1. This guidance relates to the calculation of a single price and net asset value in accordance with these Rules. Under these Rules, the Fund Manager should take all reasonable steps, and exercise due diligence, to ensure that the Fund Property is valued in accordance with the FSMR, these Rules and the Fund's Constitution.
2. This guidance sets out the expected minimum standards of control in relation to the valuation of the Fund Property to which the Fund Manager, the Trustee and the Persons providing the oversight function should have regard in determining whether they have met their obligations under the applicable Rules and the Fund's Constitution.
3. The Fund Manager should take action forthwith to rectify any breach in respect of valuation. Where the breach relates to the incorrect pricing of Units, rectification should extend to the reimbursement or payment of money by the Fund Manager to Unitholders, former Unitholders or to the Investment Undertaking.
4. The Trustee or the Persons providing the oversight function may direct that rectification need not extend to reimbursement where it appears that the incorrect pricing is of minimal significance. This would only be appropriate where the Fund Manager has adequate controls in place.
5. The price of a Unit of any class should be calculated by valuing the Fund Property attributable to Units of that class and dividing that value by the number of Units of the class in issue. All the Fund Property should be valued at each valuation point and any part of the Fund Property which is not an Investment should be valued at fair value. The Regulator expects a Fund Manager to agree on its methodology for valuing the Fund Property with the Trustee or Eligible Custodian, or other Persons providing the oversight function and that the methodology in place is applied consistently.
6. In respect of Securities quoted on an Exchange:
a. the Fund's Constitution should set out the valuation policy that will be adopted by the Fund Manager where a single price for buying and selling a Security is quoted; and also where separate buying and selling prices are quoted on an Exchange. Either the official mid-market price or the last trade price should provide an appropriate basis of valuation for the Fund. The Fund Manager should, however, document the choice of methodology and ensure that the procedures are applied consistently and fairly; and
b. where there has been no recent trade in the Security concerned, or no reliable price exists, an Investment should be valued at a price which, reflects a fair and reasonable price for that investment. For example, a Fund Manager may obtain a valuation from three experienced brokers and average the value. In such cases, the Fund Manager is required to document the reasons for his decision and should be prepared to justify any assumptions made.
7. Where instances of incorrect pricing occur, the de minimis provisions set out in this guidance should apply only where the Fund Manager and Trustee or the Person providing oversight functions are able to meet the standards set out in this guidance. Evidence of persistent or repetitive errors, or errors consistently in the Fund Manager's favour, are likely to make it more difficult for the Fund Manager to demonstrate that he is able to meet the standards in this guidance.