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Dubai Financial Services Authority (DFSA): Contents

Dubai Financial Services Authority (DFSA)
Laws
Rulebook Modules
Collective Investment Rules (CIR) [VER25/07-19]
Part 6 Rules Specific to Specialist Classes of Domestic Funds
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Policy Statements
DFSA Codes of Practice
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  • CIR 13.4 Property Funds

    • CIR 13.4 Guidance

      See CIR Rule 3.1.7 for the definition of a Property FundG .

      Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

    • Permitted Form and Listing

      • CIR 13.4.1

        (1) A Fund ManagerG of a Domestic FundG which is a Property FundG must use only a Closed-ended legal structure for the investment vehicle, unless it is an Exempt FundG or a Qualified Investor FundG .
        (2) In the case of a Property FundG which is or intends to be a Public FundG , the Fund ManagerG :
        (a) may only use either an Investment CompanyG or Investment TrustG as the investment vehicle of the FundG ;
        (b) must ensure that it is listed and traded on an Authorised Market InstitutionG or is listed and traded on an exchange in a Recognised JurisdictionG within 3 years from the date on which the UnitsG of the FundG are first OfferedG to the public or any other shorter period as specified in the Fund'sG ProspectusG ; and
        (c) must ensure that the ConstitutionG of the FundG includes provisions that deal with:
        (i) the manner in which the issue and redemption of UnitsG of the FundG will be made to ensure that the FundG is Closed endedG ; and
        (ii) if applicable, the circumstances in which any Private PlacementsG may be made.
        (3) If the offer document or marketing material of a Property FundG which is an Exempt FundG or QIFG states that it intends to be listed and traded on an Authorised Market InstitutionG , or on an exchange in a Recognised JurisdictionG , it must:
        (a) be registered as a Public CompanyG ;
        (b) list and trade its UnitsG on the exchange specified in its offer document or marketing material within 3 years of its registration; and
        (c) during the period pending its listing and trading, comply with all the requirements applicable to a Public FundG other than the requirements relating to:
        (i) the independent oversight function; and
        (ii) the issue of a Public Fund ProspectusG .
        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]
        [Amended] DFSA RM218/2018 (Made 22nd February 2018) [VER23/12-18]

        • CIR 13.4.1 Guidance

          See Article 18A of the Law for the definitions of Open-ended Fund and Closed-ended Fund.

          Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]
          [Amended] DFSA RM218/2018 (Made 22nd February 2018) [VER23/12-18]

    • Self-custody of Real Property for Public Funds

      • CIR 13.4.2

        (1) A Fund ManagerG of a Public Property FundG is not required to appoint an Eligible CustodianG under CIR Rule 8.2.2(2) for Real PropertyG if the Fund ManagerG :
        (a) acts as custodian of the Real PropertyG ;
        (b) has in place adequate systems and controls to ensure the proper segregation and protection of the Real PropertyG ; and
        (c) has in place effective arrangements which ensure that the real Property is not available to creditors if the Fund ManagerG becomes insolvent.
        (2) The systems and controls referred to in (1)(b) must, as a minimum, ensure that:
        (a) legal title to the Real PropertyG is registered in the name of the FundG ;
        (b) the Fund ManagerG identifies, manages and monitors any conflicts of interest that may arise due to it acting as custodian of the Real PropertyG ;
        (c) the Fund ManagerG clearly designates the employees who are responsible for safeguarding the ownership rights of the FundG over any Real PropertyG including but not limited to:
        (i) safekeeping title deeds and other legally relevant documents relating to the Real PropertyG ; and
        (ii) ensuring that legal title to the Real PropertyG is registered in the name of the FundG ; and
        (d) the employees referred to in (c) are not required to carry out duties and functions which may conflict with their duties and functions referred to in that paragraph.
        [Added] RM158/2015 (Made 9th December 2015). [VER19/02-16]

        • CIR 13.4.2 Guidance

          1. A Fund ManagerG of a Public Property FundG may itself act as custodian of Real PropertyG if it has in place adequate systems and controls to ensure the segregation and protection of the Real PropertyG . This option only applies for Real PropertyG (defined as land or buildings, whether freehold or leasehold, where the unexpired term of any lease exceeds 20 years). It does not permit the Fund ManagerG to act as custodian of Property Related AssetsG such as SharesG in a Body CorporateG which invests in Real PropertyG or Units in another Property FundG .
          2. In identifying, managing and monitoring conflicts of interest that may arise due to it acting as custodian, the Fund ManagerG must take into account that it is required under the Law to give priority to Unitholders'G interests if there is a conflict between its own interests and the interests of UnitholdersG .
          3. If a Fund ManagerG decides to act as custodian of Real PropertyG as permitted under this Rule, it must disclose in the Fund's Prospectus that it acts as custodian, the additional risks that may arise due to it acting as custodian, and how it has addressed those risks (see CIR Rule 14.4.4A).
          [Added] RM158/2015 (Made 9th December 2015). [VER19/02-16]

    • Self-custody of Real Property for Exempt Funds

      • CIR 13.4.2A

        A Fund ManagerG of an Exempt Property FundG is not required to appoint an Eligible CustodianG under CIR Rule 8.2.2(2) for Real PropertyG if the Fund ManagerG :

        (a) acts as custodian of the Real PropertyG ; and
        (b) has in place effective arrangements which ensure that the Real PropertyG is not available to creditors if the Fund Manager becomes insolvent.
        [Added] RM158/2015 (Made 9th December 2015). [VER19/02-16]

        • CIR 13.4.2A Guidance

          Under this Rule, the arrangements must be legally effective to ensure that the Real PropertyG is not available to creditors if the Fund ManagerG becomes insolvent. This might involve, for example, the use of trust arrangements or registration of title in the name of the FundG . This option only applies to custody of Real PropertyG and not, for example, to Property Related AssetsG .

          [Added] RM158/2015 (Made 9th December 2015). [VER19/02-16]

    • Alternative Custody Arrangements for Real Property in Certain Jurisdictions

      • CIR 13.4.2B

        (1) If a Fund ManagerG wishes to rely on CIR Rule 8.2.2(3)(a)(ii), or a TrusteeG of an Investment TrustG wishes to rely on CIR Rule 8.2.3(b), to make alternative arrangements for the purposes of those Rules, it may do so only if the requirements in (2) and (3) are met.
        (2) The Fund ManagerG or, in the case of an Investment TrustG , the TrusteeG , for the purpose of meeting the legal or regulatory requirements in relation to the ownership of Real PropertyG applicable in the jurisdiction in which the Real PropertyG is situated, may implement alternative arrangements for safekeeping where the arrangements:
        (a) in the case of an Investment TrustG , enable the TrusteeG to continue to control the Fund PropertyG ; and
        (b) in all cases:
        (i) do not enable the Fund ManagerG to have unfettered control of the Fund PropertyG ; and
        (ii) are in accordance, where applicable, with the requirements in Rules CIR 13.4.6 to CIR 13.4.11.
        (3) If the Fund ManagerG or, in the case of an Investment TrustG , the TrusteeG , implements arrangements in accordance with (2), it must satisfy the DFSAG that the arrangements have the effect specified in (2) and are legally effective in the DIFCG and in the jurisdiction where the Real PropertyG is situated.
        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]
        [Amended] RM158/2015 (Made 9th December 2015). [VER19/02-16]

        • CIR 13.4.2B Guidance

          1. CIR Rule 13.4.2B applies in limited situations such as where legal title to Real Property cannot be held in a GCC country due to an applicable law in another jurisdiction. It enables Fund ManagersG and TrusteesG to find suitable alternative arrangements to those mandated under Rule CIR 8.2.2(2) and CIR 8.2.3(b) for the safekeeping of Real PropertyG . In such situations appropriate use of declarations of trust, indemnities and resolutions may produce an acceptable alternative. The DFSAG has previously permitted such alternative arrangements by way of waiver and modification to earlier provisions preceding the enactment of Rule CIR 8.2.2(2) and CIR 8.2.3(b).
          2. Note that in relation to an Investment CompanyG or Investment PartnershipG , CIR Rule 8.2.2 requires a Fund ManagerG to delegate the activity of Providing CustodyG to an Eligible CustodianG . In relation to an Investment TrustG , CIR Rule 8.2.3(b) also permits a TrusteeG to delegate the activity of Providing CustodyG to an Eligible CustodianG .
          Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]
          [Amended] RM158/2015 (Made 9th December 2015). [VER19/02-16]

    • Investment Committee

      • CIR 13.4.3

        (1) A Fund ManagerG of a Property FundG must, subject to (2), call a meeting of UnitholdersG to vote on the election of at least three experts who are independent of the Fund ManagerG to sit on an investment committee of the FundG .
        (2) A Fund ManagerG of a FundG which is constituted as an Investment TrustG need not appoint an investment committee.
        (3) The committee members in (1) are appointed to review investment opportunities and must not involve themselves in the day to day management of the FundG .
        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

    • Investments

      • CIR 13.4.4

        (1) A Fund ManagerG must, subject to (2), ensure that the assets of a Property FundG , except where otherwise provided in the RulesG in this section, consist only of any or all of:
        (a) Real PropertyG ;
        (b) Property Related AssetsG ; or
        (c) Units in another Property FundG ; and
        (d) cash, government and public SecuritiesG , up to a maximum of 40%.
        (2) The requirements in (1) do not apply to a Fund ManagerG during the initial 6 month period of the Fund'sG operation and in any case, will be subject to any other time period set out in the ProspectusG or as approved by a Special ResolutionG of the UnitholdersG .
        (3) A Fund ManagerG must ensure that:
        (a) Property Related AssetsG of a Public Property FundG :
        (i) are listed and traded on an ExchangeG which is provided for in the ProspectusG of the FundG ; or
        (ii) if not listed and traded as specified in (i), are approved and reviewed regularly by the investment committee of the FundG to ensure that they are sufficiently liquid and can be accurately valued; and
        (b) the Property Fund does not grant any Person an option to acquire any property included in the Fund.
        (4) The Fund ManagerG or, where appointed, the TrusteeG , must, subject to (5), ensure that the FundG holds good marketable legal and beneficial title in all its Real PropertyG , whether directly or via Special Purpose VehiclesG controlled by the FundG . The FundG may hold such title as joint tenants or tenants-in-common with one or more third parties provided that the FundG must hold the majority interest and control and have the freedom to dispose of its interest.
        (5) Any special arrangement entered into in respect of Fund PropertyG for the purposes of Islamic finance arrangements where the legal title to the property is held by a financial institution will be acceptable for the purposes of (4) provided information relating to such arrangements either disclosed in the ProspectusG of the FundG or approved by Special ResolutionG of UnitholdersG .
        (6) The Fund ManagerG and, if appointed, the TrusteeG , must take all reasonable care to ensure that the Fund ManagerG arranges adequate property insurance and public liability insurance coverage in relation to the Real PropertyG of a FundG .
        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]
        [Amended] RM158/2015 (Made 9th December 2015). [VER19/02-16]

        • CIR 13.4.4 Guidance

          1. CIR Rule 13.4.4(5) enables Fund ManagersG and TrusteesG to use certain Islamic structures such as ijara for property financing which require the legal ownership of the real property to be held by the financial institution providing the financing.
          2. CIR Rule 13.4.4.(5) does not require individual transactions to be specified in the ProspectusG or approved by Special ResolutionG of UnitholdersG . Instead, it would be sufficient for general information relating to such arrangements, such as their legal effect, to be included in the ProspectusG , failing which UnitholderG approval by Special ResolutionG will be required. Similarly, UnitholdersG can by Special ResolutionG grant general approval for use of such Islamic financing arrangements, obviating the need for each specific transaction to be separately approved.
          Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

    • Borrowing

      • CIR 13.4.5

        (1) The Fund ManagerG of a Public Property FundG may borrow either directly or through its Special Purpose VehicleG for financing investment or operating purposes, but aggregate borrowings must not at any time exceed 50% of the gross value of the FundG .
        (2) The Fund ManagerG of a FundG may pledge the Fund'sG assets to secure borrowings under (1).
        (3) In the event that the borrowing limit under (1) is exceeded, the Fund ManagerG must inform the TrusteeG (if appointed), the UnitholdersG and the DFSAG of the magnitude of the breach, the cause of the breach, and the proposed method of rectification. The Fund ManagerG must use its best endeavours to reduce as soon as reasonably possible the excess borrowings.
        (4) All borrowings by the FundG must be conducted at arm's length.
        (5) Borrowings by any Special Purpose VehiclesG held by the FundG must be aggregated for the purpose of calculating borrowings of the FundG for the purposes of this RuleG .
        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]
        [Amended] DFSA RM137/2014 (Made 21st August 2014). [VER17/06-14]
        [Amended] RM158/2015 (Made 9th December 2015). [VER19/02-16]

        • CIR 13.4.5 Guidance

          The gross asset value of a FundG should be calculated as the total value of the Fund PropertyG , based on the most recent valuation under CIR Rule 8.4.1(1), but without making the deductions provided for in the other paragraphs of that Rule.

          [Added] RM158/2015 (Made 9th December 2015). [VER19/02-16]

    • Joint Ownership Arrangement

      • CIR 13.4.6

        The Fund ManagerG must ensure that when a joint ownership arrangement is entered into, the FundG has a majority stake or holding in respect of that arrangement, that is, more than 50% ownership and control in each property at all times.

        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

      • CIR 13.4.7

        (1) In making any joint ownership investment under CIR Rule 13.4.6, the Fund ManagerG must:
        (a) be able to demonstrate that the arrangement, including the decision to own less than a 100% interest in the property, is in the interests of the UnitholdersG ; and
        (b) must obtain a legal opinion in accordance with (2).
        (2) The legal opinion referred to in (1)(b) must include:
        (a) a description of the significant terms of the joint ownership arrangement;
        (b) a statement whether the FundG will have a good and marketable legal and beneficial interest in the property;
        (c) a description of the equity and profit sharing arrangements of the parties to the agreement;
        (d) a statement that the relevant contract and joint ownership arrangements are legal, valid, binding and enforceable under applicable law;
        (e) a statement that all necessary licences and consents required in the location where the subject property is located have been obtained by the FundG or its Special Purpose VehicleG ;
        (f) any restriction on divestment by the FundG of its interest, in whole or in part, in the property; and
        (e) if applicable, the implication of foreign rules and regulations that may prohibit full ownership of the property by the FundG .
        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]
        [Amended] RM158/2015 (Made 9th December 2015). [VER19/02-16]

      • CIR 13.4.8

        The Fund ManagerG must ensure that:

        (a) proper due diligence is conducted in identifying restrictions and constraints that may limit a Fund'sG direct ownership of a 100% interest in a property; and
        (b) the liability of, or assumed by, the FundG does not exceed the percentage of its interest in the joint ownership arrangement and there is to be no assumption of unlimited liability by the FundG .
        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

      • CIR 13.4.9

        The Fund ManagerG must disclose to UnitholdersG ;

        (a) the ownership structure of the property interest and the material terms thereof, including restrictions on divestments and the impact or implication of such restrictions on the divestment value of the interest in the property;
        (b) the identity, background and ownership of the remaining legal and beneficial owners in the property, transactional history of these owners with the FundG in relation to the property;
        (c) financial, remuneration, fee-sharing or other material arrangements that have been or will be entered into between the FundG and the other owners of that property or their associates;
        (d) a summary of the contents of the legal opinion in CIR Rule 13.4.7(1)(b) in relation to the property; and
        (e) where appropriate:
        (i) the nature of restrictions on foreign ownership and the duration of them, and the impact of such restrictions on the operations and financial position of the FundG as a whole;
        (ii) the Valuer'sG opinion and evaluation of the impact of such prohibitions on the value of the property; and
        (iii) any other information which may reasonably be relevant to a UnitholderG .
        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

    • Use of Special Purpose Vehicles

      • CIR 13.4.10

        (1) The Fund ManagerG of a Property FundG may hold Real PropertyG for the FundG through a Special Purpose VehicleG , subject to (2) and (3), only if the FundG has majority ownership and control of the Special Purpose VehicleG .
        (2) A Special Purpose VehicleG set up by the Fund ManagerG of a FundG under (1) may itself hold Real PropertyG through another Special Purpose VehicleG (the second Special Purpose VehicleG ) for the sole purpose of directly holding Real PropertyG for the FundG or arranging financing for the FundG but the second Special Purpose VehicleG must not hold Real PropertyG for the FundG through another Special Purpose VehicleG .
        (3) The Fund ManagerG of the FundG must ensure that:
        (a) neither the ConstitutionG of any Special Purpose VehicleG nor the organisation, transactions or activities of such vehicles under any circumstance contravene any requirements of the RulesG in this section;
        (b) the board of directors of each of the Special Purpose VehiclesG is appointed by the Fund ManagerG in agreement with the TrusteeG or PersonsG performing oversight functions of the FundG where applicable and, where elected, the investment committee; and
        (c) both the FundG and the Special Purpose VehiclesG must appoint the same AuditorG and adopt the same accounting principles and policies.
        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

        • CIR 13.4.10 Guidance

          Additional Special Purpose VehiclesG may be permitted by the DFSAG by waiver or modification under limited circumstances, such as where the Fund ManagerG can demonstrate to the satisfaction of the DFSAG that the arrangement is necessary for the purpose of meeting the legal or regulatory requirements of another jurisdiction.

          Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]
          [Amended] RM158/2015 (Made 9th December 2015). [VER19/02-16]

      • CIR 13.4.11

        If the FundG acquires Real PropertyG through the acquisition of a Special Purpose VehicleG , the following matters must be complied with by the Fund ManagerG for the purpose of the purchase:

        (a) a report made by the Fund'sG AuditorG must be prepared on:
        (i) the profit and loss of the Special Purpose VehicleG for each of the three years preceding the transaction or any shorter period as is relevant if the Special Purpose VehicleG was in existence for less than three years; and
        (ii) the assets and liabilities of the Special Purpose VehicleG as at the last date, which is no more than 6 months old from the date of the report to which the accounts of the Special Purpose VehicleG were prepared;
        (b) the report required under (a) must:
        (i) indicate how the profits and losses of the Special Purpose VehicleG would, in respect of the SharesG to be acquired, have affected the FundG , if the FundG had at all material times held the SharesG to be acquired; and
        (ii) where the Special Purpose VehicleG has subsidiaries, deal with the profits or losses and the assets and liabilities of the Special Purpose VehicleG and its subsidiaries, either as a whole, or separately; and
        (c) a valuation report in respect of the Special Purpose Vehicle'sG interest in Real PropertyG must be prepared in accordance with the requirements set out in Rules CIR 13.4.18 to CIR 13.4.22.
        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

    • Related Party Transactions

      • Guidance

        1. A Fund ManagerG of a Public Property FundG is required pursuant to CIR Rule 8.3.2 to obtain the agreement of UnitholdersG by way of an ordinary resolution before undertaking a Related Party TransactionG where the total consideration or value of the transaction is 5% or more of the net asset value of the FundG . See also CIR App2 and CIR App3.
        2. A Fund ManagerG of a Public Property FundG may enter into a Related Party TransactionG for the acquisition or sale of Real PropertyG in the State without obtaining specific approval for the transaction under CIR Rule 8.3.2 if all of the conditions in CIR Rule 13.4.11A(1) are met.
        3. If a Fund ManagerG enters into a Related Party TransactionG under the exclusion in CIR Rule 13.4.11A, it must notify UnitholdersG of details of the transaction as soon as practicable after entering into the transaction. It also must disclose in the Fund'sG ProspectusG if it has UnitholderG approval to enter into such transactions without obtaining a resolution in each case (see CIR Rule 14.4.4B).
        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]
        [Amended] RM158/2015 (Made 9th December 2015). [VER19/02-16]

      • CIR 13.4.11A

        (1) The Fund ManagerG of a Public Property FundG is not required to comply with CIR Rule 8.3.2(3) and (4)(a) for a Related Party TransactionG if:
        (a) the transaction is for the acquisition or sale of Real PropertyG in the StateG ;
        (b) the Fund ManagerG has general Unitholder approval in accordance with (2) to enter into such transactions;
        (c) the oversight provider of the FundG has confirmed in writing, before the transaction is entered into, that it is on terms that comply with the requirement in CIR Rule 8.3.2(2) and that all other applicable requirements have been complied with; and
        (d) the investment committee of the FundG has confirmed in writing, before the transaction is entered into, that it is on terms that comply with the requirement in CIR Rule 8.3.2(2) and it has no objection to the transaction.
        (2) UnitholderG approval under (1)(b) must be by way of an ordinary resolution of the UnitholdersG of the FundG that:
        (a) was passed at the previous annual general meeting of the FundG ;
        (b) is valid only until the date of the next annual general meeting of the FundG (when it may be renewed): and
        (c) authorises the Fund ManagerG to enter into Related Party TransactionsG referred to in (1)(a) without obtaining prior UnitholderG approval in each case during the period for which the resolution is valid.
        (3) If a Fund ManagerG of a Public Property FundG enters into a Related Party TransactionG under this Rule, it must as soon as practicable after entering into the transaction provide written notification to UnitholdersG of the FundG setting out relevant details of the transaction including the identity of the Related PartyG and the nature and extent of his interest.
        [Added] RM158/2015 (Made 9th December 2015). [VER19/02-16]

      • CIR 13.4.12

        (1) The following information in relation to Related Party TransactionsG must be disclosed to UnitholdersG and where appointed, the TrusteeG , by the Fund ManagerG of a Public Property FundG :
        (a) any beneficial interests of the Related PartyG , and any changes thereof, in the FundG ; and
        (b) any potential conflicts of interests involving the Related PartyG and the measures implemented to address such conflicts.
        (2) If the Fund ManagerG operates more than one FundG and a transaction involves two or more of the FundsG operated by the Fund ManagerG , such transactions between the FundsG will be Related Party TransactionsG for each of the FundsG involved in the transactions.
        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]
        [Amended] RM158/2015 (Made 9th December 2015). [VER19/02-16]

      • CIR 13.4.13

        (1) Where any Related PartyG has an interest in an UndertakingG which competes or is likely to compete, either directly or indirectly, with the Fund'sG activities, the Fund ManagerG of a Public Property FundG must disclose to UnitholdersG and where appointed, the TrusteeG , the following:
        (a) a description of the UndertakingG of the Related PartyG and its management, to enable UnitholdersG to assess the nature, scope and size of such business, with an explanation as to how such UndertakingG may compete with the FundG ;
        (b) where applicable, a statement from the relevant Related PartyG that it is capable of performing, and shall perform, its duty in relation to the FundG independently of its related business and in the best interests of the FundG and its holders; and
        (c) a statement as to whether the FundG may acquire any of the related business or assets of the Related PartyG .
        (2) If there is any change in information required under (1) after initial disclosure, the Fund ManagerG must disclose such changes to the UnitholdersG and where appointed the TrusteeG .
        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]
        [Amended] RM158/2015 (Made 9th December 2015). [VER19/02-16]

      • CIR 13.4.14

        Where a Related PartyG has, for the purpose of the establishment of the FundG , agreed to sell Real PropertyG to the FundG , the Fund ManagerG of a Public Property FundG must disclose the following in the ProspectusG :

        (a) a valuation report by an independent valuer of the Real PropertyG that the Related PartyG has agreed to sell; and
        (b) the price to be paid by the FundG for the Real PropertyG and other material terms of the transaction.
        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]
        [Amended] RM158/2015 (Made 9th December 2015). [VER19/02-16]

      • CIR 13.4.15

        (1) The Fund ManagerG of a Public Property FundG must ensure that if any cash forming part of the Fund'sG assets is deposited with a Related PartyG (being an institution licensed to accept deposits), interest must be paid on the deposit at a rate not lower than the prevailing commercial rate for a deposit of that size and term.
        (2) The Fund ManagerG of a Public Property FundG must ensure that in the event of borrowing from a Related PartyG (being an institution licensed to lend money), interest charged on the borrowing is at a rate not higher than the prevailing commercial rate for a borrowing of that size and term.
        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]
        [Amended] RM158/2015 (Made 9th December 2015). [VER19/02-16]

      • CIR 13.4.16

        (1) This Rule applies to a Related Party TransactionG of a Public Property FundG that involves either:
        (a) services provided in the ordinary course of estate management of Real PropertyG of the FundG , including renovation and maintenance work; or
        (b) engaging a property agent to provide services to the FundG , including advisory or agency services in property transactions.
        (2) The Fund ManagerG , and if appointed, the TrusteeG , must ensure that if the value of the transaction is 5% or more of the most recent net asset value of the FundG as disclosed in the latest published audited accounts, it is entered into only with the prior approval of the oversight provider of that FundG .
        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]
        [Amended] RM158/2015 (Made 9th December 2015). [VER19/02-16]

        • CIR 13.4.16 Guidance

          The requirements in CIR Rule 13.4.16 are in addition to other requirements in these Rules applying to Related Party TransactionsG . For example, under CIR Rule 8.3.2, the Fund ManagerG must ensure the transaction is on normal commercial terms, is subject to UnitholderG approval if it represents 5% or more of the net asset value of the FundG and is disclosed to UnitholdersG .

          [Added] RM158/2015 (Made 9th December 2015). [VER19/02-16]

      • CIR 13.4.17 [Deleted]

        [Deleted] RM158/2015 (Made 9th December 2015). [VER19/02-16]

    • Valuation Function

      • CIR 13.4.18

        (1) The Fund ManagerG of a Property FundG must, subject to the approval of the TrusteeG , appoint a PersonG who is able to provide professional valuation services in accordance with the RulesG in this section.
        (2) The Fund ManagerG must ensure that the PersonG appointed under (1) values each Real PropertyG prior to its acquisition and disposal.
        (3) The Fund ManagerG must commission the PersonG referred to in (1) to produce a valuation report of the Property FundG each year in accordance with CIR Rule 13.4.22. The net asset value of the FundG following this valuation must be reported in the annual report of the FundG .
        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

      • CIR 13.4.19

        For the purpose of CIR Rule 13.4.18, a Fund ManagerG must appoint a PersonG :

        (a) who carries on the business of valuing Real PropertyG ;
        (b) who is not RelatedG to the Fund ManagerG ; and
        (c) whom the Fund ManagerG , and if appointed the TrusteeG , have reasonable grounds to believe would be capable of providing objective valuation of Real PropertyG .
        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

        • CIR 13.4.19 Guidance

          1. The term "RelatedG " has the meaning given to it in the GLO module.
          2. A Fund ManagerG , and where appointed the TrusteeG , in forming the opinion required under CIR Rule 13.4.19(c), should be satisfied that the PersonG to be engaged for providing valuation of Real PropertyG meets if not all, at least most of the following criteria:
          a. the PersonG is a, or has key personnel who are, fellow or associate members of a recognised professional body of surveyors or property valuers and who are qualified to perform property valuations;
          b. the PersonG has or has access within the organisation to the relevant expertise, that is, knowledge of and experience in the valuation of property of the relevant kind in the relevant area where the property is situated;
          c. the PersonG has robust internal controls and checks and balances to ensure the integrity of valuation reports and that these reports are properly and professionally prepared in accordance with international best practice;
          d. the PersonG has adequate professional insurance to cover its usual risks;
          e. the PersonG does not have ownership or other commercial links with any other PersonsG providing Financial ServicesG to the FundG (such as investment advisers or investment managers appointed to the FundG ), which would impair that Person'sG ability to provide independent and objective valuation services to the FundG ; and
          f. the PersonG or any of his associates has not been instrumental in relation to the finding of the Real PropertyG for the FundG .
          Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

      • CIR 13.4.20

        (1) A Fund ManagerG must ensure that any valuation by the PersonG appointed to provide valuation services to the FundG is carried out on the basis of an 'open market value' as defined in the ConstitutionG and the most recent ProspectusG of the FundG .
        (2) The valuation report under (1) must confirm that if the Real PropertyG was acquired for the Property FundG it could be disposed of at that valuation within a reasonable period.
        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

      • CIR 13.4.21

        The Fund ManagerG must ensure that the property is acquired within a reasonable time from the date of the valuation report and in any event not later than six months from the date of valuation and at a price no more than 5% above the valuation price.

        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

        • CIR 13.4.21 Guidance

          The DFSAG would expect the Fund ManagerG to define 'open market value' to be based on an authoritative text such as the Royal Institute of Chartered Surveyors' Appraisal and Valuation Standards (fifth edition) ("Red Book"); or similar practitioners text used by surveyors; or International Valuation Standards issued from time to time by the International Valuation Standards Committee

          Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

    • Valuation Report

      • CIR 13.4.22

        A Fund ManagerG must ensure that any valuation report prepared by the PersonG appointed:

        (a) includes all material details in relation to the basis of valuation and the assumptions used;
        (b) describes and explains the valuation methodologies adopted;
        (c) outlines the overall structure and condition of the relevant market including an analysis of the supply and demand situation, the market trend and investment activities;
        (d) includes a brief description of the property, its location, the nature of the interest the FundG holds in the property, its existing use, any encumbrances concerning or affecting the property, the lease expiry profile if any, the capital value in existing state at the date the valuation was performed, the net monthly income from the property, and any other matters which may affect the property or its value;
        (e) confirms the professional status of the valuer and that the valuation report is prepared on a fair and unbiased basis; and
        (f) explains the rationale for choosing the particular valuation method if more than one method is available.
        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

      • CIR 13.4.23

        A Fund ManagerG must ensure that whenever a valuation report is prepared for the FundG , the date of the valuation report must be:

        (a) the date the FundG is valued, if such report is prepared for the purpose of calculating the net asset value of the Fund; or
        (b) a date which is not more than six months before the date on which:
        (i) an offering document is issued;
        (ii) a circular is issued, if the circular relates to a transaction that requires Unitholders' approval; or
        (iii) a sale and purchase agreement or other agreement to transfer legal title is signed, if the transaction does not require UnitholderG approval.
        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]
        [Amended] RM165/2016 (Made 10th February 2016). [VER20/02-16]

    • Reappointment of Valuer

      • CIR 13.4.24

        (1) A Fund ManagerG must ensure that where a PersonG appointed pursuant to CIR Rule 13.4.19 has conducted valuations of the Real PropertyG for the FundG for five consecutive years, that PersonG is not permitted to continue to provide valuation services for the FundG unless before the end of that period the position has been put out to tender and the PersonG has been re-appointed in accordance with that process..
        (2) If the Fund ManagerG decides to re-appoint the same PersonG to provide valuation services for the FundG following the tender process referred to in (1), it must, in the next interim or annual report provided to UnitholdersG , specify the reasons for the re-appointment and the evidence supporting those reasons.
        (3) The Fund ManagerG , and if appointed the TrusteeG on instructions of the Fund ManagerG , may at any time remove the PersonG appointed to provide the valuation services by notice in writing in any of the following events:
        (a) the PersonG enters into liquidation, becomes bankrupt or has a receiver appointed over its assets; or
        (b) the Fund ManagerG , in consultation with the TrusteeG , determines on reasonable grounds that it is necessary to remove that PersonG in the interests of the FundG and the UnitholdersG ; or
        (c) an ordinary resolution is passed by the UnitholdersG to dismiss that PersonG .
        (4) Upon the retirement or dismissal of the PersonG appointed to provide the valuation services to the FundG , the Fund ManagerG must appoint another PersonG to provide valuation services to the FundG where the Fund ManagerG and where appointed the TrusteeG are satisfied that the PersonG meets the requirements specified in CIR Rule 13.4.19.
        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]
        [Amended] RM158/2015 (Made 9th December 2015). [VER19/02-16]