The management agreement between the Company and Henderson provides for the payment of a composite annual management fee, calculated as a percentage of the value of the assets under management. The management fee is calculated quarterly as a percentage of the value of the assets under management on the last day of the quarter preceding the quarter in respect of which the calculation is made. Assets under management for the purpose of calculating the management fee exclude any holdings in funds managed by Henderson. The management fee is payable quarterly in advance.
The performance fee is calculated as 15 per cent of any outperformance of the benchmark index, on a total return basis, over the Company’s accounting year. This is subject to a limit on the total management fees payable in any one year of 1.0 per cent of the average value of the net assets of the Company during the year (calculated monthly) and an absolute limit to the performance fee of £2 million in any one year. There is a further cap to the effect that any enhancement to net asset value resulting from share buy-backs in excess of 5 per cent of the opening issued share capital is excluded from the calculation of the performance fee for the year.
No performance fee is payable if on the last day of the Company’s accounting year the Company’s share price is lower than the share price as at the preceding year end. If on the last day of the Company’s accounting year the net asset value per share, calculated, in accordance with the Company’s accounting policies, net of costs (including any performance fee), is equal to or lower than the net asset value per share as at the preceding year end, the performance fee payable will be restricted to such amount, if any, as will result in the net asset value per share being higher than the net asset value per share at the preceding year end.
Any underperformance relative to the benchmark or any unrewarded outperformance (for example as a result of a cap), will be carried forward and set against any outperformance or underperformance respectively in subsequent years.
Morningstar calculates all expenses for the financial year, consisting of management fees, performance fees, directors' fees, administration fees, custody fees, audit fees, marketing fees, loan interest, tax, restructuring costs and all other expenses given in the Statement of Total Return and notes in the Report and Financial Statements. They subtract performance fee, restructuring costs, transaction costs, compensation scheme expenses and trail commission then calculate the average daily net assets on a cum fair basis, then divide the total expenses by the average daily net assets and multiply the resulting figure by 100 to arrive at this ratio.
Please note, not all companies have yet adopted ‘ongoing charges’ as the methodology in their Annual Report and Financial Statements. This may mean there are differences between the charges shown on our factsheets and website and the TER shown in the Annual Report.