Unit Pricing Discretions Policy

Transcription

1 Navigator Australia Limited Unit Pricing Discretions Policy 2 October 2010 Contents Definitions 1 1. Background Introduction Applicable regulatory background Which Schemes does this Policy apply to? Commencement date 1 2. Unit Price Discretions Unit price: applications Unit price: withdrawals Net Asset Value Valuation methods Soft and hard unit prices Transaction costs in unit prices Suspension of unit pricing Unit roundings 3 3. Policy and Procedures Exercise of discretion Departures from this Policy Record keeping Any Questions 3 Schedule 1: Departure Report 4

2 Definitions In this Policy, the following definitions apply: Client means an investor in a Scheme; Corporations Act means the Corporations Act 2001 (Cth); Navigator means Navigator Australia Limited ABN AFSL ; Policy means this Navigator Australia Limited Unit Pricing Discretions Policy ; Responsible Entity has the same definition as in the Corporations Act; Scheme means a managed investment scheme of which Navigator is the Responsible Entity. 1. Background 1.1 Introduction This Policy sets out the background considerations used in reaching decisions regarding the discretions used in calculating unit prices for the Schemes. The Constitutions of the Schemes allow the Responsible Entity to exercise discretions in determining the unit price for each Scheme. 1.2 Applicable regulatory background This Policy ensures that Navigator meets its regulatory requirements. The Australian Securities and Investments Commission ( ASIC ) has determined: that the constitution of a registered scheme may provide a formula that is to be used to set the issue price of units; and that the responsible entity may have the discretion to decide a matter that affects the value of a factor included in the formula provided that the responsible entity meets certain requirements. ASIC Class Order 05/26 requires Navigator as Responsible Entity to have a written Unit Pricing Discretions Policy. Copies of this Policy can be obtained by Clients at no charge via our website, ASIC Class Order 05/26 also requires Navigator to keep a record of any exercise of any discretion: which is not covered by the Unit Pricing Discretions Policy; or which involves a departure from the Unit Pricing Discretions Policy. A Client may obtain a copy of these records from Navigator at no charge. 1.3 Which Schemes does this Policy apply to? Navigator applies this Policy to all of its Schemes which are open ended. These are Schemes which continue to issue new units throughout the life of the Scheme. The Schemes to which this Policy applies are the MLC Navigator Pre Select Funds, the MLC Navigator Access Investment Options and the Cash Account Income Fund. 1.4 Commencement date The commencement date of this Policy is 2 October Unit Price Discretions 2.1 Unit price: applications* The Scheme constitutions allow the Responsible Entity to exercise discretions in determining the unit price for each Scheme. The respective constitutions of the Schemes provide that the following formula is to be applied in determining the application price of a unit: Net Asset Value + Transaction Costs Units on Issue 2.2 Unit price: withdrawals* Respective constitutions for each Scheme provide that the following method is to be applied in determining the withdrawal price of a unit: Net Asset Value Transaction Costs Units on Issue 2.3 Net Asset Value Each Scheme s constitution defines Net Asset Value as the total value of all trust property less all trust liabilities. Trust property includes all property, rights and income of the Scheme. Trust liabilities means all liabilities including borrowings, accrued costs, expenses and outgoings, contingent liabilities and accrued management fees due to the Responsible Entity determined in accordance with generally accepted accounting principles. In calculating the Net Asset Value of a Scheme, Navigator may determine valuation methods and policies for each category of asset and change them from time to time. Assets and liabilities for the purpose of calculating the Net Asset Value will be in accordance with each Scheme s constitution and in accordance with the recognition and measurement requirements of applicable International Financial Reporting Standards, Australian Accounting Standards and the Corporations Act. * Excluding the Cash Account Income Fund where the unit value remains at $1 1

3 2.4 Valuation methods Each Scheme s constitution allows us to determine the methods by which we calculate the value of the assets. We generally use independent valuations from sources we consider reliable. The calculation methods used are as follows: Derivative financial instruments Bond and bill futures The value of these contracts is marked to market based on the value of the last quoted purchase or sale price of the relevant close out contract traded on a recognised futures exchange. Forward foreign currency contracts The market value of the forward foreign currency contract (forward) fluctuates with changes in currency exchange rates. The forward is marked to market daily. Share price index (SPI) futures The value of these contracts is marked to market based on the value of the last quoted purchase or sale price of the relevant close out contract traded on a recognised futures exchange. Exchange trade options The current market value of an option listed on a traded exchange is valued at its last settlement price. Listed shares and securities For accounting purposes, the fair value of securities listed on a stock exchange is determined as the bid price of the instrument at the close of business on the day the securities are being valued. Further, securities that are primarily traded on overseas exchanges are valued at the closing bid price on their respective exchanges, and those values are then translated into Australian dollars at the current exchange rate. However, for unit pricing purposes listed securities are valued at the last sale price at the close of business on the day the securities are being valued, rather than the bid price. Fixed income and money market securities Fixed income and money market securities are recorded at fair value based on bid prices at the close of business on the day the securities are being valued. However, for unit pricing purposes listed securities are valued at the last sale price at the close of business on the day the securities are being valued, rather than the bid price. Units in an unlisted managed investment scheme Fair value of units in unlisted managed investment schemes is determined at the net asset value (NAV) per unit at the close of business on the day the units are being valued. The NAV is calculated by the managed investment scheme s Responsible Entity by deducting from the value of the managed investment scheme s gross assets the value of its liabilities. A buy sell spread may be placed by the managed investment scheme s Responsible Entity on this unit price when quoting entry and exit prices. Accruals and contingent liabilities Accruals are calculated daily. However, we will not allow for contingent liabilities until there is a reasonable likelihood of them becoming payable. 2.5 Soft and hard unit prices It is our policy that all of our Schemes are to be priced on hard close valuations. However situations will arise where unit prices may be required to be estimated using a sound and reliable methodology. Estimation may be utilised if security values are not available to reflect market movement, if a reliable index can be sourced to calculate estimations and it is deemed to be in the best interests of Clients. If at any point, estimation is deemed to be no longer in the interests of Clients, unit pricing will be suspended. Investment switches, redemptions and applications will not be processed while unit prices are suspended. See paragraph 2.7 for further detail. 2.6 Transaction costs in unit prices When Clients make an application to or a withdrawal from a Scheme, the Scheme will generally incur costs in purchasing or selling investments. To ensure existing Clients do not continually bear the costs resulting from future applications and withdrawals a buy/sell spread is applied to each transaction. In calculating the application price, an allowance for transaction costs for the purchase of investments effectively increases the unit price. In calculating the withdrawal price, the allowance for transaction costs for selling investments effectively decreases the unit price. The difference between the two prices represents the buy/sell spread. For directly held assets, we determine the estimated costs of buying and selling the investments for each Scheme based on advice from our investment managers. For investments in unlisted managed investment schemes, we replicate the spreads of the underlying fund managers. 2

4 In-specie transactions of stock into and out of a Scheme should incur no spread as there is no cost involved in purchasing or selling investments. These transactions should be processed at the mid price which excludes the buy/sell spread. 2.7 Suspension of unit pricing Unit prices are calculated daily. There may be times when it is necessary to suspend unit pricing if Navigator believes it is in the best interests of Clients. Unit pricing will be suspended if there are conditions, internal or external, where it may be inappropriate to issue a unit price. Unit pricing will not recommence until any deficiencies have been rectified. Applications and withdrawals received during suspension will receive the unit price applicable to the day of the instruction, and will be processed as soon as practically possible. 2.8 Unit roundings Each Scheme s constitution allows us to round unit prices to four decimal places. The application and withdrawal prices are rounded to four decimal places. Similarly units issued and units redeemed are rounded to four decimal places. For example: Application price calculated as $ will be $ Withdrawal price calculated as $ will be $ If a Client provides $10,000 in application monies, the application price of $ would result in the issue of 9, units. If a Client requests a $10,000 withdrawal, the withdrawal price of $ would result in the withdrawal of 9, units. 3. Policy and Procedures 3.1 Exercise of discretion Navigator must act reasonably in exercising any discretion. However the manner in which a discretion is exercised must as far as practicable be consistent with ordinary commercial practice for valuing assets of the relevant kind. Navigator has based this Policy on ordinary commercial practice and therefore considers it is reasonable to exercise the discretions documented in accordance with this Policy. 3.2 Departures from this Policy If Navigator exercises a discretion in either of the following circumstances, then Navigator must complete a notice in the form set out in Schedule 1: Departure Report (or similar): Navigator exercises a discretion which is not covered by this Policy or in relation to which there is no documented policy that is current at the time of the exercise; Navigator exercises a discretion in a way that involves a departure from this Policy. 3.3 Record keeping Navigator will ensure that the records which it keeps under section 988A of the Corporations Act are kept in such a way as will enable any documented policy that was applied in the exercise or departure from a discretion that relates to the pricing of a unit to be identified. Navigator will: Retain any documents concerning the exercise of a discretion (including this Policy) for seven years after they cease to be current; Give a copy of such policy to the following persons on request at no charge: - a Client; - a person who has been or should have been given, or who has obtained, a copy of the disclosure document for a Scheme. Copies of any relevant documents are available by contacting Navigator (details below). 3.4 Any Questions If Clients or potential investors have any further questions or would like to request any of the relevant documents please contact Navigator: Navigator Australia Limited GPO Box 2567 Melbourne VIC 3001 Telephone: Facsimile: (03) services@mlc.com.au MLC_PL150B_1010 3

5 Navigator Australia Limited Unit Pricing Discretions Policy Schedule 1: Departure Report Scheme (insert Scheme name) Responsible Person (insert name of person) Position (insert position of person) Date discretion was exercised How was the discretion exercised? Explain how it departed from the Policy and why, or in what way it was covered by the Policy. Why was it reasonable to exercise the discretion the way it was exercised? If the discretion was not exercised in a way which is consistent with Scheme assets being valued in accordance with ordinary commercial practice, why was it impracticable to do so? This form must be completed and submitted to < date the discretion was exercised. > as soon as possible following the Checked by (insert name of person) Signed 7 Comments Checked by (insert name of person) Signed 7 MLC_PL150B_1010 4