The following sections explain the purpose of the charges disclosed within the Key Investor Information Document (KIID).
One-off charges taken before or after you invest
This is the maximum that might be taken out of your investment before the deal is placed in your specified fund(s).
For example, if you invest £1,000 in the A Share Class of Henderson China Opportunities Fund, an entry charge of 5% means that £950 will be used to purchase shares in the fund.
For dual priced funds, the entry charge is included in the price at which you buy into the fund(s), this is known as the bid/offer spread and is the difference between the quoted bid and offer prices.
The entry charge covers the costs of setting up your investment, and may also cover payments to your financial adviser or any other firm through which you may invest.
All entry charges can be found on the Key Investor Information Document (KIID).
Whilst Henderson does not charge an exit charge by default, we reserve the right to make a charge where the Manager suspects excessive trading by an investor (and specifically on subscriptions held for less than 90 days). The charge will be taken from your investment once your shares/units are sold.
Charges taken from the fund over the course of a year
The ongoing charge is expressed as a percentage amount paid from the fund. The charge covers all aspects of operating the fund during the funds financial year. The charge includes fees paid for managing the fund, otherwise known as the annual management charge, all administration and oversight functions, which includes Trustee/Depositary, Custody, legal and audit fees. For funds that are registered for sale outside of the UK, the fee also includes registration costs.
Where a fund invests a substantial amount of its assets in other funds, the ongoing charge figure includes the impact of the charges made in those other funds.
Broker commissions, transfer taxes, stamp duty and the funds performance fees (where applicable) do not form part of the ongoing charge calculation.
All ongoing charges can be found in the KIID and the fund fact sheets.
Charges taken from the fund under certain specific conditions
Certain funds may be entitled to a performance related management fee, which becomes payable when the funds outperform their performance fee benchmark and high watermark (where applicable).
The latest performance fees payable can be found in the relevant fund’s KIID.
Further information on how the performance fee is calculated can be found in the relevant Prospectus. For a free copy please contact Henderson Global Investors at PO Box 9023, Chelmsford CM99 2WB or by calling our Investor Services team on 0800 832 832.
UK domiciled funds fit into three different types of methodology for pricing the portfolio.
Henderson operates both dual and single swinging priced funds.
Dual priced funds
All purchases of units will take place based on the quoted offer price, while withdrawals will take place based on the quoted bid price.
If a fund receives more purchases than redemptions, the fund is said to be on an "offer basis". The offer price is arrived at by valuing the assets of the fund on the basis of the cost of acquiring those assets (i.e market prices, dealing costs, stamp duty etc), dividing this by the number of units in existence and adding on the entry charge.
If a fund receives more redemptions than purchases, the fund is said to be on a "bid basis". The bid price is arrived at by valuing the assets on the basis of the amount that the fund would receive if the assets were sold (i.e. market prices less dealing costs and expenses) and dividing the result by the number of units in existence. This means that, when investments are bought or sold as a result of other investors joining or leaving the fund, your investment is protected from the costs of these transactions.
Single swinging priced funds
For each fund (with the exception of the "dual priced" funds) investors buy and sell shares or units at a single price which is approximately the midpoint between the funds' buying ("offer") and selling ("bid") prices. This use of a single price means that when buying shares or units you, as the investor, potentially pay a lower price than the fund itself would pay to buy equivalent assets. Equally, when you sell shares or units the price you receive will potentially be higher. Over time, the effect of this mis-match between prices, coupled with various dealing charges, taxes and commissions is to slightly reduce the value of the funds for continuing investors. This is called 'dilution'. In certain circumstances, a dilution adjustment may be applied to ensure fair treatment between investors joining, leaving or remaining in a fund. The price of the shares or units of a fund may be adjusted to protect its value from being reduced in the case of large scale movements into or out of that fund. Further details can be found in the full Prospectuses, under 'Dilution'.
Funds also incur costs as a necessary part of buying and selling the underlying investments, these are otherwise known as portfolio transaction costs, and include charges such as broker commission.
Portfolio transaction costs
The purchase and sale of shares for a fund incurs broker commissions, transfer taxes and stamp duty which are paid by the fund on each transaction. In addition, there is a dealing spread between the buying and selling prices of the underlying investments. Unlike shares, other types of investments (such as bonds, money market instruments, derivatives) have no separately identifiable transaction costs; these costs form part of the dealing spread. Dealing spreads may vary considerably depending on the transaction value and market sentiment.
Comparing portfolio transaction costs for a range of funds may give a false impression of the relative cost of investing in them for the following reasons:
Transaction costs do not necessarily reduce returns. The net impact of dealing is the combination of the effectiveness of the manager's investment decisions in improving returns and the associated cost of investment.
Historic transactions costs are not an effective indicator of the future impact on performance.
Transaction costs for buying and selling investments due to other investors joining or leaving the fund may be recovered from those investors. For further information please refer to the Pricing Policies section above.
Transaction costs vary from country to country.
Transaction costs vary depending on the types investment in which a fund invests.
As the manager's investment decisions are not predictable, transaction costs are also not predictable.
For further information on these disclosures and a guide to charges and costs, please visit the Investment Association's website.
Please see the below table for average portfolio transactions costs over the last three financial years: