TIDMPCT
RNS Number : 1139W
Polar Capital Technology Trust PLC
15 April 2019
Polar Capital Technology Trust plc (the "Company")
Legal Entity Identifier: 549300TN1O5392UC4K19
15 April 2019
Change in fee arrangements with the Manager
-- As indicated in the last annual and interim reports, the
Board has been keeping under review its fee arrangements with Polar
Capital LLP (the "Manager") as the size of assets has grown,
performance has been strong in both absolute and relative terms,
and in light of the impact of MiFID II with regard to contributions
to research costs.
-- The Board has agreed with the Manager a package of amendments
to the current arrangements. These include: the removal of any
contribution to research costs; reductions in marketing costs paid
by the Company; further reduction of the base management fee above
certain sizes of net asset value; a reduction in the percentage of
outperformance paid to the Manager; a reduction in the cap on any
such performance fees payable; and an amendment to the performance
fee arrangements so as to allow the earning and carrying forward
(but not the cash payment) of a fee in respect of outperformance in
a year when Net Asset Value ("NAV") has fallen or has not exceeded
a previous high water mark in order better to align investment risk
and reward.
-- The Board has offered consultation with larger shareholders
of the Company and has engaged in helpful discussions with certain
of these about the principles involved.
Current fee arrangements
-- The current base management fee is 1% of the NAV up to
GBP800m and above GBP800m the base fee reduces to 0.85%. On 1
January 2018 in connection with discussions and the Company's
agreement to making a 50% contribution to research costs under
MiFID II regulations, a temporary third tier management fee of
0.80% on assets over GBP1.7bn was introduced.
-- In addition, the Manager is currently entitled to a performance fee based on:
o 15% of outperformance above the relevant Dow Jones World
Technology Index (the "Benchmark");
o performance high water marks, so that the performance fee will
only be payable if, and to the extent that, Adjusted NAV exceeds
the higher of:
-- the NAV on the last day of the previous accounting period;
and
-- the Adjusted NAV on the last day of a performance period in
respect of which a performance fee was last paid;
-- both indexed in line with the Company's Benchmark as
described above; and
o a cap on the performance fee which can be paid by the Company
in any one year (or upon termination without cause of the
Investment Management Agreement (the "IMA")) of 2% of NAV.
Amended fee arrangements
-- The Board believes that a performance fee is appropriate for
an actively managed and capacity constrained approach, which is
characteristic of the Manager's business model. However, as it
stands, no performance fee can be paid out, or credit taken for
outperformance, in a year when the NAV has fallen, or the Adjusted
NAV does not exceed a previous high water mark. The Board is keen
to realign the performance fee to provide an incentive to
outperform in falling markets, as well as to outperform in rising
ones, and to make sure the Manager does not lose that incentive in
more difficult times. The Board therefore believes that the
outperformance fee should be capable of being recognised in falling
markets as well as in rising markets, thereby potentially rewarding
the Manager for reducing risk. However, no performance fee will be
paid out unless the previous high water mark conditions are
met.
-- In addition, the Board and the Manager have agreed that:
o The Manager pays all research costs from 1 January 2019. In
the calendar year 2018, such costs in aggregate were approximately
GBP447,000.
o The performance fee participation rate is reduced from 15% of
outperformance to 10%.
o The cap on the amount which can be paid out in any one year
(or upon termination of the IMA without cause) is reduced from 2%
to 1%.
o The tiering arrangements for the base management fee will be
altered with effect from 1 May 2019. It has been agreed to lower
the threshold for, and give permanent effect to, the third tier to
GBP1.6bn, and to introduce a fourth tier charged at 0.70% on NAV
above GBP2bn, as summarised in the table below.
o The Manager has also agreed to contribute GBP100,000 per annum
to the Company's external marketing costs.
-- The notice period of 12 months and other key terms of the IMA
remain unchanged. Various amendments have been made to the detailed
terms of the IMA to reflect changes in regulation and practice
since it was last updated. The changes to the management fee,
performance fee and marketing costs will become effective from 1
May 2019. The Board will continue to keep all of its costs,
including management fees, under review.
-- Under the Listing Rules of the FCA, the Manager is a Related
Party of the Company. The Proposals constitute a smaller related
party transaction and are subject to the modified requirements for
such transactions set out in Listing Rule 11.1.10. The Company has
obtained written confirmation from a Sponsor in accordance with the
requirements of LR 11.1.10(2)(b) that the terms of the Proposals
are fair and reasonable as far as shareholders are concerned.
-- Note: the current and amended tiering arrangements for the
base management fee are summarised below:
Current Amended
Tier 1: 1.00% on NAV up to 1.00% on NAV up to
GBP800m GBP800m
---------------------- -----------------------
Tier 2: 0.85% on NAV between 0.85% on NAV between
GBP800m and GBP1.7bn GBP800m and GBP1.6bn
---------------------- -----------------------
Tier 3: 0.80% on NAV above 0.80% on NAV between
GBP1.7bn GBP1.6bn and GBP2.0bn
---------------------- -----------------------
Tier 4: 0.70% on NAV above
GBP2.0bn
---------------------- -----------------------
For further information please contact:
Sarah Bates Mark Bloomfield / Neil Ed Gascoigne-Pees
Winward
Polar Capital Technology Stifel - Corporate Broker Camarco
Trust plc - Chair
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Tel: 020 7227 2700 Tel: 020 7710 7600 Tel: 020 3757 4984
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END
MSCUUANRKBASAAR
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April 15, 2019 02:00 ET (06:00 GMT)
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