Unit Pricing Policy
What is Becton’s Unit Pricing Policy?
This document sets out;
- the formula that Becton Investment Management Limited and Lachlan REIT Limited (“Becton”) will use in determining the unit prices for registered schemes managed by Becton; and
- the principles Becton will adhere to in exercising its discretion on certain aspects of the calculation of unit prices.
Why Does Becton Have a Unit Pricing Policy?
Becton believes it is important that investors understand how the unit prices for their investments are determined.
The Policy also ensures that Becton 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.
Those requirements are set out below followed by an explanation of Becton’s policy relating to each requirement. For each requirement we have also included a summary of why we believe we are acting reasonably, and in the best interests of members, in adopting the policy we have.
Which funds does this policy apply to?
Becton applies this policy to all of its funds which are open for investment, or have the potential to be open for investment, or redemptions. These are funds which may continue to issue new units throughout the life of the fund. Becton has six funds which may be open for investment:
- Becton Diversified Property Fund (ARSN 117 509 921) (“BDPF”)
- Becton Industrial Fund (ARSN 099 680 252) (“BIF”)
- Becton Office Fund (ARSN 106 453 196) (“BOF”)
- Becton Retail Fund (ARSN 107 250 420) (“BRF”)
- Becton Diversified Direct Property Fund (ARSN 095 428 827) (“BDDPF”)
- Becton Office Fund No.2 (ARSN 102 233 518) (“BOF2”)
(each a "Fund" and collectively the “Funds”)
Unit Price—Applications
Except for the BDPF, the respective constitutions of the Funds provide that the following formula is to be applied in determining the application price of a unit:
Net Asset Value – Accrued Income + Transaction Costs
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Units on Issue
The BDPF provides the following formula is to be applied in determining the application price of a unit:
Net Asset Value + Transaction Costs
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Units in Issue
Unit Price—Withdrawals
Except for the BRF, the respective constitutions of the Funds provide withdrawals may be made from the Funds. Under the constitution for the BRF, a unit holder may only withdraw from the Fund by transferring its units in accordance with its constitution, therefore no method for determining withdrawal prices is provided for under its constitution.
In respect of the remaining Funds, the following methods are to be applied in determining the withdrawal price of a unit:
- BOF determines withdrawal prices by considering the Current Unit Value, calculated in accordance with the constitution, and deducting disposal costs and transaction charges as determined by Becton.
- BIF determines withdrawal prices by considering the Current Unit Value, calculated in accordance with the constitution, and deducting withdrawal costs and other amounts specified in the constitution.
- BDPF determines withdrawal prices by deducting Transaction Costs from the Net Asset Value and dividing the sum by the Units in Issue.
- BDDPF determines withdrawal prices by deducting Transaction Costs from the Net Asset Value and dividing the sum by the Units in Issue.
- BOF2 determines withdrawal prices by deducting Transaction Costs from the Net Asset Value and dividing the sum by the Units in Issue.
Net Asset Value
The Net Asset Value of each Fund is determined by valuing all property, rights and income of the Fund and then subtracting any liabilities of the Fund. Each of the elements of this calculation is considered below:
- Value of property, rights and income
Property, rights and income of the Fund are valued in accordance with the method of valuation as set out below (see "Valuation Methods"). - Liabilities of the Fund
Under each Fund’s constitution, liabilities are defined as all the liabilities of the Fund, including any provisions Becton considers should be taken into account in determining liabilities. To the extent accounting standards require any amounts representing unitholders’ funds to be classified as a liability, then for the purposes of calculating Net Asset Value for the Fund, unitholders’ funds are not to be treated as a liability.
Net Asset Value does not include:
- Distributable income awaiting payment to unit holders
- Application money for units which have not been issued
- The fair market value of derivative financial instruments
- Proceeds from withdrawals from the Funds which have not been paid
Generally, Becton complies with the Australian equivalents of International Financial Reporting Standards (“AIFRS”) in determining the value of assets and liabilities and for the recognition of accruals of expenses etc. However, there are some times when we will depart from these standards as detailed below.
Under the constitutions of the Funds, Becton may determine Net Asset Value at any time, including more than once on each day.
Becton Policy
Assets and liabilities will be valued according to the method detailed in the constitution or the product disclosure statement (PDS) of each Fund, irrespective of whether these methods are consistent with AIFRS.
Becton may also use a different valuation method where it considers it reasonable and in the best interests of investors that the alternative method, rather than the method which is consistent with AIFRS, is appropriate.
The Unit Pricing Committee (see ‘Unit Pricing Committee’ below) must be informed of all details relating to any variances from AIFRS valuation bases.
Reasonableness
Becton considers this policy reasonable for the following reasons:
- To value assets and liabilities by a method other than that detailed in the constitution or PDS would be a breach of the constitution and may cause the PDS to be misleading and deceptive.
- AIFRS is designed for general purpose reporting, while Becton’s unit pricing policy seeks to ensure equal treatment of new, remaining and departing unit holders, and this treatment is not required to be reflected in the financial statements (for example, certain contingencies may only be recorded in the notes under AIFRS because payment is not certain but those contingencies may be sufficiently probable that they be included in calculations for unit pricing purposes.
- Some of the deficiencies in the use of AIFRS as a base for providing an equitable method of valuation for pricing purposes are recognised by ASIC in a class order [CO 04/1575].
Valuation Methods
Becton Policy
Becton may determine valuation methods and policies for each category of asset and change them from time to time. Unless determined otherwise, the value of an asset for the purpose of calculating Net Asset Value will be determined in accordance with the relevant Fund constitution.
If Becton values an asset at other than its historical cost, the valuation methods and policies applied in determining that value must be capable of resulting in a calculation of the unit price that is independently verifiable.
For each real property asset in the Funds, Becton follows its Valuation Policy.
The BDPF may have a proportion of its funds invested in property trusts listed on the Australian Stock Exchange (“LPTs”) from time to time. These investments will be “marked to market” on a daily basis. This means the value of the BDPF’s LPT investments will move on a daily basis in accordance with movements in the price of the LPTs on the Australian Stock Exchange.
The BDPF may have a proportion of its funds invested in non-Becton unlisted managed funds, in accordance with the ASIC’s “Unit pricing – Guide to good practice” (August 2008), we intend to use the unit price most recently advised to Becton by the relevant responsible entity.
For short term and floating rate deposits and loans we use the book value.
Accruals will be entered for each pricing period. However we will not allow for contingent charges until we believe there is a reasonable likelihood of their becoming payable.
We reserve the right to depart from this basis if we consider that events have occurred that we believe will materially affect the value of an asset and that it would be unreasonable to investors in the Funds to use the methods detailed above.
Reasonableness
Becton considers this policy is reasonable because:
- Valuing real property assets on a rolling quarterly basis prevents large rises and falls in unit price which can occur if all the assets in the Funds were valued at the same time each year (i.e., June 30) which can disadvantage new and exiting unit holders.
- The method for valuing LPTs is in accordance with AIFRS requirements for determining fair value and is one of the common methods used in the funds management industry.
- The value obtained for unlisted investments is in accordance with ASIC policy.
- The ability to depart from this policy, should there be events which materially affect the value of an asset, ensures Becton always has sufficient flexibility to ensure the unit price is reasonable.
Transaction Costs on Unit Prices
As shown in the formula above (see ’Unit Price—Applications’), Transaction Costs are added to the Net Asset Value in determining the unit prices of the Funds.
Transaction costs are the costs the relevant Fund has incurred, or will incur, when assets are bought and sold. Transaction costs are often referred to as the buy/sell spread.
Transactions costs applicable to the purchase of an asset are:
- Stamp duty on asset acquisitions
- Legal fees incurred in acquiring assets
- Agent costs
- Finance costs
- Brokerage fees (for LPTs)
- RE property acquisition fees
- Offer costs
On the sale of an asset, Becton also applies 1% of the value of the asset being sold for the purposes of calculating transaction costs.
These fees are paid by investors who are transacting rather than investors remaining in the Fund.
Becton Policy
Becton intends to treat Transaction Costs in the following manner:
- Transaction Costs will be amortised over the remaining term of the relevant Fund, or over ten years, whichever is the shorter period of time.
- If the amortisation of the Transaction Costs would result in the application price for the relevant Fund decreasing below the previous unit price then Becton has the discretion to accumulate the Transaction Cost and subsequently ‘net them off’ against future rises in Net Asset Value when this will not result in a decrease in the application price.
- Becton has discretion to accelerate the amortisation of Transaction Costs if there has been a significant increase in Net Asset Value and the acceleration will not disadvantage new or exiting unit holders.
Reasonableness
Becton considers this policy is reasonable because:
- Allowance for transaction costs is recommended in the ASIC Good Practice Guide as a means of retaining equity between new, remaining and exiting members.
- Imposing Transaction Costs ensures that members of the Funds who are not buying or selling interests in the scheme at a particular point in time are not disadvantaged by the scheme bearing costs associated with the need to buy and sell scheme assets in order to satisfy applications made for the issue or withdrawal of interests in the scheme. In effect, such costs are borne by the members whose entry to or exit from the scheme cause the expenses to be incurred, rather than being borne by all scheme members.
- If Transaction Costs were allowed to flow through into Net Asset Value rather than be established as a reserve for the expected future costs it would advantage those exiting the Funds just prior to an asset purchase when compared to unit holders entering and remaining.
- Becton’s approach to amortisation of transaction costs is consistent with industry market practice and helps to protect unit holders against significant fluctuations in unit prices in the Funds.
Costs on Withdrawal Prices
Becton Policy
As shown in the formula above (see ’Unit Price—Withdrawals’), Becton has discretion in relation to disposal costs as they affect the BOPT and withdrawal costs as they affect the BIPT.
Costs applicable to the withdrawal price are:
- Legal fees incurred in acquiring assets
- Agent costs
- Brokerage fees (for LPTs)
- RE disposal fees
Reasonableness
Becton believes it is reasonable to apply disposal and withdrawal costs to the withdrawal price of units for the same reasons it applies transaction costs to the issue price of units (see 'Transaction Costs on Unit Prices').
Frequency of unit pricing
Under the constitutions of the Funds, Becton must determine the Unit Price on the later of-
- the day it receives an application for units, or
- the day it receives an application money or property against which units are to be issued.
Becton Policy
The Unit Price for the Becton Diversified Property Fund will be calculated daily. The price for the previous day will be available by 12 noon on any business day.
The unit price for all the other Funds will be calculated at the close of business on the last business day of the month following each quarter however, Becton reserves the right to price units more frequently.
The BDPF issues units on a daily basis. The other Funds issue units at the beginning of each month, however, Becton reserves the right to price units more frequently
Reasonableness
- Becton believes daily pricing of BDPF is necessary due to its investment in LPTs as the value of those investments will move on a daily basis in accordance with movements in the price of the LPTs on the Australian Stock Exchange
- As the assets of the other funds are mostly real property assets held directly by the Funds, Becton considers quarterly pricing to be reasonable because the values of the property assets will not be normally expected to show significant movements within this timeframe.
- The ability to price units more frequently, should there be events which materially affect the value of an asset, ensures Becton always has sufficient flexibility to ensure the unit price is reasonable.
Suspension of Unit Pricing
Becton Policy
We will suspend unit pricing if there are conditions – either internal or external – which mean that Becton believes it is not appropriate to declare a unit price. Unit pricing will not recommence until we believe any deficiencies have been rectified. Applications and redemptions received during suspension will be processed at the next available price subject to normal considerations.
Reasonableness
Whilst we have established processes and procedures that are designed to limit any material issues, it is not possible to rule out these occurring. In order to maintain reasonable equity between unit holders it is necessary to have the ability to suspend prices until the material issue can be resolved.
Exercise of Discretion
- Becton must act reasonably in exercising any discretion. However the manner in which any discretion is exercised must as far as practicable be consistent with ordinary commercial practice for valuing property of the relevant kind.
- Becton has based this Policy on ordinary commercial practice and therefore considers that it is reasonable to exercise the discretions documented in this Policy in accordance with this Policy.
Unit Pricing Committee
Becton has a Unit Pricing Committee (“the Committee”). The Members of the Committee will always include the:
- Becton Property Group CEO (optional attendee)
- Head of Funds Management (required attendee)
- Chief Investment Officer (required attendee)
- Becton Property Group General Counsel; and (required attendee)
- BIM Financial Controller (required attendee)
The Committee meets every quarter, or more regularly if deemed necessary, to consider and set the unit prices of the Funds and ensure compliance with this policy. A quorum of at least three members of the Committee must be in attendance for all meetings.
Setting of Unit Price
The Committee will consider the raw unit price as provided by the Fund Accountant, together with other information provided by the Fund Manager that the Committee deems appropriate in the setting of the Unit Price.
The Fund Manager is responsible for providing all other additional information used by the Committee in considering the Unit Price.
Only Committee members may vote on setting the Unit Price. Each Committee member has one voting right. The Unit Price will be set according to a simple majority of votes cast by the required attendees, however where the required attendees are unable to reach a majority, the discussion will be referred to the BPG CEO for a casting vote.
Departures from this Policy
If Becton or its nominee exercises a discretion in either of the following circumstances, then Becton or its nominee must complete a notice included as Schedule 1—Departure report:
- Becton or its nominee 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 exercise.
- Becton or its nominee exercises a discretion in a way that involves a departure from this Policy.
Record Keeping
Becton will ensure that the records which it keeps under section 988A of the Act are kept in such a way as will enable any documented policy that was applied in the exercise or departure from of a discretion that relates to the pricing of a unit to be identified.
Becton must do the following:
- 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 documents to the following persons on request at no charge:
- A member of the Fund.
- A person who has been or should have been given, or who has obtained, a copy of the disclosure document for the Fund.
If you would like a copy of any relevant documents please contact Becton (details below).
Questions?
If you have any further questions or would like to request any of the information available to existing or potential investors please contact Becton Investor Services:
Toll free number 1800 182 257
Level 2
289 Wellington Parade South
East Melbourne, VIC 3002
Telephone (03) 9832 9000
Facsimile (03) 9832 9068