1) What are the advantages to members of Xodus

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Frequently asked questions

Gold, Silver, or platinum pools (i.e. the unit prices) are valued at the daily wholesale price (which is priced at around at 5% premium - e.g. 1oz Krugerrands - over the London PM Fix). A member, therefore, buys in and sells at this wholesale price. The admin fee and commission are added to this when buying in.


     * When buying elsewhere, buyers could be charged as much as 10% or more above the London PM Fix. Similarly, sellers could be offered less              than the London PM Fix. (i.e., if Mr X were to buy elsewhere at 10% over the London PM Fix, and sell at the London PM Fix, he would lose a              10% spread). The biggest advantage of a unitized system is that it is highly unlikely that members will sell for less than wholesale price (i.e.              London PM Fix plus 5%). As mentioned above, the cost of getting in and out is reduced from above 5% to as little as about 0.15% per trade.              No other gold, silver or platinum dealers offer anything close to this.

       

     * Xodus is unique in South Africa because its entire price structure is presented clearly to its members, and at the lowest end of what is                      available in the marketplace.


     * The FAIS (Financial Advisory and Intermediary Services) Act does not make provision for a unit trust to hold physical precious metals. In                    ignoring this method of investing in gold, silver or platinum, it deters access or exposure by investors to these precious metals. Xodus Gold has        used this opportunity/vacuum to create these unitized pools. By buying units in the Xodus pool, members receive up to 99% physical gold,                silver or platinum


What makes Xodus's offering unique is that members are able to redeem their units for cash or gold, silver or platinum or any combination of these.  

2) How safe is my holdings with Xodus?

PHYSICAL STOCK


The bulk of the gold, silver and platinum stock is kept at Knox Vault (www.knoxvault.co.za). Knox has extremely high-security standards of both vaults and security. Entrance to the vaults is controlled by eye recognition technology and has to be pre-arranged.


The members (in a general meeting) of Xodus will on a regular basis, decide to what extend the stock is to be insured against theft. Insurance is currently underwritten by Zurich on a first loss basis.


Visit to the vault are only:


     1. To add gold, silver or platinum.

  

     2. To withdraw gold, silver or platinum.


     3. To audit the amount of gold, silver or platinum held in stock.


Any visit to Knox Vault must be attended by at least one Xodus member appointed by the Xodus Board and one person appointed by Xodus's auditors. The auditors always check the quantity of all gold, silver and platinum in the vault being opened.


Formal stock audits are performed at least once a year.


CO-OPERATIVE


This is a very secure business vehicle for holding a member's precious metal assets. The Co-operative has the right of possession, while members share ownership of the pools according to the number of units allocated to them. Therefore, creditors of the co-operative, if any, are not entitled to lay claim to any precious metals or cash that is being held on behalf of the members.


The Co-operative has no creditors apart from the bank for bank charges and the auditors. Its only liability is to the members for their units.


3) What are the investment requirements?

Minimum lump sum tranches of R5000 (initial or additional amounts). This may be amended from time to time, or;


Minimum debit order of R500 pm.


No maximum.


4) Why unitized pools instead of direct holdings in precious metals?

5) How does unitizing work?

Unitizing is a method used to as accurately as possible keep record of each investor's equitable share in a pool of assets. It ensures that a new investor's share is based on the price he joins the pool and investors in that pool shares pro-rata in the costs of that pool.


Example:


Day 1


Pool X starts at R 1.00 per unit.


Investor A invests R100 000.


He, therefore, receives 100 000 units at R1.00 each.


The pool now has R100 000 available and purchase 11 Krugerrands at R9 000 each.


The pool has, therefore, R1 000 in CASH and 11 Krugerrands at R9 000 each totalling R99 000.



Day 2


Krugerrands are priced at R9 200 for the day 


Value of the pool:


Krugerrands:  R101 200   (11 x R9 200)


Cash:  R 1 000


Total Value:  R 102 200


Unit price:  R102 200/ 100 000 (units) = R1.022/unit


Mr X value of pool = 100 000 units x R1.022 = R102 200



Mr Z invests R 100 000 on day 2.


He receives R100 000 / R1.022 = 97 847.36


Total units issued by the pool is now 197 847.36 units.


This clearly illustrates that Mr Z does not receive the same number of units because the price of the Krugerrands went up. The pool buys another 10 Krugerrands at R9 200 each totalling R92 000.


The pool now consists of:


21 x Krugerrands @ R9 200     :   R193 200


Cash                                            :   R9 000


Total                                            :   R202 200


Unit Price remains at R202 200/ 197 847.36 units = R1.022


Each member's share is now calculated as:





Pool

Unitising stock and cash in a pool have a number of advantages:


As mentioned earlier, the cost of getting in and out is reduced from over 5% to as little as maybe 0.15% per trade.


      * It accommodates any round amount without calculating exactly what must be paid for a gold, silver or platinum coin or bar, e.g., R100 000.

      * It accommodates small amounts (less than the smallest metal unit). For example, a minimum of R500 debit order allows the investor                         immediate exposure to gold, silver or platinum. Each R500 contributes towards the value of a gold coin or bar.

      * Withdrawal amounts in cash can be round figures. For example Member X's value of his gold pool amounts to R545 678.98 and he wants to           withdraw R4 500 ad-hoc or per month in cash. This is possible by redeeming the number of units totalling R4 500 in value.

      * Costs relating to insurance, safekeeping and administration are paid from the pool without involving the member. (The effect of this is to               marginally lower the unit price.)

      * It makes switching between pools easy - for example, if Member X wants to switch R200 000 of his gold pool share into the silver pool, this is         easily done by applying the wholesale price without necessarily selling any gold provided that the pool holds sufficient cash. [Cost 0.25%]

      * The commission payable as well as the reduced value normally associated with selling gold, silver or platinum is avoided.


Note that unitizing avoids cross-subsidizing as a new deposit or withdrawal is executed at the unit price of the day.



Gold
Silver

6) What will affect a member's composition of coins or bars in the pool?

7) Is it important for a member to keep his composition of coins and bars at the same level?

Not really as the member will eventually sell his metals and is seeking capital growth. If the unit price increases with 15% for the year, it means that the growth in value was 15% after costs have been deducted. The composition of coins and bars may have changed but the net value still increased. Consider this as a unit trust portfolio invested in hard metals and you are looking for capital growth.


8) What are the tax implications?

Income Tax


None, since no interest is earned and therefore income tax is not an issue to be considered - both as regards members' interests as well as their membership fees.


Capital Gains Tax (CGT)


No capital gains or loss is realized when a member withdraws his member's interest and takes delivery of his physical gold, silver or platinum. However, if a member should sell his precious metal afterwards, or withdraws in cash, capital gains or losses will result, in which case the member is liable to declare such gains or loss to SARS


Profit or losses realised when units are redeemed in the Trading Pool, will be subject to CGT, in the member's hands. Xodus has no CGT liability


Value Added Tax (VAT)


No VAT applies to Krugerrands.


Silver and platinum are subject to VAT. Xodus is VAT registered, and therefore will be entitled to claim back the INPUT tax on VAT paid for silver and platinum purchases. This means that VAT refunds from INPUT tax can be used to buy more silver and platinum.


9) Should Xodus sell any silver or platinum VAT OUTPUT tax will be paid over to SARS?

If a member should take delivery of silver or platinum, the member will be charged VAT OUPUT tax which will be paid over to SARS by Xodus. (If the member who withdraws his silver or platinum from the Xodus pool is VAT registered, he can claim a refund of any VAT paid as INPUT tax).


1.   Costs for insurance, vaults and administration are deducted from the pool once a month or as they occur. This will effectively result in a          member "selling" a small portion of his metals. Members may make ad-hoc contributions to pay out of their pockets for these costs.


2.  When the pool is not 100% invested in precious metals but holds some cash, the increase or decrease in the price of the                metals will cause the unit price to increase or decrease a slower rate than the actual metal prices. This may cause a slight                change, either positive or negative, in the composition of the metals. The co-op aims to keep 3% to 10% max in cash.