PROCEDURE FOR DETERMINATION OF THE NET ASSET VALUE OF INVESTMENT FUNDS

Transcription

1 [Translation only] This document is a translation of the Estonian original version. In case of any discrepancy between this translation and the Estonian original version, the Estonian original version shall prevail. Approved by the Management Board of Swedbank Investeerimisfondid AS on 28 of June 2012 with decision no. A /8 PROCEDURE FOR DETERMINATION OF THE NET ASSET VALUE OF INVESTMENT FUNDS This Procedure (hereinafter Procedure ) shall determine the rules for determination of the net asset value of the investment funds managed by Swedbank Investeerimisfondid AS. The Procedure has been established in accordance with the Securities Market Act, Investment Funds Act, Regulation No. 39 of the Ministry of Finance from June 17 th, 2010 Procedure for Establishment of Net Asset Value of an Investment Fund s Assets and terms and conditions of funds managed by Swedbank Investeerimisfondid AS. 1. Definitions The terms used in this Procedure shall have the following meaning: 1.1. bid price the last known purchase quote at the regulated market; 1.2. closing price the closing price of the regulated market; 1.3. valuation date the day for which the net asset value of the fund is determined; 1.4. information provider the data vendor through which the prices of financial instruments are obtained; 1.5. mid-market price the average price at the regulated market; 1.6. market-maker a person defined in Securities Market Act 6 1 ; 1.7. fair value the amount for which it is possible to exchange assets or settle an obligation in a transaction between conscious, interested and independent parties; 1.8. management company Swedbank Investeerimisfondid AS; 1.9. fund administrator a person to whom the management company may have outsourced NAV calculation activities; regulated market a market defined in Investment Funds Act 257(1) clauses 1 and 2; business day any calendar day that is not Saturday, Sunday or national holiday in Estonia; listed security a security admitted to trading on a regulated market; professional investor a person defined in Securities Market Act 6(2); fund an investment fund managed by the management company. 1

2 2. General principles for determination of the net asset value of the fund and fund unit 2.1. The net asset value of the fund and fund unit is determined according to Investment Funds Act, Regulation No. 39 of the Minister of Finance from June 17 th, 2010 Procedure for Establishment of Net Asset Value of an Investment Fund s Assets, this Procedure and terms and conditions of the fund The net asset value of the fund and fund unit is determined by the management company. The management company may according to the Investment Funds Act outsource determination of the net asset value of a fund to a third party, e.g. the fund administrator In order to determine the net asset value of a fund, the value of the fund s assets (securities, other rights etc. belonging to the assets of the fund) is calculated from which the liabilities of the fund are subtracted. The value of the fund s assets is determined primarily on the basis of market value. If it is impossible to determine the market value, the value of fund s assets is determined on the basis of another method for calculating fair value according to the Procedure The net asset value of a unit is calculated by dividing the total net asset value of the units in the given class with the number of units in the same class that have been issued and not redeemed as of the moment of calculation, which has previously been adjusted with the units in the given class that arise from issue and redemption orders that have been received by the management company but not yet settled In case the valuation of the fund's assets pursuant to the Procedure does not ensure the determination of the fair value of the assets with sufficient reliability, the management company may in exceptional cases, if it is in the best interests of the fund unit holders and based on the best knowledge and skills of the management company, determine the fair value of the assets differently from the provisions of this Procedure primarily following the valuation methods approved by International Financial Reporting Standards (hereinafter IFRS ). Exceptional case primarily denotes situations when trading of securities on a regulated market is suspended or the management company believes that the market price of the assets does not reflect its actual value and therefore it is not possible to establish the fair value of the assets in a reliable manner. The management company shall document such cases in writing and justify the respective decision on valuation and valuation principles, and also indicate how the management company reached such value of the assets The management company has a right not to calculate the net asset value of the fund if 50% or more of the markets that the fund invests in are closed. 3. Determination of the value of money and deposits 3.1. The value of money and deposits shall be their nominal value The value of interest on deposits that has been calculated on the accrual basis but not yet received shall be determined as accrued income as at the valuation date pursuant to clause 12 of this Procedure. 4. Determination of the value of assets denominated in foreign currencies 4.1. The value of foreign currencies, assets and claims against the fund quoted in foreign currencies shall be revalued to the official currency of Estonia on the basis of the fund depositary s or professional investor s exchange rate as of valuation date When revaluing foreign currencies the rate of which is not fixed by the fund depositary or any known professional investor, the exchange rate against euro fixed by the central bank of the respective country is used. 2

3 5. Determination of the value of listed securities and regulated market selection principles 5.1. Determination of the value of listed shares The basis for determining the value of a listed share shall be the valuation date closing price as supplied by the currently used information provider. The valuation date mid-market price shall be used as the basis if there is no closing price. The valuation date bid price shall be used as the basis if there is no mid-market price. The last known price determined in the abovementioned manner shall be used if there is no bid price As an exception, the management company may, if it is in the best interests of the fund s unit holders, use any of the closing, mid-market or bid price known within 20 business days preceding the valuation date if the management company decides that this represents the fair value of the listed share more accurately. Such exceptions and the analyses of these cases have to be documented. Exceptional case primarily denotes situations when the price mentioned in clause does not reflect recently revealed or other available information If no transactions have been made with the share on any of the regulated markets where the share is listed within the last 20 business days, the value of the share shall be determined according to the rules for determination of the value of nonlisted securities pursuant to clause 6 of this Procedure, but as soon as one of the prices mentioned in clauses appears, such price shall be used as the basis for determination of the value of the share Determination of the value of listed debt securities The value of a listed debt security is determined on the basis of valuation date mid-market price given by sources of quotes accepted by the currently used information provider. The valuation date closing price shall be used as the basis of valuation if there is no mid-market price. The mid-market price of the previous business day shall be used as the basis of valuation if there is no closing price for the valuation date As an exception, the management company may, if it is in the best interests of the fund s unit holders, use any of the close, mid-market or bid price known within 20 business days preceding the valuation date if the management company decides that this represents the fair value of the listed debt security more accurately. Such exceptions and the analyses of these cases have to be documented If the quotes/prices specified in clause are missing or the management company believes that they do not represent the actual value of the listed debt security, as an exception in valuation a bid price outside the regulated market, depreciated acquisition cost or other fair value may be used As an exception, the management company may, if it is in the best interests of the fund s unit-holders, use depreciated acquisition cost method for valuation in case the debt security has been initially acquired into fund portfolio with the aim to keep it until redemption date As an exception, the management company may, if it is in the best interests of the fund s unit-holders, use depreciated acquisition cost method for valuation of short term debt securities in valuation of the net asset value of a money market fund or other fund with equivalent investment policy When using the depreciated acquisition cost method or other fair value, the management company shall primarily follow the IFRS. 3

4 In cases specified in sections , the management company shall document in writing and justify the decision on valuation and valuation principles, and also indicate how it reached such value of the assets In cases specified in sections , the management company shall compare the value reached with the mid-market price of the regulated market at least once a month and adjust the value if the difference exceeds 0.5% unless the fund s terms and conditions specify otherwise Principles for selection of regulated markets If a security has been listed on several regulated markets, the management company shall select one main market on the basis of the liquidity principle. 6. Determination of the value of non-listed securities 6.1. In case of non-listed securities, the valuation methods specified in IFRS shall be primarily followed in the establishment of their fair value Subject to clause 6.1, the value of non-listed shares may be determined on the basis of the market-maker s price or the audited book value of the company s equity capital Subject to clause 6.1,,the value of non-listed debt securities may be determined on the basis of the yield curve method and market-makers quotes or security s initial issuance yield may serve as the basis of setting up yield curve valuation As an exception, the management company may, if it is in the best interests of the fund s unit-holders, use depreciated acquisition cost method for valuation of non-listed debt securities in case the debt security has been initially acquired into fund portfolio with the aim to keep it until redemption date As an exception, the management company may, if it is in the best interests of the fund s unit-holders, use depreciated acquisition cost method for valuation of short term non-listed debt securities in valuation of the net asset value of a money market fund or other fund with equivalent investment policy. 7. Determination of the value of investment fund shares or units 7.1. If the investment fund shares/units are listed, the value of the shares/units shall be determined on the basis of clause If the investment fund shares/units are non-listed, the redemption price or the last net asset value known to the management company shall be the fair value of an investment fund unit/share The value of the holdings in private equity funds and the value of other closed-end funds shall be determined either on the basis of: net asset value of the private equity fund, but not older than one calendar year; or net asset value of the closed-end fund, but not older than one calendar year. 7.4 For determining the value of holdings in a real estate fund, the fund management company may, in addition to clause 7.3.2, if it is in the best interests of the fund unit holders and based on the best knowledge and skills of the management company, use fair value determined on the basis of or with reference to a valuation report or opinion prepared by attested property valuator or another competent person. The fund management company commissions the preparation of such valuation report or opinion at least annually, if necessary. 8. Determination of the value of derivative instruments 8.1. The value of a listed derivative instrument shall be determined on the basis of clause 5.1 or the fair value based on generally acknowledged valuation models adequate for 4

5 the valuation of the derivative instrument of a respective type The value of non-listed derivative instruments shall be determined considering the value of the underlying asset, the risk of the counterparty (credit risk), price movements and the time left for liquidation of positions. 9. Determination of the value of repurchase agreements In case of repurchase agreements and reverse repurchase agreements revaluation is only performed for accrued interest payments and receipts. Principal amount is accounted in nominal value. Present value of repurchase and reverse repurchase agreement is determined via theoretical, daily updated repo curve and daily updated price of underlying instruments. 10. Determination of the value of immovables The value of an immovable is determined on the basis of its market value or the fair value in case of market value s unavailability, determined on the basis of a valuation report provided by an attested property valuator. When choosing an attested property valuator, following criteria shall be considered: experience in assessing the value of similar immovables, good reputation and professionalism. The attested property valuator shall not be a unit-holder of the fund The valuation report specified in clause 10.1 shall be ordered at least once a year. In case the management company has reason to believe that the fair value of immovable has considerably changed, the valuation report specified in clause 10.1 shall be ordered more frequently than once a year If the fair value of the immovable cannot be reliably determined according to clause 10.1, the acquisition cost method must be used according to IFRS If the management company has reason to believe that external quotations or valuation estimates do not represent the correct fair value of immovable, the management company has a right to determine the fair value based on generally acknowledged valuation models adequate for the valuation of the respective immovable. 11. Determination of the value of other assets Income calculated on the accrual basis but not received shall be summarized under accrued income and prepaid expenses, incl. interest and claims of interest nature, dividend claims and other accrued income and prepaid expenses The fair value shall be used in the valuation of assets not specified in this Procedure. If it is impossible or irrelevant to take the fair value as basis, other generally acknowledged methods primarily following the valuation methods specified in IFRS may be used. 12. Impact of payments made on account of the fund The payments to unit holders made on account of the fund as stipulated in section 152 of the Investment Funds Act are reflected daily as liabilities of the fund. Said payments shall not have an impact on the net asset value of the fund. 13. Correction of miscalculations and errors in determination of net asset value and compensation for damages In the event inaccuracies are found in the net asset value of the fund, which were caused by miscalculations or incorrect data in the determination of the net asset value of the fund, the circumstances that caused the miscalculation or error shall be ascertained and the correct net asset value of the fund and fund unit shall be calculated. 5

6 13.2. The permitted error margin for the net asset value of the fund is: maximum 0.5% of the net asset value of the bond fund; maximum 1.00% of the net asset value of the equity fund; maximum 0.5% of the net asset value of the mixed fund; maximum 0.1% in the case of the difference in the rate of returns of different classes of units in the same fund that are subject to the same management and depositary fees Any error that exceeds the margins specified in clause 13.2 shall be deemed to be a significant error and the person who detects it shall inform the management company, the fund s depositary and the fund administrator thereof and these persons together shall prepare an action plan for elimination of the error and avoiding it in the future. The action plan must contain the following actions: assessment of the impact the error had on different investors; recalculation of the net asset value of the unit from the day the error was ascertained; determination of the pecuniary damages caused to the fund or an investor who suffered damages; informing the supervisory authorities of the countries where the fund units are publicly offered; informing the investors who suffered damages of the ascertained error and compensation of the associated damages The damages caused by a miscalculations or errors made in the determination of the net asset value shall be compensated on account of the management company as follows: units of the relevant fund are issued to the unit holders who suffered damages in order to compensate for the damages caused. If the unit holder has left the fund, the relevant amount of money shall be transferred to their current account in order to compensate for damages; in the event the damages were caused by the difference between under or over valuation of the fund s assets and the recalculation of the net asset value of the unit, the damages to the fund shall be compensated by transferring the relevant amount of money into the fund The minimum sum that will be compensated to a unit-holder is 3.5 Euros per investor. Damages below the minimum sum will not be compensated to a unit-holder except in case the unit-holder expresses its wish to receive the sum. 14. Final provisions Generally the management company does not disclose the price inputs for security valuation (internal and third party expert analyses, decisions and other specific information for basis of valuation). When disclosed, such information shall not be considered as investment consultancy, investment advice or provision of any other investment service. 6