F&C Global Smaller Companies PLC (the "Company")
Change in Benchmark and performance fee arrangements
Since the start of the 2005/6 financial year, the Company's Benchmark has been a blended index of the returns from the Hoare Govett UK Smaller Companies Index and MSCI World Small Cap ex UK Index (developed countries version), using a 40%/60% split between the UK and global indices.
As part of a regular review the Board has concluded that it is appropriate, in order to better reflect the current and likely future geographical emphasis of the Company's portfolio and the evolution of market indices, to change the Benchmark to a blended index of 30% Hoare Govett UK Smaller Companies Index (excluding investment companies) and 70% MSCI World ex UK Small Cap Index (all countries version). The revised MSCI Index incorporates smaller companies from a wider range of markets to which the Company has become exposed via its portfolio of third party collective vehicles.
The Company pays a base management fee of 0.40% per annum on the net assets managed by F&C (with the debenture stock at market value), with a reduced fee of 0.25% payable on investments made in third party collective vehicles since 30 April 2006. A performance fee, equal to 10% of any outperformance of the Benchmark, may be payable annually if the net assets outperform the Benchmark, subject to a maximum of 0.6% of average monthly net assets. Performance above the cap and underperformance are carried forward for inclusion in the performance calculation in the subsequent period.
The increasing use of third party collectives means that under the current structure the total fee receivable by the Manager (performance and base), even in the event of achieving the maximum level of out-performance, may not reach the originally intended maximum level of 1% of average monthly assets.
The Board has therefore reviewed the structure of the performance fee and it has concluded that the performance fee calculation should be adjusted so that the absolute cap on the level of fees that the Manager can earn in any one year should be 1% of average month-end net assets during that year. This change is not expected to have a meaningful impact on any particular year's total fee.
The changes to the performance fee calculation, including the use of the new Benchmark index will be effective from the start of the new financial year on 1 May 2010. Any shortfall or excess performance based on the existing formula will be carried forward into this calculation.
For F&C Management Limited
Secretary
25 March 2010