Collective Investment Undertakings

In addition to the Bank of Botswana Act 1999, the Income Tax Amendment Act 1999, and the Collective Investment Undertakings Act 1999, Collective Investment Undertakings, or CIUs, are also covered by the Collective Investment Undertakings Regulations 2001.

It is possible to establish CIUs as trusts or investment companies, including variable capital companies and unit trusts. Moreover, both open and close-ended trusts are allowed under current legislation. It is, however, necessary to create a management company that is completely separate from the trustees and may not include trustees. The management team is also required to have its registered office and head office within the borders of Botswana.

Following approval for its management company, obtaining a trust deed, choosing trustee, and deciding upon a name, it is possible to receive a license for a CIU from the Bank of Botswana. Please not that certain controls over management charges, especially as between unit truss in common ownership, exist.

It is possible for a licensed bank or company that is complexly owned by a similar licensed bank or a completely legally licensed financial institution either inside or outside Botswana to act as a trustee. It is necessary for a trustee to convince the Regulatory Authority that he/she has the pertinent expertise and enough experience to successfully carry out his functions as stated by the Act.

CIUs are strictly forbidden from investing more than 10% of its nets assets in securities that are neither traded nor dealt in on a market that is provided for in the articles of association or trust deeds. The regulatory authority has the authority to restrict certain markets on a case-by-case basis. Other prudential and fiduciary requirements like those in the EU’s UCITs legislation also exists.

CIUs are not allowed to borrow anymore than 25% of their net assets.

CIUs are compelled to publish a dated prospectus and to update the information in the prospectus on a regular basis. Investors should be able to make an informed decision about the CUI after reading its prospectus and any material changes to the prospectus must be announced to the unit holders in subsequent reports. Also, the prospectus along with any amendments should be submitted to the appropriate regulatory authority for their approval prior to publication.

Although schemes must receive approval from the regulatory authority, in general both funds of funds and umbrella schemes are allowed.

Non-resident collective investment schemes receiving their licenses from the regulatory authority in its country of resident are allowed to market their units in Botswana provided that they are in compliance with the provisions of the Botswana Collective Undertakings Act no. 20 of 1999.

If the CIU has received prior approval of its prospectus from the appropriate regulatory authority, it may use the Internet for marketing purposes as it see fit.

Taxation

All collective investment undertakings are exempt from tax. Taxation of resident unit holders/investors in a resident fund is based on the income realized during the tax year, i.e. income from the sale of units or other forms of distribution from the fund.

Resident unit holders/investors of a non-resident collective investment undertaking are taxed on income received during the tax year either from the sale of units or by way of a distribution.

Non-resident unit holders of a resident collective investment undertaking are not taxed by the Botswana government.

The issuance or sale of shares or securities by a collective investment undertaking is not subject to any form transfer tax, stamp duty or capital duty on the purchase.