Page 69 - Profile's Unit Trusts & Collective Investments - March 2026

Costs and pricing Chapter 3

However, the two indices became increasingly aligned over the years as dual-listed companies
lost their right to include all their shares in the Alsi after moving their listings to other markets and
corporate actions.
The JSE decided that as of 18 March 2024, the ALSI would adopt a free float weighting methodology
consistent with that of the SWIX indices to merge the two indices. It stopped publishing the SWIX
index from January 2026.
Reinvestment of income
Income from CISs is usually declared and paid out quarterly or twice yearly. The yield and the
frequency of income payment obviously has an impact on investment performance – particularly,
due to compounding, over longer periods.
Two methods are used in the industry for dealing with income declarations for the purpose of
calculating performance statistics.
The first method simply reinvests the income on the ex div date (ie, the day after the declaration
date) using the published price on the ex div date.
The second method reinvests the income on the payment date using the reinvestment price
supplied by the CIS manager. There can be as much as four weeks difference between the declaration
and payment, but on average it differs by a few days.
In Profile’s Unit Trusts & Collective Investments we calculate returns based on the payment date
using the reinvestment price obtained from the CIS manager. This is the more accurate method.
Note that all performance statistics reflect before-tax rates of return. For the calculation of
performance figures, reinvestment of income distributions ignores DWT and any other tax that may
be payable by an investor (eg, tax on interest). This is because applying gross distributions is the
cleanest way of creating comparable figures across different funds and management companies
– if net figures were used disputes might arise about applicable deduction levels. Some foreign
investors, for example, enjoy a lower rate of DWT, and companies and special trusts are exempt
from DWT – on a net reinvestment basis these exceptions might give rise to arguments in favour of
average DWT actually applied or other complex calculations.
DWT creates a disparity between reported performance figures and the actual returns enjoyed by
individual investors, most of whom are subject to DWT at 20%. Although distributions are treated as
free from deductions for purposes of reinvestment of income when calculating performance figures,
the actual reinvestment of a distribution for an investor occurs net of DWT (ie, after the fund manager
has deducted the withholding tax).

Tricks and tips
When looking at published performance figures –
and especially when comparing performance stats
from different sources (eg, fund fact sheets from
the fund managers and independent figures in a
newspaper) and/or offshore funds – always double
check to see how each of the following factors has
been treated.
R Have costs been taken into account? If so,
exactly which costs are excluded and which are
included in the calculation? Most performance
figures are net of annual management fees but
don’t take into account initial charges, broker
commissions, trailer fees and exit fees.
R Are the different figures calculated over the
same period? A fact sheet might quote a three-
year return to the end of the last quarter while a
daily paper or website might show a three-year
return up to the most recent trading day.

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