C1T3L4 · Revised 2026-10-26

Decision and objectives

Practical task: Audit an expense ledger without double charging the management fee

Objectives: Separate embedded expenses from investor charges; Interpret a hypothetical performance-fee rule; Reconcile a gross portfolio result with unit-holder cash.

Required prior knowledge: C1T3L3. Classification: domestic. Revision: 2026-10-26. All fictional names, prices, rates, fees, calendars and tax schedules below are hypothetical unless explicitly identified as a dated document observation.

A fee table contains different types of numbers: a daily accrual rate, an annual ceiling, an estimated expense ratio and a charge levied directly on the investor. Adding them indiscriminately can be as wrong as ignoring them. Establish the payer, base, timing and whether the published unit price already reflects the deduction.

Mechanics

Management fees compensate portfolio administration under the stated base and accrual rule. Other fund expenses can include custody, audit and portfolio transaction costs. An expense ceiling is a limit under its defined scope, not necessarily the actual annual charge and not an extra line to subtract. Entry or exit commissions, investor account charges and investor taxes may sit outside the published unit return.

A performance fee is conditional compensation. Its calculation can depend on a benchmark or hurdle, a high-water mark, crystallization dates, investor equalization and treatment of subscriptions. A high-water mark is a past reference value that can prevent charging again merely for recovering an earlier loss, but only as defined by the particular contract.

Price and return drivers

A simple expense reconciliation subtracts accrued fund expenses from gross portfolio assets before computing unit price. A stylized fee on positive profit above a hurdle is fee rate × max(pre-fee ending value − hurdle value, 0), subject to any high-water condition. This lesson's invented rule is intentionally explicit; it is not a universal free-fund method. When a fund reports an after-fee price, begin with that price and add only the investor's remaining deductions.

Worked case

Hypothetical unleveraged fund starts with TRY 1,000,000 and 100,000 units. Gross investment profit is TRY 100,000. Accrued management expense is TRY 15,000, other expenses TRY 5,000. NAV becomes TRY 1,080,000 and unit value TRY 10.80; published unit return is 8%. A holder of 1,000 units, cost TRY 10,000, redeems for TRY 10,800. Invented tax is 10% of the TRY 800 gain, or TRY 80, and investor exit fee TRY 20: net TRY 10,700, return 7%. Subtracting TRY 150 of management expense again would double count an embedded charge.

Independent performance-fee illustration: a fictional mandate has starting/high-water capital TRY 100,000, hurdle value TRY 108,000, pre-performance-fee ending value TRY 115,000 and a 20% fee on the excess over the higher of hurdle and high-water value. Fee = 20% × 7,000 = TRY 1,400; after-fee value is TRY 113,600. Investor tax is excluded from this separate illustration.

Adverse case

If pre-performance-fee value is TRY 104,000, the same fictional rule charges zero: value is below the TRY 108,000 hurdle. If a previous high-water value is instead TRY 118,000, a TRY 115,000 pre-fee value also incurs zero despite exceeding the hurdle. Paying a fee on every positive calendar-year gain would give a different result. Recovery does not necessarily mean a new fee is due. Entry and exit timing may also affect an investor's actual allocation under equalization provisions.

Practical use

Read the current fund's expense and performance-fee disclosures rather than extrapolating the example. TI1's prospectus section VII and investor-form expense table allow a dated comparison of fee categories and expense treatment; that ordinary fund's table does not establish a free fund's conditional-fee method. Obtain actual investor charges from the distributor. For a tax-net result, establish residence/status, income year, acquisition basis and effective rule, including how fees affect taxable gain. All tax percentages here are hypothetical.

Decision boundaries

Use a fee ledger to identify both the ongoing drag and the cash charge at exit. It does not prove that a low-cost strategy provides suitable exposure. Defer purchase if the performance fee cannot be reproduced from the supplied documents, especially if an early redemption crystallizes an otherwise avoidable charge. Do not treat an annual maximum as an expected actual cost or overlook trading costs simply because the management fee is low.

Practice and references

Exercise: hypothetical fund gross ending assets TRY 550,000, embedded management TRY 6,000 and other expenses TRY 4,000, with 50,000 units. An investor holds 2,000 units bought at TRY 10. Answer: NAV TRY 540,000; unit TRY 10.80; redemption TRY 21,600. With invented 15% tax on the TRY 1,600 gain and TRY 30 investor fee, net is TRY 21,330, a 6.65% return on TRY 20,000. The already accrued TRY 10,000 fund expenses are not subtracted again.

Takeaway: label who pays each cost and where it already appears.

Reference guide: mutual-fund; free-fund; net-asset-value; holding-period-return; management-fee; performance-fee; high-water-mark. Next: C1T3L5. Topic test.

Sources: SPK Mutual Funds Introduction Guide — What is a fund; fund expenses; fund types; founder and manager; recorded units; date not stated; retrieved 2026-10-26; checked 2026-10-26; SPK Communique III-52.1 — Articles 3–6, 14–15, 24–27; Annexes 2–3; date 2013-07-09; consolidated text lists amendments through 2024-03-01; checked 2026-10-26; TI1 prospectus attached to KAP notification 1662920 — Sections I–III; IV asset separation; V valuation; VI dealing; VII expenses; VIII taxation; IX disclosure; date 2026-09-15 notification; checked 2026-10-26; TI1 Investor Information Form attached to KAP notification 1665983 — Pages 1–2: identity; risk profile; expenses; important information; date 2026-09-21; checked 2026-10-26. Source records: sources.json. Check the cited rule dates and confirm current dealing terms before any transaction.

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