45
Ascott Residence Trust
Annual Report 2015
Overview
Sustainability
Business
Review
Portfolio
Details
Corporate
Governance &
Transparency
Financials &
Additional
Information
The Manager’s management fees, which are contained in Clause 15.1 of the Trust Deed, are annual fees earned
by the Manager for the management of Ascott Reit’s portfolio. Pursuant to Clause 15.1.1 and Clause 15.1.2 of the
Trust Deed, the management fees are payable quarterly in arrears. The Manager’s management fees should be
viewed holistically as a whole which comprise two components, namely the Base Fee and the Performance Fee,
which are elaborated further below:
Base Fee
The Base Fee enables the Manager to cover operational and administrative overheads incurred in the management
of the portfolio. The Base Fee is calculated at a percentage of asset value as the asset value provides an
appropriate metric to determine the resources for managing the assets.
Performance Fee
The Performance Fee is based on objective benchmarks that are aligned with the interests of Unitholders as a
whole – in this case, Gross Profit. This serves as motivation for and provides the Manager with the incentive to
enhance Gross Profit on a long-term and sustainable basis through efficient portfolio management, astute cost
management and effective use of debt and equity. This can be achieved by proactive organic and external growth
strategies such as asset enhancement initiatives, acquisitions, developments and divestments to continually
refresh the portfolio and sustain income accretions. Taking on short-term risks of deferring asset enhancement
initiatives or repairs and maintenance is deterred as the Manager strives to achieve sustainability.
The pegging of the Performance Fees to Gross Profit also aligns the Manager with the interests of Unitholders
as the Manager’s compensation is commensurate with the value the Manager delivers to Unitholders as a whole
in the form of distributable income which is also derived from the net income and as evidenced by the Manager
achieving an optimal percentage of the overall fees to total assets of 0.4%.
In addition, the Manager is also paid an Acquisition Fee or a Divestment Fee upon the successful completion
of an acquisition or divestment respectively. Further details on the Acquisition Fee and the Divestment Fee are
provided below:
Acquisition Fee
The Acquisition Fee, which is contained in Clause 15.2.1 of the Trust Deed, is earned by the Manager upon the
successful completion of an acquisition. This fee seeks to motivate and compensate the Manager for its efforts
expended to continually seek out and acquire distribution per Unit accretive assets to increase longer term
returns for Unitholders. In addition, the Acquisition Fee allows the Manager to recover the additional costs and
resources incurred by the Manager in the course of seeking out new acquisition opportunities, including but not
limited to, due diligence efforts and man hours spent in evaluating the transaction.
As required by the Property Funds Appendix, where Acquisition Fee is to be paid to the Manager for the
acquisition of assets from an Interested Party, the Acquisition Fee is to be paid in the form of Units at the
prevailing market price, which should not be sold for a period of one year from their date of issuance. As the
Manager’s interest is closely tied to the performance of Ascott Reit, in this regard, this helps to ensure that any
acquisitions from Interested Parties perform and contribute to Unitholders’ returns.
Divestment Fee
The Divestment Fee, which is contained in Clause 15.2.1 of the Trust Deed, is earned by the Manager upon the
successful completion of a divestment. This fee seeks to motivate and compensate the Manager for its efforts
expended to continually rebalance the portfolio and maximise value received by Ascott Reit in the divestment.
In addition, the Divestment Fee allows the Manager to recover the additional costs and resources incurred by the
Manager for the divestment, including but not limited to due diligence efforts and man hours spent in marketing
and maximising the divestment price.
As required by the Property Funds Appendix, where Divestment Fee is to be paid to the Manager for the
divestment of assets to an Interested Party, the Divestment Fee is to be paid in the form of Units at the prevailing
market price, which should not be sold for a period of one year from their date of issuance.
