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What is the minimum percentage of achieved net profits that a public real estate investment fund must distribute to its unit holders every year?
How often must the evaluation of a fund's real estate assets occur?
What is the maximum percentage of total assets that a real estate investment fund may borrow?
What must be disclosed when there is a relationship between the lender and the real estate investment fund?
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Which of the following is NOT an obligation of the management company or board of directors of the real estate investment fund?
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What is the maximum percentage of the fund's net assets that can be invested in usufructuary rights with less than 30 years remaining?
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What is required for the management company when dealing with a real estate asset of the fund?
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Which of the following must be included in the biannual financial reports of the real estate fund?
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What is the maximum length for the first financial year of a local fund from the licensing date?
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When must the semi-annual financial reports be audited by an external independent auditor?
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In addition to financial reports, which of the following must be prepared by the fund manager and board of directors?
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What is the required timing for the annual financial reports to be audited by an external auditor?
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Who is responsible for maintaining the fund's accounts and preparing the financial reports?
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What should be included in the financial reports if required by local regulations?
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Which of the following expenses must not be borne by the local fund?
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How soon must a local fund begin to exercise its investment policy post-licensing?
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What must be included in the evaluation report of real estate assets?
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Which of the following is NOT a responsibility of the fund's legal adviser?
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What is a key requirement for shares exchanged as in-kind contributions to an investment fund?
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Which of the following is NOT a variable analyzed by the real estate appraiser?
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What must the real estate appraiser ensure concerning their relationship with the fund?
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What type of information must be disclosed in the evaluation report concerning the property?
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Which party must receive copies of the evaluation reports generated by the real estate appraiser?
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In an in-kind share transfer, which aspect of the shares must be aligned?
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What must a fund ensure before announcing its establishment to the public?
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Which statement regarding the corporate identity of a local fund is accurate?
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What information must be included in the fund's prospectus regarding shares in-kind?
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What is specifically prohibited in the offering documents for the local fund?
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Which aspect concerning shares in-kind must the evaluation report summarize?
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What must be clearly explained regarding shares in-kind after the fund is established?
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What requirement must the founders of a self-managed fund satisfy during the initial approval period?
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What aspect of the prospectus must be shared concerning shares in-kind?
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Who is allowed to establish a local fund according to the regulations?
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What is a requirement for a corporate entity to establish a self-managed fund?
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In a family investment fund, how must the units be owned?
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What is one of the qualifications for a natural person to establish a self-managed fund?
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What requirement exists for corporate persons intending to establish a local fund?
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Which of the following statements about family involvement in local funds is true?
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What is the minimum capital requirement for a corporate person seeking to establish a self-managed fund?
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Which of the following conditions must be met by two or more natural persons establishing a self-managed fund?
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What must venture capital funds with managed assets valued at less than AED 180 million do regarding their annual report?
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Which statements are true about the responsibilities of general and limited partners in a GP/LP fund?
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What is required of natural persons to qualify as limited partners in a GP/LP fund?
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What is the primary role of the general partner in a GP/LP fund?
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Who has the right to perform oversight and enforcement of penalties regarding GP/LP funds?
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What must be included in the licensing application of a GP/LP fund submitted to the Authority?
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What distinguishes general partners from limited partners in terms of liability?
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Which entities can qualify as limited partners in a GP/LP fund?
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What is the maximum limit for the investment in usufructuary rights defined in relation to the net assets of the fund?
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Which of the following actions is allowable for a management company regarding asset evaluations?
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Under what condition can a public real estate investment fund distribute net profits more than 80% to unit holders?
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What percentage of the total revenues must be generated by real estate assets in the fund?
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Which of the following responsibilities is NOT required of the real estate fund's management company or board of directors?
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What maximum percentage of the fund's total assets can a real estate investment fund borrow?
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Which of the following must be comprised in the biannual financial reports of the fund?
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What is required to be done before the buying or selling of any real estate asset by the management company?
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What is the primary responsibility of the real estate appraiser in regards to the evaluation report?
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Which of the following is NOT included in the items that must be evaluated in the real estate assets?
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What must be ensured when signing contracts with the legal adviser for the fund?
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What is a requirement for the assets provided by an investor to subscribe for fund units?
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Which item must be explicitly detailed in the evaluation report by the appraiser regarding the property?
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Which of the following must the evaluation reports be submitted to as requested?
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What services should the fund engage when implementing its business plan?
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What must the real estate appraiser analyze regarding market conditions?
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Study Notes
Real Estate Investment Fund Requirements
- Real Estate Assets: At least 75% of the real estate assets held must generate revenue, and real estate revenue must comprise at least 90% of the fund's total revenue.
- Usufructuary Rights: The percentage of investment in usufructuary rights with a remaining period of less than 30 years cannot exceed 25% of the fund's net assets.
- Valuation: Real estate assets must be valued at least every six months based on reports prepared by the fund's real estate appraiser.
- Borrowing: The fund can borrow up to 50% of its total asset value, provided the lender is authorized by the UAE competent authority.
- Dividend Distribution: Public real estate investment funds must distribute at least 80% of their net profits annually to unit holders, with potential for multiple distributions throughout the year.
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Management Company Responsibilities:
- Valuation: Value real estate assets before buying or selling, utilizing a contracted appraiser.
- Appraiser Access: Provide appraisers with access to necessary documents and information for evaluation.
- Report Usage: Do not rely on evaluation reports that are older than three months.
- Asset Management: Assume full responsibility for the fund's management, projects, investment decisions, and assets, including insurance against risks.
- Financial Reporting: Include all investments, their market value, type, and location in biannual reports, along with the credit rating of bond investments.
Local Investment Fund Reporting Requirements
- Financial Year: Every local fund must specify a financial year in its offering document. The first financial year cannot exceed 18 months and must be at least 6 months following the licensing date. Subsequent financial years are consecutive 12-month periods.
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Financial Reports:
- Semi-annual Report: Audited by an independent auditor within 45 days of the semi-annual period's end.
- Annual Report: Audited by an independent auditor within three months of the fund's financial year-end.
- Semi-annual Performance Report: Prepared by the fund manager and board of directors in coordination with the administrator within 45 days of the semi-annual period's end.
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Other Reporting Obligations:
- Legal Advisor Contract: Contracting with a legal advisor for contract preparation and review to ensure legality of fund actions.
- Real Estate Appraiser Contract: Contracting with a qualified real estate appraiser to evaluate the fund's real estate assets.
- Other Party Contracts: Contracting with relevant parties for fund activity, such as real estate developers, management companies, distributors, promoters, and service companies.
Real Estate Appraiser Obligations
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Evaluation Report Requirements:
- Include the evaluation approach, method, and underlying assumptions.
- Analyze market variables like supply and demand, property specifics, and descriptions.
- Identify property-related risks.
- Disclose any asset-related violations, risks, and proposed or implemented remedial actions.
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Report Availability:
- Provide evaluation reports to the fund's management company, investment manager, administrative services company, and auditor.
- Provide reports to the SCA upon request.
- Independence: Maintain independence from the fund and its related parties.
In-kind Share Requirements
- In-kind Transfers: Certain provisions apply when fund units are exchanged for non-cash assets. Such assets must meet specific requirements.
- Investor-Provided Shares: Shares provided by investors to subscribe for fund units must align with the fund prospectus and investment policy.
Establishing a Local Fund
- Local funds can be established by licensed entities, family members, or multiple individuals meeting specific criteria.
- A local fund can be established by an entity licensed by the Authority to carry on the activity of management of Investment Fund investments.
- A local fund can be established by an entity licensed by the Authority to conduct the activity of family investment management in relation to a family fund, provided that the units of the fund shall be 100% owned by one or more members of the family, whether such member is a natural person and/or corporate person which is wholly owned by them, and provided that the unit holder is the beneficial owner
- A local fund can be established by two or more natural and/or corporate persons in relation to a self-managed fund provided that the following conditions are met:
- The natural person must meet the conditions and standards of qualification and fitness related to approved employees' fit and proper requirements as laid down in the Authority's Financial Activities Rulebook, excluding of the professional licensing tests and continuous professional development.
- The corporate person must be established in the UAE and conduct a financial, banking or insurance activity. The corporate person may also conduct other activities provided that their main activity is that conducted by the investment fund through its investment policy. The corporate person must also fulfil the following conditions:
- Capital of not less than 20 million Dirhams.
- An initially approved fund is prohibited from making any announcements or initial procedures for establishing or licensing, subscribing in its units, promoting thereof, distributing any promotional materials or announcing any information until the Authority's final approval has been obtained.
- The founders of a self-managed fund must ensure that the fund meets the conditions of licensing the activity of managing the investments of investment funds in Section 2 of the Authority's Financial Activities Rulebook during the initial approval period and before commencement of the offering procedures
- A local fund is permitted to have a corporate identity throughout the period of its establishment and licensing to the extent necessary for it to fulfil its licensing conditions and enable it to carry out necessary procedures such as acquisition of premises or lease, opening bank accounts, appointing approved employees and any other acts as may be allowed by law to be carried out by companies under incorporation.
Offering Documents
- Local funds must prepare an offering document (prospectus) and an information summary (Key Investor Information Document or KIID) in Arabic or English.
- The prospectus must include full disclosures of any shares in kind provided and the units to be issued against them.
- Full information on every share in-kind, its owners, and value, and the number of units to be issued against every share.
- Summary of the evaluation report of the shares in-kind.
- Explanation of the extent to which the shares in-kind can be disposed of after establishing the fund pursuant to investment resolutions taken.
- Explanation of the extent to which the values of the shares in-kind will vary after establishing the fund according to the market circumstances and evaluation reports.
- For venture capital funds with managed assets that are valued at less than AED 180 million, the fund must:
- prepare a summary of the annual report in accordance with IFRS, and
- not exceed its net asset value in its total exposure to risks.
General and Limited Partnership Funds
- A general and limited partnership fund (GP/LP) is an investment fund with fixed capital established in the UAE.
- The general partner must be a firm licensed by the Authority to manage investment funds.
- The limited partners are natural or corporate persons capable of managing, following up on, and protecting their own investments, including:
- The federal government and local governments, government institutions and agencies, or companies fully owned by any of them.
- General pension funds, corporate pension funds, insurance companies, sovereign funds, endowments, and family companies.
- International agencies and organizations.
- Persons licensed to exercise a commercial business in the UAE provided that the purposes of the business include investment.
- Natural persons with financial solvency and annual income not less than AED 3 million, or net equity rights (excluding their main residence) equal to AED 7 million. These individuals must also declare sufficient knowledge and experience, either independently or through a financial adviser.
- A person who is represented by an investment manager licensed by the Authority or by a similar supervisory entity.
- The general partner is fully liable for the fund's obligations.
- The limited partners are only liable to the extent of their respective share in the capital of the fund.
- The Authority has the right to perform control and inspection, as well as enforce penalties on the general partner for any failures to meet regulatory obligations.
- The licensing application of the fund is submitted by the general partner, or their representative, on the designated form, enclosing supporting documents and data, including:
- The trade name, date of incorporation, and headquarters of each general partner.
- Proof of licenses relevant to their activity.
- Summary of the fund's investment strategy and planned investment policy, including the investment policy document and investment policy.
- Financial statements certified by an auditor licensed in the UAE.
- The offering document and offering document information summary prepared in accordance with the Authority's rules and regulations.
- The fund's partnership agreement, reflecting the conditions and rules of engagement of the general and limited partners.
- Proof of bank account that will be used for the fund.
- The personal details, including the curriculum vitae and professional experience of the general partner's employees responsible for managing the fund's operations.
- The details of the entity that will conduct the fund's administrative services, including a copy of its license, details of its business activity and its experience in the investment fund management business.
- An undertaking to ensure the compliance of the fund with the provisions of the resolution and other relevant legislation.
- Any other documents, data or information needed to complete the licensing application process.
Public Real Estate Investment Funds
- At least 75% of real estate assets held must generate revenue, and revenue generated must not be less than 90% of the fund's total revenue.
- The percentage of investment in usufructuary rights -- for which the remaining period is less than 30 years -- must not exceed 25% of the net assets of the fund upon listing its units in the market or upon transferring the usufructuary right to it.
Valuation and Borrowing
- Evaluation of a real estate fund's assets must occur every six months, based on evaluation reports prepared by the Real Estate Appraiser of the Fund.
- The management company or board of directors may, for acceptable reasons after informing the SCA, postpone the date of assets evaluation.
- A real estate fund can borrow up to 50% of its total assets value, provided the lender is authorized by the competent authority in the UAE.
- Any relationship between the lender and the fund, or related parties, must be disclosed, and conflicts of interest appropriately managed.
Distributions of Dividends from a Public Real Estate Investment Fund
- A public real estate investment fund must distribute at least 80% of its achieved net profits every year to unit holders, with the potential for multiple distributions throughout the year.
Obligations of the Real Estate Fund's Management Company or Board of Directors
- Real estate assets must be valued before buying or selling, using the services of a contracted real estate appraiser.
- The management company or board of directors must enable the real estate appraiser to perform their tasks, including providing access to required documents and information.
- The management company or board of directors cannot rely on evaluation reports older than three months when dealing with real estate assets of the fund.
- The management company or board of directors must assume full responsibility for the fund's projects, investment decisions, and assets, and insure them against risks.
- The management company or board of directors must include all investments, their market value, and the nature, type, and location of real estate assets, and investments in biannual financial reports, along with the credit rating of any bond investments.
- The management company or board of directors must include details of the fund's assets and any material legal disposals in the annual report.
- The management company or board of directors must sign a contract with a legal advisor to prepare and review contracts, obligations, and legal dealings of the fund and its real estate assets, ensuring everything is legal and free from ownership restrictions.
- The management company or board of directors must contract with a real estate appraiser with the required experience in the field to evaluate the real estate assets of the fund.
- The management company or board of directors must sign contracts with other parties associated with the fund's business plan, including the real estate developer, management company, distributor, promoter, and service company.
Obligations of the Real Estate Appraiser
- The real estate appraiser must include the following items in the evaluation report:
- The evaluation approach, method, and assumptions.
- Analysis of real estate market variables, such as supply and demand, property particulars, and description.
- Risks related to the property under evaluation.
- Disclosure of any violations or risks related to the assets under evaluation and proposed or implemented remedial actions.
- Evaluation reports must be made available to the fund's management company or board of directors, investment manager, administrative services company, and auditor, and provided to the SCA upon request.
- The real estate appraiser must maintain independence from the fund and any related parties.
Evaluation of In-Kind Shares for Investment Funds
- If assets are shares provided by an investor to subscribe for units of an investment fund, then the shares must align with the fund prospectus and its investment policy.
- The Authority's Decision No. 63 of 2019 outlines provisions for scenarios where fund units are exchanged for assets other than cash ('in-kind' transfer).
- Such assets exchanged 'in-kind' must meet certain requirements.
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Description
This quiz covers the essential requirements for real estate investment funds, including asset valuation, revenue generation, and dividend distribution. Test your knowledge on the regulations surrounding the management and structure of these funds, particularly within the UAE context.
