Page 197 - Profile's Unit Trusts & Collective Investments - September 2025

Fact sheet tips

Class A, R, B and C charges
In terms of changes approved by the Financial Services Board – now the Financial Sector Conduct
Authority (FSCA) – which came into effect on 1 April 2000, unit trusts may now apply different fees
to different investors in the same fund. Some management companies (CIS managers) now have
many tiers of charges, such as Class A, B, C and R charges. What follows is an explanation of these
tiers and how they affect this book.
Deregulation of charges was first implemented in June 1998. New funds created after June 1998
were given permission to set their own fees (ie, they were not limited by the Unit Trusts Control Act),
and they were free to vary fees provided they notified unitholders. Existing funds, however, were only
permitted to change their fees if they obtained the approval of unitholders, and such approval was
not going to be readily forthcoming. So one pressure point for more change was to allow existing
funds to also vary their charges. Another was that unit trusts were, under the old system, obliged to
offer the same scale of charges to all investors, and many management companies wanted to be
able to offer reduced fees to institutions without reducing fees to individual investors.
As a result of these pressures, unit trust fees were further deregulated from April 2000. In order
to protect existing investors, management companies may still not increase the fees of those
unitholders already invested. So an existing fund that wants to increase fees has to have two
structures: it has to preserve the old structure as Class R fees, and then introduce a new scale (Class
A) to apply to new investors. All of these changes can apply to both initial charges and annual fees.
Class A charges
These charges are applicable to all new investments into funds with Class A charges. Not all funds
will necessarily have both Class A and Class R fees.
Class R charges
These charges apply to funds in existence before June 1998, and to unitholders invested prior to
1 April 2000. The charges apply to both lump sums and debit orders. In other words, a CIS manager
cannot increase either initial charges or annual fees for an existing debit order client established
before 1 April 2000. On reinvestment of dividends from a lump sum investment made prior to
1 April 2000, the fund is also obliged to stick to the old charges (R Class).
Class B and C charges
These are the fee structures which generally apply to institutions or other “wholesale” clients.
CIS managers are reluctant to publish these fee structures.
Buy and sell prices
The implementation of the Collective Investment Schemes Control Act (CISCA) in 2003 saw the
demise of the old buy and sell prices. However, their legacy lives on when it comes to performance
figures, and we therefore include some explanation here of how buy and sell prices worked under
the old Unit Trusts Control Act.
Under CISCA, all transactions between the investor and the management company must be
executed at net asset value (NAV). The NAV is more-or-less equivalent to the old “sell” price (ie, the
price at which units were redeemed, also known as the repurchase price).
Although most CIS managers had sliding scales for initial fees, most price reporting historically
only reflected one buy price and one sell price per fund per day. As a rule, buy prices reflected
maximum initial charges. Until April 2000, sell prices were the same for everybody.
In reality, both buy and sell prices varied depending on the investor. Buy prices varied depending
on the level of initial charges (ie, the buy price on the same day for the same fund was higher for a
new Class A account than for an existing Class R debit order account). Because CIS managers
could also apply different annual fees, the sell price also varied.
Previously, CIS managers recovered their annual fees (usually daily) from the income received
by the fund. The sell (or repurchase) price was calculated after the deduction of the annual fee.

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