Page 65 - Profile's Unit Trusts & Collective Investments - March 2026

Costs and pricing Chapter 3

DWT is deducted from securities before dividends are credited to a portfolio and to each investor –
the dividend portion is net of DWT and therefore there is no further tax liability for individual investors
when it comes to the dividend portion of a distribution.
Certain entities, like companies and retirement funds, are exempt from DWT. If units in a collective
investment scheme are held via a company, application can be made to the fund manager to
pay the gross dividend. Similarly, non-residents holding South African unit trusts may qualify for
a reduced rate of DWT if a double-taxation agreement exists between SA and the investor’s
country of residence. Most fund managers provide application forms for investors who qualify for a
reduced rate of DWT. Investors can also apply for DWT refunds where too much tax has previously
been deducted.
Cum and ex div
The terms “cum div” and “ex div” (cum dividend and ex dividend in full) derive from the stock
market. They are also used informally in the unit trust industry, however, although the word
“dividend” is something of a misnomer as the distributions made by unit trusts consist of dividends
and interest. As a rule, the word dividend used in the context of a payout by a unit trust really means
the distribution or income declaration.
“Cum” in this context means “with” or “including”, and “ex” means “after” or “excluding”.
Most unit trusts define very specific days for income declaration. This is usually the last day of a
month end, quarter end or year end (eg, 31 March or 30 June). Most funds pay dividends within three
or four business days after declaration.
The income declaration date is akin to the cum div date for a share. An investor buying a
participatory interest on the income declaration date (eg, 30 June) buys “cum div”, meaning he
or she qualifies for the dividend to be declared at close of trade that day. An investor buying the
following day buys “ex div”, meaning he or she does not qualify for the dividend.
The income declaration date is important because the unit price, all things being equal, will drop
by the value of the distribution between the cum div and ex div date.
As we saw under pricing, income accruals are for the benefit of investors and are incorporated into
the unit price. When income is declared, the income to be distributed is removed from the portfolio. It
follows that if there was no change in the market value of the underlying assets, the unit price would
fall by exactly the amount of the dividend to be paid.
The gap between income declaration and payment varies from one management company to
another. Most ETFs now follow a more standardised distribution timetable and typically pay dividends
quarterly, with payment occuring within a few weeks after declaration. Different management
companies have different policies when it comes to the frequency of income declaration. Many pay
twice a year, some only pay once a year, and a few (mostly short term interest bearing funds) pay
quarterly. Money market funds pay monthly.
Performance and reporting

Fund reports
In terms of notices published under CISCA, every collective investment scheme must submit
regular reports both to the registrar and to investors.
In addition to quarterly fact sheets (MDDs), CIS managers must also report to investors at least
once a year (within three months after the financial year end). The report must contain at least the
following information:
R Disclosure of any material circumstances which affected the portfolio, especially details of any
deviations from the investment policy or objectives of the fund
R Abridged income statement and balance sheet for the portfolio
R Details of any qualification made by the auditor in its report on the financial statements of the
manager and the portfolio
R Dates and amounts of each distribution by the portfolio

Profile’s Unit Trusts & Collective Investments March 2026 63