrued income would have pushed up the unit price – and thus the value of your investment.
So as far as income distributions are concerned, as opposed to market fluctuations, it makes no difference at what point you buy/sell your units.
You can make use of the following exemptions when investing in discretionary unit trusts:
A portion of interest income is tax exempt: R23 800 p.a. for investors younger than 65 and R34 500 p.a. for investors over 65.
Realised capital gains exemption: R40 000 annually for individuals
In line with international best practice, SARS has changed and simplified your IT3(b) tax certificate. Your updated tax certificate has less columns and any redundant information has been omitted. We have introduced source codes to your form enabling you to complete your tax return quickly, easily and with confidence.
To access your tax certificates, login to our secure site by selecting the Login tab in the top right hand corner of this page. Remember, you’ll need to be registered to get access.
For assistance in completing your 2015 tax return, download the Unit Trust Tax Return document.
DWT is a tax levied at a flat rate of 20% on dividends received by a shareholder and is a ‘withholding’ tax. This means that the entity paying the dividend must subtract the tax from the dividend and withhold the tax before paying the net dividend to the shareholder.
Should a foreign company declare a dividend, foreign withholding tax could be incurred on the dividend. If such a foreign tax is incurred and it is not claimable from the foreign tax authority, this foreign tax will be allowed as a rebate (deduction) against any local DWT due to the South African Revenue Service (SARS).
The general principle is that you shouldn’t be. Although local dividend is income, it is subject to dividend tax and not income tax.
Shareholders are liable for both dividend and income tax. DWT is a tax on dividends received by a shareholder, but is a ‘withholding’ tax. This means that the entity (or the regulated intermediary) paying the dividend must withhold the DWT prior to paying the net dividend to the shareholder or paying SARS.
Income Tax is a tax imposed on all taxpayers; calculated on the taxable income of both natural and legal persons. The taxpayer is responsible for paying this tax to SARS.
The introduction of DWT will bring South Africa in line with the international tax of regimes of other countries.
Individuals, trusts and most foreign investors must pay DWT.
Entities that are exempt from DWT are legal persons: South African companies, public benefit organisations and retirement funds are fully exempt from DWT.
All exempt shareholders must complete and submit the declaration form as soon as possible. Failure to complete the declaration form before dividends are paid to you will result in DWT being withheld at a rate of 15%. The completed form can be faxed to +27 21 5091770 or Send an email
Under the Financial Intelligence Centre Act, all South Africans have been asked to produce a range of documents when entering into relationships with banks, cellular service providers and companies such as Old Mutual. New legislation builds upon this collection of information to allow for more effective combating of money laundering and tax evasion.
The Foreign Account Tax Compliance Act (FATCA) requires financial institutions that are not US-based to provide information relating to their US customers to the US Internal Revenue Services (IRS). Similarly, the Common Reporting Standard (CRS) facilitates the exchange of financial account information of all foreign-held accounts with global tax authorities.
When we receive the relevant information on non-South African tax resident customers from Old Mutual, SARS shares it with relevant international tax authorities. The same global tax authorities share identical information on South Africans holding financial accounts in their countries with SARS, ensuring that all South Africans fulfill their local tax obligations. This sharing of information between global tax authorities is an important step in curbing financial crime.
Old Mutual together with all other South African financial institutions, must collect information and report to SARS on all our customers (individuals and entities) who hold specified products, and that are;
Old Mutual is also required to include the following information when reporting your information to SARS:
The Effective Annual Cost (EAC) is a measure which has been introduced to allow you to compare the charges you incur and their impact on investment returns when you invest in different Financial Products. It is expressed as an annualised percentage. The EAC is made up of four components, which are added together, as shown in the table below. The effect of some of the charges may vary, depending on your investment period. The EAC calculation assumes that an investor terminates his or her investment in the Financial Product at the end of the relevant periods shown in the table.
Example of Effective Annual Cost Calculation:
1. Advice charges
2. Administration charges
3. Other charges
4. Term to maturity
To view your Effective Annual Cost please visit the EAC page or download the calculator.
You incur initial fees and annual fees:
If the amount that you are switching is in line with the stipulated fund minimum, there is no management company charge when you switch between unit trusts. If you use an adviser or a broker, you may incur an increase in your initial adviser fee if you are moving from a fixed income fund into an asset allocation or equity fund. This is because the maximum initial adviser fee for fixed income funds is 0.69% and 3.45% for equity and asset allocation funds. Switching may trigger a capital gains event.
The Total Expense Ratio (TER) can be used to calculate how costs impact the value of your investment. Download our Total Expense Ratio document for more information on this new measure and how it works.
An exit fee is an amount charged by a management company, like Old Mutual Unit Trusts, to clients who disinvest from their funds prematurely. Leaving a fund too early can have dire consequences for both the client who disinvests and other investors in that fund. Taking a long-term view when investing is far more beneficial to clients than trying to time the markets and the exit fee aims to discourage clients from moving in and out of funds when they should, instead, allow themselves to maximise the returns they could achieve over the long term. In addition, it aims to protect other investors who remain in the fund. When too many investors move in and out of funds too frequently, it results in volatility in the liquidity of the fund, increasing risk for the remaining investors and potentially affecting the performance of the fund, causing the fund to deviate from its mandate. It also makes business sense, because very transaction we undertake requires resources, and by reducing unnecessary transactions it means we are able to utilise our resources more effectively – ultimately another opportunity for us to add value to our clients.
Regulation 28 of the Pension Funds Act determines the types of assets a Retirement Fund (Retirement Annuity, Preservation Pension Fund or Preservation Provident Fund) may invest in, and what maximum percentage of the portfolio may be invested in specific asset classes. It was amended in 2011 and again in 2018. New provisions came into effect for individual members from 1 April 2011 and Foreign and Africa limits changed in February 2018. Regulation 28 does not apply to member-owned living annuities or standard unit trust portfolios.
Old Mutual Retirement Annuity, the original fund-owned Living Annuity investments, and the two Preservation Funds are the only Old Mutual Unit Trusts products that are affected by the regulation. The regulation impacts the structure of your portfolio. The regulation sets maximum exposure limits to the asset classes in which you may invest.
Previously, Regulation 28 applied at Retirement Fund level rather than member level. The amendment now requires individual member contracts to comply with the limits stipulated in the regulation. All contracts that predate 1 April 2011 may remain invested as-is, even if they do not comply with Regulation 28 at the individual level, provided there have been no transactions in that portfolio on or after 1 April.
However, if you transact within your portfolio or make a material change to the portfolio on or after that date, you must amend it to comply with the new regulations. A transaction or material change is likely to be defined as:
Actions that you may take within your pre-1 April portfolio that are not likely to be considered transactions and therefore may not require you to adjust the structure of your portfolio:
In summary: If your current retirement portfolio does not comply with the new regulations, and you wish to maintain its current structure, you should not make a material change to that portfolio.
If you want to actively manage a portion of your retirement savings, you may open a new Old Mutual Retirement Annuity contract and manage your new portfolio in compliance with the new regulation, while your existing contract will remain unaffected.
Yes, you can, even if the funds you select are completely in line with the regulation, market movements can alter the proportion of the asset class exposure. This means you need to keep a watchful eye on its structure. If your portfolio does breach the regulation, you will be notified and asked to rebalance your portfolio within a specified time frame.
They are among the most flexible and convenient investments available. You can stop your investment at any time without incurring any penalties, although we do recommend you remain invested for at least 3-5 years. You can also access your money at any time - especially in emergencies. If all your records are up to date and we have your latest FICA documents on record, the money will be deposited in-to your account within two days of receiving your request to sell.
If you have not done so already, register on our secure site to access and manage your portfolio online, 24.7. Simply select 'Login' at the top right corner of this web page and follow the easy steps. You can then view your investment value at your convenience.
If you know the number of units you hold within a certain fund, you can find unit trust prices in most newspapers. Find you unit trust and multiply the number of units you have by the price. This should give you an idea of the value of your investment.
Alternatively, you can contact our Service Centre at 0860 234 234 and experience our efficient automated process, or you can hold for one of the operators. Be sure to have your unit trust account number handy.
This is the price at which investors buy and sell units in a unit trust portfolio. NAV = market value of the fund + all accrued income – permissible deductions. Download our fact sheet on Total Expense Ration (TER) for more information regarding permissible deductions, or read more about the TER under the question, 'How much does it cost to invest?'
Although some people are comfortable handling their own investments, many are not. Financial advisers are knowledgeable about financial markets and the investment landscape and are required to gain a thorough understanding of your financial situation prior to advising you in the way they think best for your personal situation and needs. The demands and complexities of effective investment management can prove challenging even for the most diligent individual investor. Regardless of your financial situation, choosing to work with an investment professional may be a wise decision.
Shares are prone to short-term fluctuations, but tend to go up over the longer term. Investors are advised to take a long-term view of their portfolios. This means that you should not try to time the market, but rather stay invested.
Having different classes of units makes it possible for a unit trust company to charge different annual service fees* within one fund (portfolio). This fee is deducted from the fund’s portfolio and, as a result, reflects in the price of the units you buy (i.e. it reduces the unit price).
*The annual service fee (also referred to as a service charge) covers ongoing portfolio management and administration expenses (i.e. operating expenses).
Through the separate classes, unit trust companies can charge different types of investors different fees. Unit classes came into effect for the following reasons:
The following unit classes may exist within a fund:
You bought a specific fund, understanding its mandate and relevant characteristics. If we would like to make changes that affect the fund (and specifically the supplemental deed that established the fund), we need to first request permission from the Financial Services Board (FSB), and then from all those affected by the suggested change.
The outcome of the ballot and whether we can make our suggested changes will depend on whether the majority of investors are in favour of, or against the proposed changes.
The ‘yield’ is the income return on an investment expressed as a percentage of its current market value. It is derived from the interest and/or dividend income received from an investment. It may include costs incurred in purchasing or managing the investment.
The yield calculations for money market and fixed interest unit trust funds are based on standards governing the unit trust industry. This yield provides an estimate of income you could receive at a single point in time and is not an indication of income you will earn going forward. The actual income you receive depends on your investment start and end dates. This is different from, say, a bank’s fixed rate, which provides a set yield for a specific period of time.
How the Money Market Fund’s yield is calculated
The Old Mutual Money Market Fund’s yield is based on historical earnings. The yield reflects the weighted average income (net of costs) of the fund over the previous seven days. This figure is compounded monthly for twelve months to arrive at the published annual yield (note: it assumes monthly interest distributions are reinvested).
While this yield closely reflects the current earnings of the fund, it is not the yield investors will earn going forward. The yield is not guaranteed and will fluctuate depending on the interest income earned by the investments held in the fund.
How the Income and Bond Funds’ yields are calculated
While a money market fund’s yield is calculated using an average of the previous seven days’ yield, the yield for income and gilt (bond) funds is calculated daily. To arrive at this ‘running’ yield, the estimated daily income for each instrument is expressed as a percentage of the instrument’s market value. The running yields for all the instruments held in the fund are then weighted according to their market value, added together and annualised to arrive at a running yield for the fund as a whole. This calculation is net of fees (i.e. after ongoing service fees have been deducted).
It is important to note that the published yield is an historical reflection of income generated by the fund and is not a guarantee of the future yield. The body regulating the unit trust industry, the Association for Savings & Investment SA (ASISA), is currently reviewing this method of calculating the yield for interest-bearing funds.
It is important to note that the published yield is a historical reflection of income generated by the fund and is not a guarantee of the future yield. The body regulating the unit trust industry, the Association for Savings & Investment SA (ASISA), is currently reviewing this method of calculating the yield for interest-bearing funds.
A fund fact sheet or minimum disclosure document (MDD) is a document about a unit trust fund offered by a management company which is regulated and monitored by the Financial Sector Conduct Authority. Download a guideline to understanding your MDD.