Board Notices > Capital requirements with which a manager of a collective investment scheme in hedge funds must comply

(1)	For the purposes of paragraph 1 Table item 4 (a) fixed expense amounts must be determined as set out in the computation table and notes below:

COMPUTATION OF FIXED EXPENSE BASE REQUIREMENT
Expense Category	Treat as Fixed Expense Amounts	Treat as Trading Expense and "non-cash" items	Expenses per Income Statement
Accounting and secretarial or other services, charges, etc.	X
Auditors' remuneration	X
Depreciation		X (Note (a))
Insurance	X
Interest paid other than to Directors Bank overdraft Other Finance	X X	X (Note (f)) X (Note (f))
Charges and fees	X	X (Note (b))
Motor vehicle expenses	X
Net loss on realisation of fixed assets		X (Note (a))
Office rental	X
Machine and other leasing charges/rentals	X
Printing and Stationery	X
Salaries and wages	X	X (Note (c))
Telephone, telex and postages	X
Other expenses	X	X (Note (d)+ (g))
Directors' Salaries Directors' Fees Interest	X X X	X (Note (e)) X (Note (e)) X (Note (e))
			TOTAL

Notes to the computation table: In determining fixed cost amounts, the following principles must be applied:

(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. Asset management fees that are calculated as a percentage of assets under may be excluded. Any fixed amount or any portion of asset management fees not calculated as a percentage of assets under management, contractually agreed to with the asset manager, must be included. Any other variable fee that is calculated as a percentage of assets under management may be excluded: Provided that any fixed contracted portion thereof must be included and treated as fixed costs. This includes, but is not limited to, the fixed portion payable to an intermediary or employed sales personnel before the percentage commission is applied, as well as any fixed amount in outsourcing costs for administration.

(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 counterparties which is trade related may be excluded.

(g) Loss arising from the conversion of foreign currency balances may be excluded.

(2)

The 13 weeks' annual fixed expenditure must be calculated as the previous financial year's divided by four or if no financial year was completed, this amount must be budgeted for to the satisfaction of the registrar. All assumptions must be clearly stated and demonstrably incorporated into the budget.

(3)	The 13 weeks' liquid capital may not be invested in any portfolios other than a money market portfolio.

(4)

The registrar may, where the registrar 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, require 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 may submit a revised budget for approval by the registrar.

Collective Investment Schemes Control Act, 2002 (Act No. 45 of 2002)

Board Notices

Capital Requirements with which a Manager of a Collective Investment Scheme in Hedge Funds must comply

2. Fixed Expense Amounts