Examples of the calculation of portfolio turnover from the Manager's Report and Financial Statement of unit trusts.

1. Definitions

Total during period:

a)	purchases,
b)	sales.

Assets/unitholders' funds:

c)	at start of period,
d)	at end of period.

Let M be the multiplying factor if the start and end is not exactly a year. If this is six months then M = 2.

T = portfolio turnover % per annum :

100 x M x minimum of a) and b)
------------------------------
the average of c) and d)

This is a conservative formula for turnover. It is hardly effected by the turnover of units of the trust. If there are substantial purchases of units, then the purchases a) will be larger than the sales b). Therefore b) is used to calculate T. But b) is not effect by the purchases of units, only by the cashing-in of units. But any cashing-in can probably be paid for from the purchases.

It is certainly to be hoped that the turnover of units does not effect portfolio turnover. Otherwise existing unit holders are constantly paying dealing charges resulting from this turnover.

2. Sector turnover

For a sector four definitions of portfolio turnover are helpful.

T1 = average of T for each fund in the sector.

T2 = median of T for each fund in the sector.

We define T3 to take into account fund size.

Suppose S1 = the sum of M times the minimum of a) and b) for each fund and S2 = the sum of the average of c) and d) for each fund.

T3 = 100 x S1/S2

The Office of National Statistics publishes total sales and purchases for various sectors, such as unit trusts and investment trusts, prompting us to look at the sum of the average of a) and b) divided by S2. We need to adjust for M, so that:

T4 = sum over the funds of M times the average of a) and b) divided by S2.

Calculated from the data below

Sector	number	T1	T2	T3	T4
UK	14	75	75	76	85
UK Smaller Companies	4	70	75	62	69
European	8	109	65	92	100
American	1	89	89	89	97
Far East	6	164	117	155	192
International	1	77	77	77	80
Index tracking	1	5	5	5	8

We like the T3 measure of turnover best. It takes into account the size of funds, but not the turnover of units. The difference T4-T3 results approximately from the purchase/cashing-in of units.

3. The data

Type of trust:		Time period			£ millions
UK	T %	from:to	M	a)	b)	c)	d)

UK smaller companies

European

North American

Far East

International

Index tracking

Taking cash balances away from total assets c) and d), slightly increases the above values for portfolio turnover T, by an amount which is generally quite small such as 1-2%.