Saturday, October 27, 2007

Service Charge, Management Fee, Trustee Fee and Fund Expenses (Unit Trust)

I've found out that many are still confused with charges and fees imposed in unit trust investment. To make it simple, service charges are directly related to investors while other fees are indirectly related. Why do I say so? This is because investors have the right to know how's the net income is calculated for a particular fund and what are the expenses involved.

Service charge of up to 6.5% of NAV per unit (equity and balanced) or 0.25% of NAV per unit (bond and money market) is applicable upon the purchase of units of the fund by investors [Initial Investment(II)]. (This include also during "Standing Instruction"(SI) / "Direct Debit Instruction"(DDI) / "Additional Investment" (AI).)

As for other fees imposed are subjected to the annual operating expenses involved in running a fund. These expenses are deducted from the gross income of the fund.

------------------------------------------------------------------------------------
Take for example:
Public Ittikal Fund (P ITTIKAL)
Annual Management Fee: 1.5% per annum of NAV
Annual Trustee Fee: 0.07% per annum of NAV (min RM18K, max RM600K)

Based on "Accountants' Report" in Master Prospectus of Public Series of Shariah-Based Funds expires on 29 April 2008 (pg. 128). Statement of Income and Expenditure for the years ended 31 May.

The investment income for the fund for year 2007 is RM240,515,000

The expenditure needed:
Trustee's fee = RM463,000
Management fee = RM22,261,000
Audit fee = RM6,000
Other expenses = RM396,000

Total expenditure accumulates to RM23,126,000

Net Income Before Taxation = Investment Income - Total Expenditure
RM240,515,000 - RM23,126,000 = RM217,389,000

Taxation amounted to RM6,729,000

Net Income After Taxation = RM217,389,000 - RM6,729,000 = RM210,660,000

From here we noticed that 9.62% of the investment income is deducted for expenditure and 2.8% of the investment income is deducted for taxation.

Based on the percentage deducted from the income achieved, I'm sure most doesn't bother much regarding the fees. This is due to the fact that in a business, everyone work for salary. For a small amount to pay for the profit we can make in return, in my opinion is well deserved.

------------------------------------------------------------------------------------

If anyone wants to know more about Public Mutual funds or anything related, don't hesitate to contact me.

No comments: