Last checked at 6 Jun 2008 11:42
RIS ANNOUNCEMENT
F&C COMMERCIAL PROPERTY TRUST LIMITED
6 June 2008
AMENDMENT TO INVESTMENT MANAGEMENT AGREEMENT
Introduction
The directors of F&C Commercial Property Trust Limited (the "Company") are pleased to announce that they have agreed terms with F&C Investment Business Limited (the "Manager") for a reduction in the base management fees payable to the Manager under the investment management agreement and the introduction of a performance fee. It is expected that a supplemental investment management agreement to reflect these amended terms will be entered into by the Company and the Manager shortly.
The Board believes that the proposed amendments will better align the interests of the Manager with the interests of shareholders through a challenging relative performance based fee. These amendments will also reduce the base management fee paid by the Company. The Board has also ensured that the total fees payable to the Manager will be capped at a reasonable level.
Reduced base management fee
The current management fees payable by the Company to the Manager are 0.75% per annum of the gross assets of the group. Under the new arrangements, the Company will pay the Manager a base management fee of 0.60% per annum on invested assets of the group (including indirect property holdings) and 0.25% per annum on cash held by the group. The revised base fee will take retrospective effect from 19 March 2008. The inflation linked administration fee which is currently £106,000 remains unchanged.Performance fee
The Company has also agreed to pay the Manager a performance fee equal to 20% of the amount by which the total return on the group's directly held properties exceeds 110% of the total return on the group's benchmark and multiplied by the Company's total assets (excluding any indirect property holdings). The group's benchmark for direct property performance is the IPD total return on direct UK commercial property held by all quarterly and monthly measured funds in the IPD universe. The performance fee therefore excludes the performance of the indirect funds held by the group and the impact of gearing.
Fee cap
The performance fee payable in each financial year is capped at an amount which, when taken with the aggregate base management fee payable in each financial year, equals 1.0% of the gross assets of the Company. Performance fees in excess of this capped return can be carried forward for up to two subsequent financial years subject to the annual 1.0% cap.
Relative performance high watermark
The first performance fee will be calculated to 31 December 2008 from the valuation of the directly held properties as at 31 March 2008. The performance fee will only be payable in respect of any future financial years if the total return on the directly held properties from 1 April 2008 to the end of the relevant financial year has exceeded 110% of the benchmark total return over that same period. A performance fee is payable in the event of out-performance of the benchmark even if the total return is negative.
Rolling three year basis and clawback of performance fee
The performance fee is measured over a rolling three year period and the performance fee payable in respect of any one financial year is equal to the total performance fee earned over that three year period less any performance fees already paid in the previous two years. In the event that the amount already paid in the previous two years is in excess of the amount earned over the rolling three year period, such excess shall be repaid to the Company by the Manager.
No change to notice period
No change will be made to the notice period under the investment management agreement.
Related party transaction
The amendment to the investment management agreement is classified as a smaller related party transaction for the purposes of the Listing Rules and therefore is not subject to shareholder approval. As required by the Listing Rules, the Company has engaged Dickson Minto W.S. as an independent adviser to report on the terms of the proposed amendment. Dickson Minto W.S. has indicated to the Board that, in its opinion, the terms of the proposed amendment are fair and reasonable as far as the shareholders of the Company are concerned. Dickson Minto W.S. will formally advise the Board on the terms of the amendment once the final supplemental agreement is entered into.
Documents on display
The Company will make a further announcement once the final supplemental agreement has been entered into and a copy of the agreement, together with the original investment management agreement, will be available for inspection at the offices of Dickson Minto W.S. at Royal London House, 22/25 Finsbury Square, London EC2A 1DX for ten business days from the date of that announcement.
All enquiries:
Peter Niven, Chairman, F&C Commercial Property Trust Limited
01481 720071
Douglas Armstrong, Dickson Minto W.S.
020 7628 4455
Nigel Russell/Graeme Caton/Graham Reaves, G&N Collective Funds Services Limited
0131 226 4411