Note

BGL do not provide accounting or taxation advice. The following is designed to act as a guide for Simple Fund 360 users. It is not designed to be accounting or tax advice and should not be taken as a strict guideline. Other methods that are more suitable may be used instead of these steps.

Overview

On 1 July 2016, Growthpoint Properties Australia Limited (GOZ) announced a takeover bid to acquire all the outstanding units in GPT Metro Office Fund (GMF) by way of an off-market takeover bid.

Under the Scheme of Arrangement, GMF unit holders who disposed of their GMF units to GOZ were entitled to receive the Scheme Consideration in the following forms for each GMF share held:

Mixed Consideration	$1.25 cash 0.3968 GOZ shares
Cash Consideration	$2.50 cash¹

This article will look at three scenarios:

Mixed Consideration: Scrip-for-scrip applied
Mixed Consideration: Scrip-for-scrip not applied
Cash Consideration

_{1. This price equates to the cash consideration received under the Offer of $1.25 per GMF unit plus the value of 0.3968 Growthpoint securities acquired by Growthpoint SA at a price of $3.15 ($1.25 + 0.3968 × $3.15 = $2.50)}

Cost Base Proportion - Partial scrip-for-scrip Roll-over

When the partial scrip for scrip roll-over is chosen, the cost base of GMF that is attributable to the exchanged GOZ shares is worked out as follows:

Cost Base of GMF for the	Calculation
Scrip component
Cash component

These scrip component percentage will be entered in the Corporate Actions screen.

Example

A fund has a holding of 10,000 GMF shares purchased on 23/07/2015 at a price of $2.04.

As a result of the merger, the fund will receive the following:

	Mixed Consideration	Cash Consideration
GOZ Shares	= GOZ share per GMF share held x GMF holdings = 0.3968 x 10,000 = 3,968 shares = 3,968 x price of GOZ per share = 3,968 x $3.15 ≈ $12,500	None
Cash	= Cash received per TMF share held x GMF holdings = $1.25 x 10,000 = $12,500	= Cash received per TMF share held x GMF holdings = $2.50 x 10,000 = $25,000

A fund can either choose to:

Apply the scrip-for-scrip rollover
Not apply the scrip-for-scrip rollover

This help file will look at both scenarios.

Scenario 1 - Scrip-for-scrip rollover applied

Mixed Consideration

This example will assume that the fund has elected to apply scrip-for-scrip rollover to the acquisition of the GOZ shares.

Scrip for Scrip Rollover

Scrip for scrip rollover summary:

Deferred Capital Gains
The rollover allows you to disregard the capital gain made from the original shares, units or other interest. You are taken to have acquired the replacement shares, units or other interest for the cost base of the original interest.
Backdating to original purchase date
The replacement shares or interest, are taken to have been acquired on the original shares' or interest's purchase date.

Demerger Instructions

From the Main Toolbar, go to Investments.
Select Corporate actions from the list.

Select New Corporate Action.

Record the following details for step one:

Field	Value	Description
Security to Process	GMF.AX	This will be the existing security the demerger is recorded for
Corporate Action	Demerger	The corporate action type being processed
Chart Account	77600/GMF.AX	The chart account that will be affected by the demerger

Record the following details for step two:

Ensure the following details are recorded for step two:

Field	Value	Description
Ex / Balance Date	22/09/2016	Simple Fund 360 will apply the demerger to parcels purchased before the ex date.
Corporate Action Date	23/09/2016	Simple Fund 360 will create a demerger transaction in the Transaction List based on the corporate action date
Select New Security	GOZ.AX	If the fund did not currently hold shares in GOZ, this would be added by selecting Add New Investment
Date		Applying scrip-for-scrip, this will preserve the original contract of the GMF holdings

Record the details of the number and costbase of shares of the demerged security:

Field	Value	Description
Account required for the corporate action	77600/GOZ.AX	Automatically populated by Simple Fund 360
Units in Head security after demerger	10,000	The original holding of GMF shares
Units in Demerged Security	3,968	The amount of GOZ shares acquired
Demerged Security %	51.24	The proportion calculated previously. The head security percentage will populate automatically

Select Process Corporate Action

Proceed to the next step to process the cash consideration received.

Cash Component

The fund received the cash component of $12,500 on 27/09/2016.

This will be recorded in Simple Fund 360 by the following journal that disposes the remaining shares and receives the cash amount:

Date: 27/09/2016

Account	Code	Units	Debit ($)	Credit ($)
Bank	60400/BankCode		12,500
GMF Shares	77600/GMF.AX	-10,000		12,500

Scenario 2 - No scrip-for-scrip applied

Mixed Consideration

This example will assume that the fund has not elected to apply scrip-for-scrip rollover to the acquisition of the GOZ shares.

This will be recorded by the following journal:

Account	Code	Units	Debit ($)	Credit ($)
Growthpoint Properties Australia shares	77600/GOZ.AX	3,968	12,500
Bank	60400/BankCode		12,500
Metro Office Fund shares	77600/GMF.AX	-10,000		25,000

Click next to the credit entry for 77600/GMF.AX to view the Disposal Details screen and see that the capital gain has been automatically populated by Simple Fund 360.

Scenario 3 - Cash Consideration

The fund received the cash consideration of $25,000 on 27/09/2016.

This will be recorded in Simple Fund 360 by the following journal that disposes the remaining shares and receives the cash amount.

The capital gain associated with the disposal of the shares will automatically be calculated by Simple Fund 360.