INVESTING IS OUR STRONG SUIT

A daily column on investing by Orbis Investment Management Limited

You may meet a senior representative from Orbis Investment Management Limited at the hotel. To make an appointment please contact the hospitality desk or call the Churchill Suite, room phone: 7554.

The cost of investing

Just like any other service, there are costs associated with mutual funds. Understanding a fund's fees and expenses is an important goal for any investor.

Commissions and Selling Costs

A front end load is another name for a sales commission. Load funds charge this commission -- either when the initial investment is made or when they are redeemed -- in order to cover the cost of compensation to brokers or other sales people. The Orbis funds have no load, so you do not pay a commission to buy, sell or switch between funds, and all the money you invest goes to work for you right away.

Transaction Costs

Some funds are subject to a transaction cost. This aims to pass on to transacting investors an estimate of the expenses associated with subscriptions or redemptions and results in a bid/ offer spread for purchases and sales of fund shares. In the interests of simplicity and in line with the global trend towards single pricing, there is no bid/offer spread for the Orbis funds so all purchases and sales of shares of the Orbis funds are priced at the net asset value per share of the respective fund on the dealing day.

Management Fees

The fund manager charges a fee for the day-to-day management of the investment portfolio. This management fee is charged directly to the fund. Most fund managers charge a fee that is a fixed percentage of the net assets of the fund and thus are entitled to the same fee whether the fund performs well or poorly. The fees for the Orbis equity funds are performance based and are designed to align the Manager's interests with those of investors in the funds. The fee ranges between 0.5% and 2.5% per annum of the net assets of each equity fund. Fees are accrued weekly and the level of fee, within this range, is based each week on the extent to which the fund's returns before fees have either exceeded or fallen behind those of that fund's specific benchmark index. Thus the fee is directly related to the return achieved on the Fund compared with that of its benchmark. The Fund's published performance includes the effect of this fee.

Administration Costs

The fund pays brokerage fees and commissions on portfolio transactions, as well as taxes directly attributable to the fund. The fund may also pay daily operating expenses, i.e., legal, auditing and administrative expenses.