CIS 15.8 Valuation

Section 1: When?

1.

The manager must carry out valuations under CIS 15.8.3 R (1) (Regular valuations) regularly.

2.

The frequency of regular valuation must be specified in the prospectus.

3.

The frequency specified must be at least twice a calendar month.

4.

If the frequency specified is the minimum frequency, the regular valuations must be two weeks or more apart.

5.

Paragraphs 3. and 4. do not apply to warrant schemes or to a sub-fund which is permitted to invest entirely in warrants and there must be at least one valuation point for them on each business day.

6.

Additional valuations under CIS 15.8.3 R (2) can take place at any time during a dealing day.

7.

There is no need to value during the period of an initial offer (but see CIS 15.2.6 R (Compulsory termination of initial offer)).

Section 2: How?

8.

The valuation takes place as at a valuation point fixed by the manager under Section 1.

9.

The valuation is in base currency.

10.

Prices must be the most recent prices that can reasonably be obtained after the valuation point with a view to giving an accurate valuation as at that point.

11.

A valuation is in two parts, one on an issue basis and one on a cancellation basis.

12.

To convert to base currency the value of property which would otherwise be valued in another currency the manager must either:

(a)

Select a rate of exchange which represents the average of the highest and lowest rates quoted at the relevant time for conversion of that currency into base currency on the market on which the manager would normally deal if it wished to make such a conversion; or

(b)

Invite the trustee to agree that it is in the interests of Unitholders to select a different rate, and, if the trustee so agrees, use that other rate.

Section 3: What?

13.

All scheme property is included, subject to adjustments arising from this section, and section 4, and this section is to be applied as at the valuation point.

14.

If the trustee has been instructed to issue or cancel units, assume (unless the contrary is shown) that:

(a)

it has done so;

(b)

it has paid or been paid for them; and

(c)

all consequential action required by these rules or by the trust deed has been taken.

15.

If the trustee has issued or cancelled units but consequential action as at 14(c) is outstanding, assume that it has been taken.

16.

If agreements for the unconditional sale or purchase of property are in existence but uncompleted, assume:

(a)

completion; and

(b)

that all consequential action required by their terms has been taken.

17.

Do not include in 16. any agreement which is:

(a)

A future or contract for differences which is not yet due to be performed; or

(b)

An unexpired option written or purchased for the AUT which has not yet been exercised.

18.

Include in 16 any agreement the existence of which is, or could reasonably be expected to be, known to the person valuing the property, assuming that all other persons in the manager's employment take all reasonable steps to inform it immediately of the making of any agreement.

Section 4: Tax and other adjustments

19.

Deduct an estimated amount for anticipated tax liabilities:

(a)

On unrealised capital gains where the liabilities have accrued and are payable out of the scheme property;

(b)

On realised capital gains in respect of previously completed and current accounting periods;

(c)

On income where the liabilities have accrued;

(d)

Including stamp duty reserve tax and any other fiscal charge not covered under this deduction.

20.

Deduct:

(a)

an estimated amount for any liabilities payable out of the scheme property and any tax on it (treating any periodic items as accruing from day to day);

(b)

the principal amount of any outstanding borrowings whenever payable;

(c)

any accrued but unpaid interest on borrowings;

(d)

the value of any option written (if the premium for writing the option has become part of the scheme property); and

(e)

in the case of a margined contract, any amount reasonably anticipated to be paid by way of variation margin (that is the difference in price between the last settlement price, whether or not variation margin was then payable, and the price of the contract at the valuation point).

21.

Add an estimated amount for accrued claims for repayment of taxation levied:

(a)

on capital (including capital gains); or

(b)

on income.

22.

Add:

(a)

any other credit due to be paid into the scheme property;

(b)

in the case of a margined contract, any amount reasonably anticipated to be received by way of variation margin (that is the difference in price between the last settlement price, whether or not variation margin was then receivable, and the price of the contract at the valuation point);

(c)

any SDRT provision anticipated to be received.

Section 5: Issue Basis

23.

The valuation of property for that part of the valuation which is on a creation basis is as follows:

Property

To be valued at

(a)

Cash

nominal value

(b)

Amounts held in current and deposit accounts

nominal value

(c)

Property which is not within (a), (b) or (d):

(i)

if units in an AUT to which CIS 15 (Dual-pricing and dealing) applies

except where Note 1 applies, the most recent maximum sale price less any expected discount (plus dealing costs) [Note 2]

(ii)

if shares in an ICVC or units of an AUT to which CIS 4 (Single-pricing and dealing) applies

the most recent price (plus dealing costs) [Notes 2 and 3]

(iii)

if any other investment

best available market dealing offer price on the most appropriate market in a standard size (plus dealing costs) [Note 2]

(iv)

if other property, or no price exists under (i), (ii) or (iii).

manager's reasonable estimate of a buyer's price (plus dealing costs) [Notes 2 and 4]

(d)

Property which is a derivative under the terms of which there may be liability to make, for the account of the AUT, further payments (other than charges, and whether or not secured by margin) when the transaction in the derivative falls to be completed or upon its closing out.

(i)

if a written option under rule 20(d)

to be deducted (see 20(d)) at a net valuation of premium. [Notes 5 and 8]

(ii)

if an off-exchange future

net value on closing out [Notes 6 and 8]

(iii)

if any other such property

net value of margin of closing out (whether as a positive or negative figure) [Notes 7 and 8]

Notes

1. The issue price is taken, instead of the maximum sale price if the manager of the AUT whose scheme property is being valued is also the manager, or an associate of the manager, of the AUT whose units form part of that property.

2. In this Section and in Section 6, "dealing costs" means any fiscal charges, commission or other charges payable in the event of the AUT carrying out the transaction in question, assuming that the commission and charges (other than fiscal charges) which would be payable by the AUT are the least that could reasonably be expected to be paid in order to carry out the transaction. On the issue basis, dealing costs exclude any preliminary charge on sale of units in an AUT.

3. Dealing costs under note 2. Include any dilution levy or SDRT provision which would be added in the event of a purchase by the AUT of the units in question but, if the manager of the AUT being valued, or an associate of the manager, is also the manager of the AUT or the ACD of the ICVC whose units are held by the AUT, must not include a preliminary charge which would be payable in the event of a purchase by the AUT of those units.

4 The buyer's price is the consideration which would be paid by a buyer for an immediate transfer or assignment (or, in Scotland, assignation) to him at arm's length.

5. Estimate the premium on writing an option of the same series on the best terms then available on the most appropriate market on which such options are traded; but deduct dealing costs.

6. Estimate the amount of profit or loss receivable or incurable by the AUT on closing out the contract. Deduct minimum dealing costs in the case of profit and add them in the case of loss.

7. Estimate the amount of margin (whether receivable or payable by the AUT on closing out the contract) on the best terms then available on the most appropriate market on which such contracts are traded. If that amount is receivable (for example, the contract is "in the money") deduct minimum dealing costs. If, however, that amount is payable (for example, the contract is "out of the money") then add minimum dealing costs to the margin and the value is that figure as a negative sum.1

8. If the property is an OTC transaction in derivatives, use the relevant valuation referred to in CIS 5.2.25 R (OTC transactions in derivatives) or CIS 5A.6.6 R (OTC transactions in derivatives).

Section 6: Cancellation basis

24.

The valuation of property for that part of the valuation which is on a cancellation basis is as follows:

Property

To be valued at

(a)

Cash

nominal value

(b)

Amounts held in current deposit and loan accounts

nominal value

(c)

Property which is not within (a), (b) or (d):

(i)

if units in and AUT to which CIS 15 (Dual-pricing and dealing) applies

except where Note 1 applies, the most recent minimum redemption price (less dealing costs) [Note 2]

(ii)

if shares in an ICVC or units in an AUT to which CIS 4 (Single-pricing and dealing) applies

the most recent price (less dealing costs) [Notes 2 and 3]

(iii)

if any other investment

best available market dealing bid price on the most appropriate market in a standard size (less dealing costs) [Note 2]

(iv)

if other property, or no price exists under (i) or (ii)

manager's reasonable estimate of a seller's price (less dealing costs) [Notes 2 and 4]

(d)

Property of the type described in 23.:

(i)

if a written option under 20.(d)

to be deducted (see 20(d)) at a net valuation of premium [Notes 5 and 8]

(ii)

if an off-exchange future

net value of closing out [Note 8]

(iii)

if any other such property

net value of margin on closing out (whether as a positive or negative figure) [Notes 6 and 8]

Notes

1. The cancellation price is taken instead of the minimum redemption price if the property, if sold in one transaction, would amount to a large deal.

2. For dealing costs see note 2. In 23.. Dealing costs include any charge payable on redemption of units in an AUT (taking account of any expected discount), except where the manager of the AUT whose property is being valued is also the manager, or an associate of the manager, of the AUT whose units form part of that property.

3. Dealing costs under note 2. include any dilution levy or SDRT provision which would be deducted in the event of a sale by the AUT of the units in question and, except when the manager of the AUT being valued, or an associate of the manager, is also the manager of the AUT or the ACD of the ICVC whose units are held by the AUT, include any charge payable on the redemption of those units (taking account of any expected discount).

4. The seller's price is the consideration which would be received by a seller for an immediate transfer or assignment (or, in Scotland, assignation) from him at arm's length, less dealing costs.

5. Estimate the premium on writing an option of the same series on the best terms then available on the most appropriate market on which such options are traded, and add dealing costs.

6. For off-exchange futures, see note 6 in 23.

7. For net value of margin see note 7 in 23.

8. For over the counter transactions in derivatives, see note 8 in 23.2