Employee Savings Plans

Under a salary sacrifice arrangement an employee directs or requests that future salary or wages or bonus income otherwise payable by the employer to the employee be paid to a unit trust which is discretionary in nature. 2. An amount equivalent to the salary sacrificed is contributed to the trust and ordinarily held by the trustee as an unallocated capital contribution. 3. On receipt of the contribution or shortly thereafter, the trustee makes a loan to the employee. The loan amount is equal to the amount previously contributed to the trust. The loan is ordinarily interest free and of a limited recourse nature. 4. The employee uses the loan monies to purchase ordinary units in the unit trust. 5. As a unit holder in the trust the employee may be entitled to trust income and may be issued bonus units at the trustee's discretion. The value of the bonus units issued to the employee will typically equal the salary previously sacrificed by the employee. 6. The employee may have to satisfy minimum holding periods and/or employment related performance hurdles before the units can be redeemed. 7. When the holding period has expired and the performance hurdles are met, the employee may ask the trustee to redeem the employee's units. 8. Upon redemption, the trustee will: (a) calculate the value of the ordinary and bonus units issued to the employee; (b) offset that amount against the employee's outstanding loan balance; and (c) pay to the employee the balance of the proceeds. 9. The value of the bonus units will usually equal the outstanding loan balance, and therefore extinguish the loan. The employee will also redeem their ordinary units which will usually equal the previously sacrificed salary plus any capital appreciation.