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Performance fees - in more detail

Performance fees are paid to reward outperformance. They only apply when the manager has performed above an agreed benchmark or hurdle rate and so the payment of a performance fee is an indication of how successful the fund is.

We review the disclosable charges periodically to take account of the current performance fees. We'll communicate any significant changes through fund updates to make sure you're kept as up to date as possible.

Past performance is no guide to future performance. The value of an investment and any income from it can fall as well as rise for a number of reasons, for example market and currency movements. Investors may get back less than originally invested.

Below is a list of the funds in our range that have performance fees:

Absolute Return Select Portfolio

This fund contains a number of underlying funds where a performance fee applies. Currently, these are:

  • the Scottish Equitable BlackRock UK Absolute Alpha fund
  • the Scottish Equitable Absolute Insight UK Equity Market Neutral fund
  • the Scottish Equitable Absolute Insight Emerging Markets Debt
  • the Scottish Equitable Schroder UK Absolute Target fund 
  • the Scottish Equitable Sarasin EquiSar IIID fund
  • the Scottish Equitable Fulcrum Alternative Beta Plus Daily

The Absolute Return (ex-Cautious) Select Portfolio is wholly invested in the Absolute Return Select Portfolio.

The additional charges/expenses for the Absolute Return Select Portfolio and the Absolute Return (ex-Cautious) Select Portfolio will rise and fall depending on performance day to day – so the charge you pay may vary significantly from the figure quoted in our factsheets and other literature, which is based on recent past performance.

In the case of the Absolute Return and Absolute Return (ex-Cautious) Select Portfolios, the performance fees for all funds in the portfolio to which a performance fee applies will be added together to calculate the total fee payable.

Details of how the performance fee is calculated for each of the underlying funds named above can be found below.

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Absolute Return (ex-Cautious) Select Portfolio

See ‘Absolute Return Select Portfolio’. As of 26 September 2012, this portfolio changed its name from the Cautious Select Portfolio to the Absolute Return (ex-Cautious) Select Portfolio. Further information relating to the name change can be found on our fund updates page.

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Scottish Equitable Absolute Insight Emerging Market Debt fund

Insight may be entitled to a performance fee in addition to the annual management charge.

The performance fee represents 10% of any growth above its target growth rate* and only when the price is higher than when a performance fee was last paid. For each day when performance is above the target growth rate, an accrual is made, and on each day when it's below the target growth rate, any accrual is reduced. The accrual will be taken into account in the calculation of the daily unit price. At the end of each year any accrued performance fee will be taken from the fund and paid to Insight, and won't be refundable in the event of subsequent performance below the target growth rate.

As a result of the performance fee, we can't determine the specific charges payable in advance – they could be significantly more than the disclosed charges.

*The target growth rate is Sterling 3-month LIBID.

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Scottish Equitable Absolute Insight Equity Market Neutral fund

Insight may be entitled to a performance fee in addition to the annual management charge.

The performance fee represents 10% of any growth above its target growth rate** and only when the price is higher than it was when a performance fee was last paid. For each day when performance is above the target growth rate, an accrual is made, and on each day when it's below the target growth rate, any accrual is reduced. The accrual will be taken into account in the calculation of the daily unit price. At the end of each year any accrued performance fee will be taken from the fund and paid to Insight, and won’t be refundable in the event of subsequent performance below the target growth rate.

As a result of the performance fee, we can't determine the specific charges payable in advance – they could be significantly more than the disclosed charge.

**The target growth rate is Sterling 3-month LIBID.

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Scottish Equitable BlackRock UK Absolute Alpha

BlackRock may be entitled to a performance fee in addition to the annual management charge.

The performance fee represents 20% of any growth above its target growth rate† and only when the price is higher than it was when a performance fee was last paid. For each day when performance is above the target growth rate, an accrual is made, and on each day when it's below the target growth rate, any accrual is reduced. The accrual will be taken into account in the calculation of the daily unit price. At the end of each calendar quarter any accrued performance fee will be taken from the fund and paid to BlackRock, and won’t be refundable in the event of subsequent performance below the target growth rate.

As a result of the performance fee, we can't determine the specific charges payable in advance – they could be significantly more than the disclosed charge.

†The target growth rate is Sterling 3-month LIBOR at the last quarter end.

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Scottish Equitable Fulcrum Alternative Beta Plus Daily fund

Fulcrum may be entitled to a performance fee in addition to the annual management charge.

The performance fee is calculated over a performance period of one year. It represents 10% of any growth above whichever is the greater of, the price when a performance fee was last paid, or the price at the start of the current performance period. For each day when performance is above the greater of these two targets, an accrual is made, and on each day when it's below the greater of the two targets, any accrual is reduced. The accrual will be taken into account in the calculation of the daily unit price. At the end of each year any accrued performance fee will be taken from the fund and paid to Fulcrum, and won’t be refundable in the event of subsequent performance below the target growth rate.

As a result of the performance fee, we can't determine the specific charges payable in advance – they could be significantly more than the disclosed charge.

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Scottish Equitable Henderson UK Absolute Return

Henderson may be entitled to a performance fee in addition to the annual management charge.

The performance fee represents 20% of any growth above its target growth rate†. For each day when performance is above the target growth rate, an accrual is made, and on each day when it's below the target growth rate, any accrual is reduced. The accrual will be taken into account in the calculation of the daily unit price. At the end of each quarterly performance period, any accrued performance fee will be taken from the fund and paid to Henderson, and won’t be refundable in the event of subsequent performance below the target growth rate.

As a result of the performance fee, we can't determine the specific charges payable in advance – they could be significantly more than the disclosed charge.

†The target growth rate is the UK Base Rate.
 

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Scottish Equitable Sarasin EquiSar IIID fund

Sarasin may be entitled to a performance fee in addition to the annual management charge.

The performance fee represents 20% of any growth above its target growth rate††. For each day when performance is above the target growth rate, an accrual is made, and on each day when it's below the target growth rate, any accrual is reduced. The accrual will be taken into account in the calculation of the daily unit price. At the end of each year, any accrued performance fee will be taken from the fund and paid to Sarasin, and won’t be refundable in the event of subsequent performance below the target growth rate.

As a result of the performance fee, we can't determine the specific charges payable in advance - they could be significantly more than the disclosed charge.

††The target growth rate is the Retail Price Index +3.5%

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Scottish Equitable Schroder UK Absolute Target fund

(formerly Scottish Equitable Cazenove UK Absolute Target fund)

Schroder may be entitled to a performance fee in addition to the annual management charge.

The performance fee represents 20% of any growth above the price when a performance fee was last paid. For each day when performance is positive, an accrual is made, and on each day when it's negative, any accrual is reduced. The accrual will be taken into account in the calculation of the daily unit price. At the end of each calendar quarter, any accrued performance fee will be taken from the fund and paid to Schroder, and won’t be refundable in the event of subsequent performance below the target growth rate.

As a result of the performance fee, we can't determine the specific charges payable in advance – they could be significantly more than the disclosed charges.

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