Theta Asset Group Unit Pricing Policy

1. Introduction

The Theta Asset Group (TAG) of companies comprises Valuestream Investment Management Limited (Valuestream) (AFSL 246621), Theta Asset Management Ltd (Theta) (AFSL 230920) and Garigal Financial Services Pty Ltd (Garigal) (CAR 443096). This Policy has been adopted by the respective Boards of Valuestream, Theta and Garigal to meet their obligations as AFS licensees and representatives under the Corporations Act 2001 in relation to exercising unit pricing discretions.

The respective Boards of TAG endorse this Policy and are committed to ensuring compliance with established process and procedures.

2. Policy Objectives

Unit prices are calculated to determine the price at which scheme interests are transacted for new and existing members and to calculate the value of scheme interests for continuing members. Discretions are exercised by TAG which affect the methods and formulas applied in calculating unit prices. The aim of this policy is to ensure that the discretions available to TAG are fair and equitable, transparent and consistently applied and are reviewed and updated as deemed necessary to meet ongoing regulatory requirements and industry standards.

3. Obligations

This Policy has been prepared in accordance with:

• ASIC Instrument 2015/847, applicable for Schemes registered before 1 October 2013; and
• ASIC Class Orders 13/655, 13/656 and 13/657, applicable to Schemes registered after 30 September 2013.
• Regulatory Guide 94: Unit pricing: Guide to good practice, joint ASIC and APRA guide

Section 601FC of the Corporations Act includes the requirement for responsible entities to act in the best interests of investors and to exercise the degree of care and diligence of a reasonable person in that position. The exercise of any discretion by TAG outlined within this Policy is subject to the general duties of a responsible entity.

TAG has identified the following discretions in calculating the issue price and redemption price for units within each scheme:

• Determining the value of assets and liabilities of a scheme
• Estimating transaction costs
• Timing of the issue of units and valuation
• Allocating assets and liabilities between classes
• Suspending unit prices
• Transaction backdating
• Rounding of unit prices

4. How Unit Prices are Calculated

As outlined within each respective scheme’s constitution, the exercise of discretion is involved in calculating the issue price, application price and the redemption price for units in a relevant scheme. Unit prices will be calculated in accordance with the below methods subject to the terms outlined within the Fund Documents:

4.1 Issue Price

The calculation of the issue price for initial units is outlined within the scheme’s constitution. Generally, the issue price will be a fixed dollar amount.

4.2 Application Price

The Application Price is generally calculated according to the below formula:

(Net Asset Value + Transaction Costs)/Total number of Units In Issue

With respect to listed registered managed investment schemes, uniting pricing will not be undertaken following the issue of units in the scheme as subsequent transactions in these units will be conducted in the secondary market.

4.3 Redemption Price

The Redemption Price is generally calculated according to the below formula:

(Net Asset Value – Transaction Costs)/Total number of Units In Issue

While the relevant Scheme is not liquid, the relevant Scheme constitution may provide TAG with the discretion to reduce the Net Asset Value by an amount other than the Transaction Costs.

5. Unit Pricing Components

This section outlines the general approach to the exercise of discretion in calculating unit price components Net Asset Value and transaction costs.

Any departure from the exercise of discretions outlined within this Policy will be managed in accordance with section 7, “Departure from Policy”.

5.1 Net Asset Value

Net Asset Value is generally determined in accordance with Australian Accounting Standards. It equals the total Scheme Asset less the Scheme Liabilities at the time of calculation. The timing of the calculation of Net Asset Value must be in accordance with this Policy.

Determining Net Scheme Value involves the exercise of discretion by TAG to determine the value of the Scheme’s asset and the value of those Scheme Liabilities which are contingent at the time of calculation.

(a) Scheme Assets
The method for calculating the value of all assets of the relevant Scheme will be, as far as practicable, in accordance with Australian Accounting Standards and consistent with ordinary commercial practice for valuing assets of the relevant kind. The Valuation Policy outlines the principles and methods applied in valuing Scheme Assets.

The timing of asset valuations must be in accordance with this Policy. If the assets of the relevant Scheme are valued in a manner inconsistent with ordinary commercial practice, then the basis of valuation will be determined by TAG in accordance with their duties as responsible entities and where necessary in consultation with the relevant Scheme’s financial auditor.

(b) Scheme Liabilities
Where relevant Scheme Liabilities are evidenced through documentation and are independently verifiable, no discretion is exercised in their valuation. However, the discretion of TAG is employed when the value of a liability is contingent or anticipated in which case the liability will, to the extent practicable, be valued in accordance with Australian Accounting Standards and in a manner consistent with ordinary commercial practice for valuing that type of liability supported by relevant invoices and statements of accrual.

Where TAG must exercise discretion in assigning a value to a liability, it will use the amount shown on the most recent published accounts or most recent balance sheet of the relevant Scheme.

However, if TAG reasonably believes the amount does not represent its true value, or an amount is not shown in the accounts, then the basis of valuation will be determined by TAG in accordance with their duties as responsible entities and where necessary in consultation with the relevant Scheme’s financial auditor.

5.2 Transaction costs

Transaction costs are associated with the acquisition and disposal of assets. These costs are applied to the Net Asset Value to calculate the application and redemption prices. The exercise of this discretion is necessary to ensure unitholders are treated fairly with respect to the costs incurred by the Scheme. Transaction costs include provisions for brokerage, commissions, disbursements and other expenses associated with the acquisition or disposal of assets, subject to the relevant Scheme constitution.

Where transaction costs associated with acquiring or disposing an asset are historical and the amount can be evidenced through documentation (such as invoices), no discretion is exercised.

However, if a transaction cost is yet to be incurred at the time of valuation, TAG must exercise their discretion in estimating the value. In such instances, the basis of valuation will be determined by TAG in accordance with their duties as responsible entities and where necessary in consultation with the relevant Scheme’s financial auditor.

5.3 Number of Units

The number of Units in Issue is a predetermined amount and therefore does not involve TAG exercising any discretion. The timing of the issue of units must be in accordance with section 6.1 of this Policy.

6. General Discretions

Each of the general discretions described below are subject to the terms of the relevant Scheme’s constitution and the disclosure document.

Any departure from the exercise of discretions outlined within this Policy will be managed in accordance with section 7, “Departure from Policy”.

6.1 Timing

(a) Issue of units
Subject to the relevant Scheme’s Fund Documents, Units may be issued and allotted at any time and Units in any class, once issued or allotted, are taken to be issued or allotted at the time at which TAG calculates the Net Asset Value.

However, if units are to be issued on a reinvestment of distributions, TAG will recognise the issuance as an application to reinvest distributions immediately before the first valuation after the end of the relevant income distribution period.

(b) Valuation
Subject to the terms of the relevant Scheme constitution, TAG may cause any assets of the Scheme to be valued at any time (not limited to once a day) in accordance with the asset valuation method.

TAG may calculate the Net Asset Value at any time (not limited to once a day) in accordance with this Policy. If the constitution for a relevant Scheme allows for redemption or the issue of new units, Theta may calculate Net Asset Value for each relevant Scheme at the time of application or redemption of units.

6.2 Allocating

With respect to multi-class Schemes, TAG RE is required to allocate assets, liabilities, revenue and expenses between classes in a manner that ensures that the Net Asset Value of each class is calculated fairly.

Where assets or liabilities are tracible to a particular class of units, TAG may, subject to the terms of the Fund Document, assign the value in proportion to the class’ rights in the relevant Scheme.

6.3 Suspension of Unit Pricing

In circumstances where the valuation of scheme assets and liabilities cannot be reliably calculated, TAG may consider it necessary to suspend unit pricing calculations.

The calculation of unit prices will resume once TAG is satisfied that the valuation of assets and liabilities can be reliably produced.

During the suspension period TAG will manage the communications with internal and external stakeholders.

6.4 Backdating Unit Prices

Transaction backdating may be required to ensure the appropriate value is applied for the effective date for applications and redemptions. Transaction backdating may arise in circumstances where there are processing errors or with respect to the unit pricing calculation processing turnaround times.

The backdating of transactions may have a positive or negative impact of the Net Asset Value of the fund and there is a potential impact on non-transaction members.

The backdating of transactions will be monitored to determine whether compensation is required in accordance with this Policy.

6.5 Rounding

The Issue Price and Redemption Price will be rounded up or down to the number of decimal places specified in the Constitution for the relevant Scheme.

6.6 Foreign Currency

Where applicable, conversion of foreign currency must be carried out for each unit pricing calculation in accordance with the relevant Australian Accounting Standards. This includes relevant Schemes with international investments or investment in an underlying relevant Scheme with reporting in a foreign currency.

7. Departure from the Policy

7.1 Process

In the event that there is a departure from the method of exercising discretion that is referred to in this Policy, the departure will be referred to TAG’s Directors by TAG’s Compliance Manager. The Directors will apply a calculation method consistent with ordinary commercial practices unless it is impractical to do so. The Directors will act in the best interest of unitholders to achieve fair and equitable outcomes for all unitholders.

Any departure from this Policy will be reported to the Scheme’s Compliance Committee.

7.2 Documentation

If there is a departure from this Policy by TAG, or its nominee, a document will be prepared setting out the following requirements (and such other requirements of ASIC instruments or class orders from time to time):

• the date on which the discretion is exercised;
• the name of the fund and identity of the nominee (if applicable);
• how the discretion is exercised;
• who authorised the exercise;
• an explanation why it is reasonable to exercise the discretion the way it was exercised; and
• an explanation of why it was impracticable to exercise the discretion in accordance with ordinary commercial practice (if applicable).

8. Management of Errors

8.1 Identification

Errors may arise as part of the unit pricing process adopted by TAG, or its nominee, in:

• the number of units allocated; or
• the price per unit.

Where an error is determined to be a breach, it will be managed in accordance with TAG’s Breach Handling Policy.

Should the error result in unitholders being disadvantaged, it will be referred to the relevant TAG Board who will make appropriate recommendations as to compensation, with oversight being provided by the Independent Compliance Committee.

Unit price adjustments made as a result of estimates becoming known values, changes to tax, law, policy or scheme documents, amongst other things are not considered to be errors.

8.2 Error Materiality

In relation to the error management, TAG will have regard to applicable industry standards and ASIC policy and guidance notes relevant to determining whether an error is material.

Where errors are classified as material, TAG’s Compliance Manager will refer the error to the Compliance Committee to make appropriate recommendations.

9. Maintenance of Records

This Policy will be retained by the TAG for seven years after this policy ceases to be current. The Policy is available for download from Theta and Valuestream’s respective websites. A hard copy of this Policy will be provided at no charge.

TAG will also retain documentation for cases where there is no documented policy or where there is a departure from the documented policy at the time of exercise of discretion. This documentation will be retained for seven years after the discretion ceases to be current. A hard copy of the discretion will be provided at no charge.

10. Review

This Policy will generally be reviewed on an annual basis or any other time as necessary to ensure that it remains current with respect to industry standards, legislation and regulatory requirements.

11. Definitions

In this Policy unless otherwise stated:

• ‘APRA’ means the Australian Prudential and Regulation Authority
• ‘ASIC’ means the Australian Securities and Investments Commission
• ‘Assets’ are defined in accordance with applicable Australian Accounting Standards
• ‘Australian Accounting Standards’ means the applicable accounting standards under the Corporations Act 2001 (Cth) and other mandatory professional reporting requirements in Australia.
• Fund Documents means Fund Constitution, Product Disclosure Statement or Information Memorandum
• ‘Member’ means a member of a relevant Scheme.
• ‘Policy’ means the Unit Pricing Policy
• ‘Scheme’ means a managed investment scheme registered under Chapter 5C of the Corporations Act 2001(Cth) to which this Policy applies
• ‘Unit’ means an interest in a relevant Scheme divided into units
• ‘Units In Issue’ means the total number of Units (for each class) that have been issued for the Scheme
• ‘TAG’ means the Theta Asset Group of companies comprising of Valuestream Investment Management Limited (Valuestream) (AFSL 246621), Theta Asset Management Ltd (Theta) (AFSL 230920) and Garigal Financial Services Pty Ltd (Garigal) (CAR 443096)

Effective 20 August 2018