Commonwealth Consolidated Regulations

CORPORATIONS REGULATIONS 2001 - SCHEDULE 10

(regulations 7.9.16K, 7.9.16M and 7.9.16N)

Part 1           Interpretation

101          Definitions

                In this Schedule:

adviser service fee means an amount that is:

                (a)    paid or payable to a financial adviser for financial product advice to a retail client or product holder about an investment; and

               (b)    not included in a contribution fee, withdrawal fee, termination fee, establishment fee or management cost.

"balanced investment option" means an investment option in which the ratio of investment in growth assets, such as shares or property, to investment in defensive assets, such as cash or bonds, is as close as practicable to 70:30.

"brokerage" means an amount paid or payable to a broker for undertaking a transaction for the acquisition or disposal of a financial product.

"buy-sell spread" means an amount, deducted from the value of a financial product of a member or product holder, that represents an apportionment, among members or product holders, of the actual or estimated transaction costs incurred by the fund.

"contribution fee" means an amount paid or payable against the initial, and any subsequent, contributions made into a product by or for a retail client for the product.

Note    A contribution may be made by an employer on behalf of the product holder or retail client.

"distribution costs" means the costs or amounts paid or payable for the marketing, offer or sale of a product.

Note    This includes any related adviser remuneration component other than an adviser service fee.

"establishment fee" means an amount paid or payable for the establishment of a client's interest in a product.

Note    This does not include contribution fees paid or payable against the initial contribution into the product.

incidental fees means costs or amounts, other than costs or fees defined in this clause, that are:

                (a)    paid or payable in relation to the product; and

               (b)    not material to a retail client's decision to acquire, hold or dispose of his or her interest in the product.

Example

Cheque dishonour fees.

"performance" , of a product or a fund, includes:

                (a)    income in relation to the assets of the product or fund; and

               (b)    capital appreciation (realised or unrealised) to the value of the product or fund.

"performance fee" means an amount paid or payable, calculated by reference to the performance of a product or fund.

"service fees" means adviser service fees, special request fees and switching fees.

"special request fees" includes fees paid or deducted from a member or product holder's financial product for a request made to the fund.

Example

This applies to a fee for a request for additional information from a fund.

"switching fee" means an amount paid or payable when a product holder transfers all or part of the product holder's interest in the financial product from one investment option to another.

"termination fee" means an amount paid or payable on the disposal of all interests held in a financial product.

withdrawal fee means an amount, other than a termination fee, paid or payable in respect of:

                (a)    a withdrawal; or

               (b)    the disposal of an interest in a product.

102          Management costs

         (1)   Management costs means any of the following:

                (a)    in relation to a product or fund -- an amount payable for administering the fund;

               (b)    for a custodial arrangement -- the cost involved, or amount paid or payable, for gaining access to, or participating in, the arrangement;

                (c)    distribution costs;

               (d)    other expenses and reimbursements in relation to a product or fund;

                (e)    amounts paid or payable for investing in the assets of the fund;

                (f)    amounts deducted from a common fund by way of fees, costs, charges or expenses, including:

                          (i)    amounts retrieved by an external fund manager or a product issuer; and

                         (ii)    amounts deducted from returns before allocation to the fund;

               (g)    estimated performance fees;

               (h)    any other investment-related expenses and reimbursements, including any associated with custodial arrangements.

         (2)   The following fees and costs are not management costs:

                (a)    a contribution fee;

               (b)    transactional and operational costs;

                (c)    an additional service fee;

               (d)    an establishment fee;

                (e)    a switching fee;

                (f)    a termination fee;

               (g)    a withdrawal fee;

               (h)    costs (related to a specific asset or activity to produce income) that an investor would incur if he or she invested directly in the asset;

                (i)    incidental fees.

103          Transactional and operational costs

                Transactional and operational costs include the following:

                (a)    brokerage;

               (b)    buy-sell spread;

                (c)    settlement costs (including custody costs);

               (d)    clearing costs;

                (e)    stamp duty on an investment transaction.

104          Indirect cost ratio

         (1)   The indirect cost ratio ( ICR ) for a fund, is the ratio of the fund's management costs, that are not deducted directly from a member's or product holder's account, to the fund's total average net assets.

Note    A dollar-based fee charged directly against a member's account, such as a $1 per week management cost is not included in the indirect cost ratio.

         (2)   The ICR for a Product Disclosure Statement is to be determined for the financial year before the Product Disclosure Statement is issued.

         (3)   The ICR for a periodic statement is to be determined over the latest reporting period.

Part 2           Fees and Costs Template, example of annual fees and costs and Consumer Advisory Warning for Product Disclosure Statements

Division 1       The fees and costs template -- multiple fee structure presentation

201          The template for a multiple fee structure

Fees and other costs

This document shows fees and other costs that you may be charged. These fees and costs may be deducted from your money, from the returns on your investment or from the fund assets as a whole.

Taxes and insurance costs are set out in another part of this document.

            You have 2 different fee payment options:

     (a)       to pay contribution fees upfront, at the time when you make each investment into the fund; or

     (b)       to pay contribution fees later (for example, on the termination of your investment or by way of other increased fees).

Note    You may pay more in total fees if you choose to pay contribution fees later.

You should read all the information about fees and costs because it is important to understand their impact on your investment.

[If relevant] Fees and costs for particular investment options are set out on page [insert page number] .

1    [Where relevant] This fee includes an amount payable to an adviser. (See 'adviser remuneration' under the heading 'Additional Explanation of Fees and Costs'.)

2     [If there are other service fees, such as advisor service fees or special request fees, include a cross reference to the 'Additional Explanation of Fees and Costs'.]

Division 2       The fees and costs template -- single fee structure presentation

202          The template for a single fee structure

Fees and other costs

This document shows fees and other costs that you may be charged. These fees and costs may be deducted from your money, from the returns on your investment or from the fund assets as a whole.

Taxes and insurance costs are set out in another part of this document.

You should read all the information about fees and costs because it is important to understand their impact on your investment.

[If relevant] Fees and costs for particular investment options are set out on page [insert page number] .

1    [Where relevant] This fee includes an amount payable to an adviser. (See 'adviser remuneration' under the heading 'Additional Explanation of Fees and Costs'.)

2     [If there are other service fees, such as advisor service fees or special request fees, include a cross reference to the 'Additional Explanation of Fees and Costs'.]

Division 3       How to fill in the template

203          The preamble

                The material in the preamble to the template should only include matters that are relevant to the product.

Example

Insurance costs will generally not be relevant to a managed investment product.

204          Column 2 -- presentation of amounts

         (1)   This clause, clause 205 and clause 206 are subject to regulations 7.9.15A, 7.9.15B and 7.9.15C.

         (2)   If a particular fee or cost is not charged, 'nil', 'zero', '0' or 'not applicable' (if it would not be misleading) must be written in column 2 opposite the type of fee or cost.

         (3)   If it is not possible to determine a single amount or percentage of a fee or cost, it may be written as a range of fees or costs.

         (4)   If the exact amount of a fee or cost paid or payable is not known, an amount that is a reasonable estimate of the amount attributable to the retail client must be shown.

         (5)   An amount set out in accordance with subclause (4) must be clearly designated as an estimate.

         (6)   If an amount or cost has a number of components, the amount of each component must be listed separately.

Example

Management costs: 1.8% of member balance + $70 per year.

         (7)   A cost or amount paid or payable must include, if applicable:

                (a)    GST less any reduced inputs tax credits; and

               (b)    stamp duty.

205          Column 2 -- presentation of multiple investment options

                If a fund has multiple investment options, the fee information for each investment option can be:

                (a)    set out in the table; or

               (b)    cross-referenced in the table to another section of the Product Disclosure Statement that contains the relevant fee information.

206          Presentation of multiple fee payment options

                If a fund has more than 2 options for the payment of fees:

                (a)    the number of fee payment options must be set out in the preamble; and

               (b)    details of all fee payment options must be set out in the template.

207          Column 3 -- how and when fees and costs are payable

                Column 3 of the template must set out:

                (a)    how the fee is or will be recovered, for example by deduction from:

                          (i)    the member's investment balance; or

                         (ii)    the fund's assets; or

                        (iii)    contributions; or

                        (iv)    withdrawals; and

               (b)    the recurrence of the recovery of the fee; and

                (c)    the timing of the recovery of the fee.

208          Other material to be included in the template

         (1)   The template must clearly indicate which fees and costs are negotiable (for example, by stating in column 3 'The amount of this fee can be negotiated.').

         (2)   An indication that a fee or cost is negotiable must be cross-referenced to an explanation outside the template in the 'Additional Explanation of Fees and Costs' part of the fees section.

Division 4       Additional explanation of fees and costs

209          Matters to be included as additional explanation of fees and costs

                The following information, if relevant to the particular fund or product, must be included under the heading 'Additional Explanation of Fees and Costs':

                (a)    the explanation of service fees mentioned in footnote 2;

               (b)    information on performance fees including:

                          (i)    a statement that the management costs part of the template includes performance fees; and

                         (ii)    the method for calculating the fees; and

                        (iii)    the amount of the fees, or an estimate of the amount if the amount is not known;

                (c)    for tax or insurance costs -- a cross reference to the 'Tax' or 'Insurance' part of the Product Disclosure Statement;

               (d)    if the product is subject to tax -- whether the benefit of any tax deduction is passed on to the investor in the form of a reduced fee or cost;

                (e)    an explanation of adviser remuneration that forms part of any fee or cost in the table, including (if known to the fund):

                          (i)    the method of calculation; and

                         (ii)    the amounts of commission or the range of amounts; and

                        (iii)    whether the amounts are negotiable or rebatable; and

                        (iv)    the way in which amounts may be negotiated or rebated;

                (f)    an explanation of advisor service fees;

               (g)    for a negotiated fee or cost -- contact details of the person or body with whom the fee or cost can be negotiated and the manner of negotiation;

               (h)    worked examples (if appropriate);

                (i)    additional details of incidental fees (if appropriate);

                (j)    details of transactional and operational costs such as brokerage and buy-sell spread, including:

                          (i)    a description of the cost; and

                         (ii)    the amount, or an estimate if the amount is not known; and

                        (iii)    how and when the costs are recovered; and

                        (iv)    a statement that the cost is an additional cost to the investor; and

                         (v)    whether any part of the buy-sell spread is paid to the product issuer or an external manager;

               (k)    the following information about fee changes:

                          (i)    if applicable, a statement about the issuer's right to change the amount of fees without the investor's consent;

                         (ii)    any indexation arrangements that apply;

                        (iii)    the period of advance notice required for fee changes;

                        (iv)    any change in fee structure that is dependent on a person's employment;

                (l)    if the issuer has instituted a flexible charging structure, for each applicable fee, if known:

                          (i)    any maximum, and when it would apply; and

                         (ii)    any waiver, and when it would not apply;

              (m)    for a superannuation fund -- details regarding the protection of small accounts (member protection rules) unless already included in the Product Disclosure Statement.

Division 5       Example of annual fees and costs

210          Example of annual fees and costs

                The example of annual fees and costs:

                (a)    must contain fees and costs in accordance with the table in clause 211 or 212; and

               (b)    must be set out using the headings and the form in clause 211 or 212; and

                (c)    must be included in the 'Fees' section of a Product Disclosure Statement, following the fees and costs template.

211          Example of annual fees and costs for superannuation funds

Example of annual fees and costs for a balanced investment option

This table gives an example of how the fees and costs in the balanced investment option for this product can affect your superannuation investment over a 1 year period. You should use this table to compare this product with other superannuation products.

* Additional fees may apply:

Establishment fee  -- $50

And , if you leave the fund early, you may also be charged withdrawal fees of between 0 and 5% of your total fund balance (between $0 and $2 500 for every $50 000 you withdraw).

212          Example of annual fees and costs for managed investment products

Example of annual fees and costs for a balanced investment option

This table gives an example of how the fees and costs in the balanced investment option for this product can affect your investment over a 1 year period. You should use this table to compare this product with other managed investment products.

* Additional fees may apply:

Establishment fee  -- $50

And , if you leave the fund early, you may also be charged withdrawal fees of between 0 and 5% of your total fund balance (between $0 and $2 500 for every $50 000 you withdraw)

213          Defined benefit funds

                An example of fees and costs is not required in a Product Disclosure Statement for a defined benefit fund.

Note     Defined benefit fund is defined in subregulation 1.03 (1) of the SIS Regulations.

Division 6       How to fill in the example of annual fees and costs

214          Fees and costs must be ongoing amounts

                The fees and costs stated in the example must be the typical ongoing fees that apply to the product or investment option.

Note    The example should not be based on 'honeymoon rates'. It must be consistent with the statement for an existing member of the fund having the stated balance and level of contributions each year.

215          Minimum entry balance rule

                If the minimum balance required to enter a fund is greater than $50 000, the example of annual fees and costs must be based on an amount that is the lowest multiple of $50 000 that exceeds the minimum entry balance.

Example

If a fund has a minimum entry balance of $65 000, the relevant amount for the example of annual fees and costs is $100 000.

216          Termination fees

                If a termination fee may be charged, it must be described in a footnote to the table in the same way as a withdrawal fee, based on:

                (a)    a balance of $50 000; or

               (b)    if clause 215 applies -- an amount that is a multiple of $50 000.

217          Contribution fees

         (1)   The amounts of contribution fees to be inserted in the example of annual fees and costs for a superannuation product or a managed investment product, are applied against a $5 000 investment.

         (2)   If a Product Disclosure Statement relates to a product:

                (a)    that is paid for by a single lump sum amount; and

               (b)    for which no additional contributions can be made;

the example of annual fees and costs should be modified by removing references to contributions or contribution fees.

         (3)   The example must be based on a balance:

                (a)    of $50 000; or

               (b)    worked out in accordance with clause 215.

Note    If there is a fee paid for the initial contribution, it should be described as the establishment fee.

218          Management costs

         (1)   The example of management costs for a superannuation product or a managed investment product is applied to an amount of $50 000 or an amount that is a multiple of $50 000 if clause 215 applies.

Note    In calculating the amount, do not include contributions that may be made during the year.

         (2)   Management costs that are not deducted directly from a member's or product holder's account must be calculated using the indirect cost ratio for the fund.

         (3)   Any percentage-based management costs that are deducted directly from a member's or product holder's account should be added to the percentage amount calculated under subclause (2).

         (4)   Dollar-based management costs that are deducted directly from a member's or product holder's account must be shown separately in the management costs cell.

Example

PLUS Management costs: 1.6% + $52 per year ($1 per week).

219          Withdrawal fees and termination fees

         (1)   The example of a withdrawal fee or a termination fee for a superannuation product or a managed investment product is applied against an amount of $50 000 or an amount that is a multiple of $50 000 if clause 215 applies.

         (2)   In calculating the amount, do not include contributions that may be made during the year.

220          If there is no balanced investment option

         (1)   If a fund does not offer an investment option similar to a balanced investment option, the example should be based on the fund's default investment option.

         (2)   If a fund does not have a balanced investment option or a default investment option, the example should be based on the investment option under which the fund has the most funds invested.

Division 7       Consumer Advisory Warning

221          Consumer advisory warning

222          Where to place the Consumer Advisory Warning

                The Consumer Advisory Warning must be located at the beginning of the fees section of the Product Disclosure Statement.

Part 3           Fees and costs in periodic statements

Division 1       Other Management Costs

301          Other management costs in the periodic statement

         (1)   The following text and the appropriate amount, in dollars, must be inserted after the part of the periodic statement that itemises transactions during the period.

OTHER MANAGEMENT COSTS

This approximate amount has been deducted from your investment and includes all the other management costs that were not paid directly out of your account.

         (2)   Other management costs include all management costs not deducted directly from a member's or product holder's account during the reporting period and must be shown as a single total amount in dollars.

         (3)   Other management costs are calculated by multiplying the indirect cost ratio for the investment option by the member's or product holder's average account balance over the reporting period.

Division 2       Total fees

302          Total of fees in the periodic statement

         (1)   The following text and the appropriate amount, in dollars, must be displayed:

                (a)    at the end of the part of the periodic statement that itemises transactions during the period; or

               (b)    in a summary part of the periodic statement.

TOTAL FEES YOU PAID

This approximate amount includes all the fees and costs which affected your investment during the period.

         (2)   The total fees you paid are the total of all fees and costs disclosed in the periodic statement.

Division 3       Additional Explanation of Fees and Costs

303          Matters to be included as additional explanation of fees and costs

                The following information must be included in the periodic statement under the heading 'Additional Explanation of Fees and Costs', if it has not been included in another part of the periodic statement:

                (a)    details of incidental fees, such as cheque dishonour fees that were incurred by the member or product holder during the period;

               (b)    details of any service fees that may have been incurred by the member or product holder;

                (c)    for a product that is subject to tax -- whether the benefit of any tax deduction has been passed on to the investor in the form of a reduced fee or cost.