Unit pricing incident guidelines

1. General guidelines

Rest has developed extensive controls to minimise the chance of unit pricing and other errors occurring. Despite these controls, errors may still occur due to the nature of unit pricing calculations, which at any given time are only a best estimate of the value of each unit or account, using available information at that time.

When an issue is identified that could affect Members, the Trustee will promptly respond and investigate the issue.

This document is based on information contained in Rest's Incident Response Policy and Unit Pricing Policy and outlines how Rest will respond where Members are affected by unit pricing or errors.

2. When will Rest compensate members?

Rest will compensate Members whom it believes have been adversely affected by an error and will communicate openly with them. Rest aims to produce a fair and equitable outcome for all Members.

However, not all issues will require compensation and each issue will be considered on a case-by-case basis.

For example, Rest may apply a materiality threshold in determining when it will pay compensation (see below). Also, some changes that affect unit prices are not errors that need to be corrected. These include updating assumptions when new information becomes available or changes to a previous policy.

• Rest has adopted the following principles in compensating Members:
• Comply with legal obligations, Members’ obligations and agreed industry standards at the time of error
• Make reasonable attempts to contact lost Members
• Rest may draw on its Operating Risk Financial Requirement reserve to pay the costs of compensation where it is not appropriate for the investment option to bear these costs (this may include the administrative cost of rectifying the error) and
• Consider the recovery of amounts from any other entities responsible for the error, relevant insurance policies and whether to recover from Members who unfairly benefited from the error.

3. Use of materiality threshold

Where the Trustee determines that an error has occurred, a materiality threshold will be used to determine if an error requires compensation to Members.

In this regard, the Trustee believes a materiality threshold of 0.05% for the Cash investment option and 0.30% for all other investment options should apply when determining whether an error requires correction and compensation to Members. Where an error is below the threshold, Rest will generally not provide compensation to Members. Generally no materiality threshold applies in respect of fee errors, however compensation to individual Members will only be made if the fee error exceeds 0.05% for the Cash investment option and 0.30% for all other investment options, otherwise the compensation will be made to the impacted investment option(s).

The Trustee may choose to apply lower materiality thresholds at its discretion. Examples of where a lower materiality threshold may be considered are:

• Where there is a lower expectation of volatility.
• Where the error is lower than the materiality threshold, but large transactions have occurred which may make the impact of the error on individual Members large in absolute dollar terms.

The materiality thresholds described above are generally consistent with regulatory practice guidelines and industry standards.

4. Calculation of Member adjustments

If an error is identified as being material, and the Member has been adversely impacted by the error, individual Member compensation will most likely be made by Rest.

In determining whether compensation will be paid to current Members of Rest, there is no minimum dollar materiality threshold applicable.

In determining whether compensation will be paid to former Members of Rest, the Trustee will give consideration to applying a dollar limit to individual compensation payments to recognise that very small amounts of compensation are of no or minimal value to the former Member and to take into account the administrative costs of processing the payment of compensation to former Members. As a general guide, payments to a former Member of less than $20 will not normally be made. This threshold is generally consistent with regulatory practice guidelines and industry standards.

The Trustee will calculate the adjustments to be applied to both Members that have been disadvantaged by the error, and to Members that have benefited. The Trustee will ensure that, as far as practicable, Members have been restored to the position they would have been in had the error not occurred.

Compensation to existing Members will be made by paying amounts into member accounts or by issuing extra units. Compensation to exited Members will be paid by cheque or electronic funds transfer to their rollover fund or the Member's bank account. The Trustee will also consider whether it is appropriate to seek to recover any overpayments from former Members who have unfairly benefited from the error. Where the Trustee determines it is not appropriate to attempt to recover overpayments from an exited Member, the cost will be borne by the Operating Risk Financial Requirement reserve.

5. Recovery of compensation costs

When a unit pricing error has been caused by an external party, it may be possible for Rest to seek a good value claim from that party for the cost of compensation payments and/or the cost of managing the rectification of the error.

Where the error has been caused by or contributed to by a failure of the Trustee’s own procedures, Rest will make appropriate notifications to the relevant insurers to seek recoveries under its insurance policies.

6. Market Disruption

From time to time it may be necessary for the Trustee to alter the frequency of the calculation of unit prices or to suspend the valuation of the assets of the Fund. Examples of conditions under which such decisions may be taken include:

• Market prices of underlying assets not being available;
• Asset markets becoming extremely volatile;
• External events or shocks resulting in an inability to fairly calculate the net asset value of the Fund, for example due to one or more stock exchanges being closed for business;
• Very large amounts of redemptions which impose an unfair burden on remaining Members; or
• The Fund or an investment option becomes or is illiquid.

Where information is not available to properly calculate the net asset value of the Fund, or where the use of the most recently calculated unit prices may result in material inequity between Members, the Trustee may determine that it is appropriate to suspend the processing of all, or some, transactions having regard to the impacts on the Administrator and Members.

Rest's Incident Response Policy and Unit Pricing Policy may be revised by the Trustee at any time, without further notice to Members.

Past performance is not an indication of future performance.