The money that is managed in mutual funds is located in accounts under the names of trustees at the various banks and in turn, the trustees oversee the activities of the fund manager. Migdal Mutual Funds receives powers of attorney from the trustees to conduct purchase and sale transactions of securities and financial assets within the fund accounts.
A mutual fund is the most transparent investment product in Israel. The fund manager publishes an annual report for each fund every year, along with a main prospectus for the fund manager. The annual report for each fund includes details such as: The principal characteristics of the fund, objectives of the fund, the way to attain the objective – the investment policy of the fund, the underlying asset of the fund, unique risk factors for the fund’s investments and for the manner of its management and more. The main prospectus for the fund manager includes details concerning the fund manager and its shareholders, proposal of units in the funds managed by the manager, the various organs of the fund manager, the trustees of the funds, service providers, of the funds, the investment selection policy, the manner of management and more. In addition, the fund manager is obligated to publicly report any matter or incident, as required by law and by virtue of the regulations. The publication of an annual report for each fund, a main prospectus for the fund manager and ongoing reports concerning any matter or incident are published in the Securities Authority distribution website, whose URL is as follows: www.magna.isa.gov.il
Certain mutual funds are limited in terms of foreign securities (with up to 10% of their assets invested in foreign securities or in foreign currency) and may be purchased and sold during weekdays (Sunday to Thursday) that are trading days. Other mutual funds are not limited in terms of foreign securities and can invest over 10% of their assets in foreign securities or in foreign currency. These may be purchased and sold during weekdays (Monday to Thursday) that are trading days.
The diversification of the investment over several securities serves to reduce the risk associated with the investment and consequently – there is usually an advantage to investing in mutual funds over an investment in a single security or in a limited number of securities.
Unlike portfolio management, that usually necessitates the investment of considerable initial capital, a mutual fund allows clients to invest small sums as well. Furthermore, there is no difference in management fees between a client investing large sums of money and a client investing small sums.
An investor in exempt mutual funds will only be liable for taxation. When selling his units in the fund. Thus, even if the fund accumulates profits throughout the period or if certain events take place in the fund, that could have been defined as taxation events for private individuals (such as: Dividend distribution, dividend in shares and the distribution of coupons in bonds), the tax liability will only occur when the units are exercised, at a rate equal to 25% of the real term earnings, in accordance with the taxation laws applicable to the client. (*) The aforementioned should not constitute a replacement for professional tax consulting that would take into consideration the special particulars and requirements of any individual. For tax considerations, a CPA or tax consultant should be consulted with.
It is possible to deposit regular sums into a mutual fund through a bank standing order.
The mutual fund sector is subject to strict regulation and supervision, in the interest of the investors. The sector is subject to the supervision of the Securities Authority, while in addition, a trustee is charged with safeguarding the rights of the unit holders. The fund manager is also obligated to make both regular and extraordinary reports. He must update and inform the investors concerning any change in the investment policy of the fund, as well as various other issues.
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