Unit pricing discretion policy

22 February 2008

BT's unit pricing policy details the discretions that BT companies may excercise calculating unit prices. Either, read the policy below or:

Download the BT Unit Pricing Discretion Policy

Purpose of this policy
Unit pricing
Discretions
Suspension of unit pricing
Records
Nominees
Variations of this policy
Further information

Appendix 1 - BT Funds priced monthly

Appendix 2 - BT Funds whose entry and exit prices are calculated to 3 decimal places

Appendix 3 - BT Funds which charge performance fees

Purpose of this policy

This policy has been prepared by BT Funds Management Limited¹, BT Funds Management No. 2 Limited² and Westpac Financial Services Limited³ (the BT Companies, and together, BT) in relation to the registered managed investment schemes (BT Funds) for which a BT Company is the responsible entity. It has been prepared for the purposes of Australian Securities and Investments Commission (ASIC) Class Order 05/26.

This policy sets out the discretions the BT Companies may exercise in calculating unit prices.

This policy is not a complete description of all matters affecting unit prices or investments in BT Funds, and should be read subject to the Product Disclosure Statement (PDS) and Constitution for the relevant BT Fund.

Back to top
Unit pricing

The entry price and exit price for units in a BT Fund at any time are each calculated as the total value of the assets of the BT Fund less its total liabilities, adjusted for transaction costs, divided by the number of units on issue.

Back to top
Discretions
1. Transaction costs
  
  Transaction costs are BT’s estimate of the total transaction cost the BT Fund would incur to buy the assets of the BT Fund (for applications) or sell those assets (for withdrawals).
  
  BT bases these estimates on costs incurred historically on transactions for the BT Funds, as well as its experience in buying or selling similar assets.
  
  In some cases, BT may estimate the transactions costs as being zero. For example, where BT agrees that an investor is to receive assets from the BT Fund instead of cash on a withdrawal, BT may agree that there will be no transaction costs. This is because no assets will need to be sold to pay the withdrawal.
  
  For an application for units, an adjustment is made to increase the unit price for transaction costs; and for a withdrawal of units, an adjustment is made to decrease the unit price for transaction costs.
  
  BT believes that exercising its discretions in this way is reasonable because it ensures that transaction costs relating to applications and withdrawals of units are fairly allocated to the relevant investors, and are not unfairly borne by all investors in the relevant fund.
  
  Back to top
2. Valuation time
  
  Entry and exit prices for the BT Funds are based on market prices or valuations available at the end of the business day on which the application or withdrawal is taken to be received.
  
  An application or withdrawal is taken to be received on a business day if it is received before the cut-off time specified by BT. BT has exercised its discretion to make the cut-off time 4pm (Sydney time) for the BT Funds. An application or withdrawal received after the cut-off time on a business day receives an entry or exit price based on market prices or valuations at the end of the following business day.
  
  BT has a discretion to change these cut-off times. If BT does so, investors will be notified, usually in the next regular communication from BT. The BT Funds listed in Appendix 1 have their unit prices determined monthly, or at other intervals, and for these funds investors should read the Product Disclosure Statement for further details.
  
  BT believes that exercising its discretions in this way is reasonable because it ensures that investors are able to apply for or withdraw units at prices that reflect the recent market valuations as closely as is reasonably practicable.
  
  Back to top
3. Rounding
  
  BT rounds entry and exit prices to 4 decimal places for all BT Funds, apart from those set out in Appendix 2, whose entry and exit prices are rounded to 3 decimal places.
  
  This is consistent with ordinary commercial practice, and is reasonable because it ensures a high degree of unit pricing accuracy.
  
  Back to top
4. Frequency of valuations
  
  BT values the assets of each BT Fund daily (apart from the funds listed in Appendix 1 as referred to in the next paragraph), based on the market prices and valuations available at the end of each business day. In unusual circumstances, such as in times of extreme market volatility, BT may value investments more than once during a business day.
  
  For the BT Funds listed in Appendix 1, BT values the assets of the fund monthly as at the time of the month specified in the fund’s constitution or Product Disclosure Statement.
  
  For some investments held by BT Funds, an up-to-date value of an investment may not be available at the end of a business day. For these investments, BT may use the value most recently obtained, or may adjust that value by reference to comparable investments or movements in market indices or other factors.
  
  BT believes that exercising its discretions in this way is reasonable because it ensures that valuations are carried out as frequently as is necessary to ensure that units are priced daily and are fair as between investors.
  
  Back to top
5. Valuations
  
  In valuing the assets of each BT Fund, BT uses the most recent market prices available to it at the time as at which it carries out the valuation. Where market prices are not available (for example, because the asset is not traded on a market) BT will calculate the value using the best information available to it, including by reference to comparable investments. BT may employ independent valuers or sources of information in determining these values.
  
  In valuing the assets of each BT Fund, BT applies valuation practices which are consistent with ordinary market practice. BT believes that exercising its discretions in this way is reasonable as it ensures to the extent practicable that a fair value is attributed to the assets of each BT Fund and that investments are valued consistently between funds and in different periods.
  
  Back to top
6. Fees and expenses
  
  Daily accrual
  
  Fees charged and expenses recovered within a BT Fund are accrued in the unit price on a daily basis, based on an estimate by BT of the amount of the fee accrued on that day.
  
  Entry and exit fees
  
  BT charges entry and exit fees for some BT Funds. Where the relevant BT Fund’s constitution provides for a maximum amount of entry or exit fees, BT will generally exercise its discretion to charge a lower fee than the maximum, and the lower fee will be set out in the BT Fund’s PDS. BT may also exercise its discretion to vary or waive entry or exit fees for specific investors, where permitted under ASIC policy and legal requirements.
  
  Entry and exit fees, including any variation or waiver of those fees, are charged outside the relevant BT Fund and do not affect unit prices.
  
  Management fees – fee accrual
  
  BT charges management fees for BT Funds. Where the relevant BT Fund’s constitution provides for a maximum amount of management fees, BT will generally exercise its discretion to charge a lower fee than the maximum, and the lower fee will be set out in the BT Fund’s PDS. BT may also exercise its discretion to vary or waive management fees for specific investors, where permitted under ASIC policy and legal requirements. If management fees are varied or waived, this occurs outside the relevant BT Fund and does not affect the unit price.
  
  Management fees are calculated by BT and accrue in the unit price on a daily basis.
  
  Performance fees
  
  Where a performance fee is charged by BT in relation to a particular BT Fund, BT calculates and accrues the fee as set out in the fund’s constitution. The BT Fund which charges a performance fee is set out in Appendix 3. BT may exercise its discretion to vary or waive performance fees for specific investors, where permitted under ASIC policy and legal requirements. If performance fees are varied or waived, this occurs outside the relevant BT Fund and does not affect the unit price.
  
  Performance fees are calculated by BT and accrue in the unit price on a daily basis. Because performance fees are generally payable based on the annual performance of a BT Fund, BT applies a reasonable methodology to accrue performance fees daily based on the daily performance of the relevant fund.
  
  Please refer to the Product Disclosure Statement for your fund to determine if performance fees apply, and the way in which they are calculated.
  
  Expenses
  
  For some BT Funds, the expenses of the fund will be met by BT from its management fee, and these expenses are not recovered from the fund. Please refer to the Product Disclosure Statement for your fund to determine if BT will meet the expenses of the fund from its management fee.
  
  For all other BT Funds, BT will recover from the relevant BT Fund the expenses of administering the fund and investing the assets of the fund. Expenses are apportioned between Funds based on the actual expenses incurred relating to that fund. Where expenses are incurred in relation to a number of BT Funds and no specific expense is attributable to a particular fund, expenses are apportioned on a fair basis.
  
  Where the fees for a BT Fund are stated in its Product Disclosure Statement to be inclusive of expenses, BT will bear the cost of any expenses which exceed this amount.
  
  Where the constitution for a BT Fund limits the amount or type of expenses that the fund can incur, BT will bear the cost of any expenses which exceed this amount.
  
  Exercise of discretions
  
  BT believes that exercising its discretions in these ways is reasonable because it ensures that fees and expenses are fairly allocated to the BT Funds and equitably apportioned as between investors in those funds.
  
  Back to top
7. Liabilities
  
  Where a BT Fund incurs liabilities other than fees and expenses, BT determines the value of these liabilities based on accepted Australian accounting principles. Where a liability is payable over an extended period, BT may make provision for the value of the liability and adjust the unit price of the relevant fund to reflect this provision. Liabilities affecting more than one fund are apportioned by BT fairly amongst the affected funds.
  
  BT believes that exercising its discretions in this way is reasonable because it ensures that liabilities of the BT Funds are borne fairly by all investors in the funds.
  
  Back to top
8. Asset transfers
  
  Where permitted by the BT Fund’s constitution, BT may in some circumstances exercise a discretion to permit an investor to:
  - transfer assets instead of cash in exchange for an issue of units in a BT Fund; or,
  - receive assets from a BT Fund instead of cash on a withdrawal of units.
  BT will only exercise its discretion to do so if it believes that this will not be disadvantageous to other investors. Where BT exercises this discretion, the assets to be transferred will be valued by reference to appropriate market prices and valuations to ensure that the value of the assets as closely as possible matches the cash that would otherwise have been payable.
  
  BT believes that exercising its discretions in this way is reasonable because it ensures that there is flexibility to enable investors in some circumstances to apply for units or withdraw units from a BT Fund by transfer of assets, while minimising transaction costs, and without disadvantaging other investors in the fund.
  
  Back to top
9. Distributions
  
  Frequency of distributions
  
  The frequency with which BT Funds distribute their income and realised capital gains in most circumstances is set out in the fund’s PDS. However, BT may exercise a discretion to vary this frequency, based on the amount and timing of taxable income and capital gains within the fund and other factors specific to the fund, such as expected cash flows.
  
  BT calculates interim distributions based on estimated income in accordance with the fund’s constitution. Capital gains and foreign exchange gains are not normally distributed until the June distribution. BT may also exercise its discretions as to whether a fund should distribute in a particular period and the amount of the interim distribution. In exercising this discretion, BT will have regard to anticipated cash flows in the fund and any anticipated large deposits into or withdrawals from the fund, in order to ensure as far as possible that all investors are treated fairly.
  
  BT believes that exercising its discretions in this way is reasonable because it ensures that the income of the fund is distributed fairly to investors and that the income and capital gains of the fund can be distributed in a way which does not impose an unfair tax burden on particular investors.
  
  Special distributions
  
  Where a large deposit is made into, or a large withdrawal is made from a BT Fund, BT may assess the tax position of the fund to decide if a special distribution is required. A special distribution will be made if BT considers that it is appropriate to distribute the fund’s income before the deposit or withdrawal, to ensure that all investors in the fund are treated fairly for tax purposes, and that no group of investors bears a disproportionate share of the tax on the fund’s income or realised gains.
  
  BT believes that exercising its discretions in this way is reasonable because it ensures that the taxable income and gains of the fund are allocated to investors fairly, and are not unfairly borne by any group of investors.
  
  Back to top
10. Multi-class portfolios
  
  Where a BT Fund has issued more than one class of units, BT exercises discretions as to the allocation of assets, liabilities, revenues and expenses to the classes, as set out below.
  
  Where the BT Fund has more than one class of units, but the same fees and expenses are applicable to each class, fees and expenses are allocated equally to all units, irrespective of class.
  
  Where the BT Fund has more than one class of units with different fees and expenses, the fund’s assets, liabilities and investment income are allocated to each class proportionally based on the size of each class.
  
  BT believes that exercising its discretions in this way is reasonable because it ensures that, where a BT Fund has issued multiple classes of units, the assets, liabilities, revenues and expenses of the BT Fund are allocated fairly between the classes.
  
  Back to top
Suspension of unit pricing

In some circumstances BT may exercise a discretion to suspend the ability of investors to withdraw from a BT Fund. In those circumstances, unit prices will generally not be available.

The circumstances in which this may occur include:
- a significant disruption in financial markets;
- the inability to obtain reliable valuations of assets; and,
- very large redemptions which may impose unreasonable tax or other burdens on remaining investors; and,
- if the fund becomes illiquid.
BT believes that exercising its discretions in this way is reasonable because it ensures that investors are able to apply for or withdraw units at prices that reflect their actual value (as far as can be determined) and that the majority of unitholders are not disadvantaged by the circumstances in which the discretion is exercised.

Back to top
Records

Where BT exercises a discretion consistently with this policy, BT will retain a record of the result of the exercise of discretion, but will generally not retain any other records relating to the exercise of the discretion.

Where BT exercises a discretion:
- in relation to which BT has no documented policy; or,
- in a way that involves a departure from BT’s documented policy,
BT will retain records containing details of the exercise of the discretion.

Back to top
Nominees

None of the discretions specified in this policy are exercised by nominees of any of the BT Companies.

Back to top
Variations of this policy

BT may vary or replace any term of this policy in relation to a BT Fund without prior notice to the investors in the relevant fund. Where the variation is material, BT may notify investors of the variation in writing or through bt.com.au.

Back to top
Further information

If you have any questions about anything in this policy or require any further information, please contact BT Customer Relations on 132 135 or post your enquiry to:

BT Financial Group
GPO Box 2675
Sydney NSW 2001

Back to top

Appendix 1

BT Funds priced monthly

Fund	ARSN
BT Multi-Strategy Yield Fund	118 596 026
BT Global Return No.2	111 629 086

Back to top

Appendix 2

BT Funds whose entry and exit prices are calculated to 3 decimal places

Fund	ARSN
BT Active Balanced Fund	106 553 977
BT Active Balanced Fund - NEF	089 133 746
BT Core Australian Share Fund	089 134 001
BT Core Hedged Global Share Fund	098 376 419
BT Diversified Share Fund	106 554 803
BT Diversified Share Fund - NEF	089 133 853
BT Ethical Share Fund	097 575 703
BT Fixed Interest Fund	089 133 184
BT Global Share Fund	089 839 743
BT Imputation Fund	089 839 912
BT Natural Resources Fund	089 134 341
BT Smaller Companies Fund	089 133 666
BT Tax Effective Income Fund	106 554 376
BT Tax Effective Income Fund - NEF	089 134 136