FUNDS 16. FUNDS 16. ACCOUNTING, AUDIT AND PERIODIC REPORTING OF A FUND
FUNDS 16.1 FUNDS 16.1 Application
FUNDS 16.1.1(1) This Chapter applies to a Fund Manager and a Trustee of a Domestic Fund.(2) In this Chapter, references to a "Fund" mean a "Domestic Fund".
FUNDS 16.2 FUNDS 16.2 Preparation of Fund financial statements
Financial statements and financial reporting standards
FUNDS 16.2.1(1) A Fund Manager of a Fund must prepare financial statements for each financial year of the Fund.(2) A Fund Manager must, in respect of a Fund, prepare and maintain all financial statements in accordance with the International Financial Reporting Standards (IFRS) or US GAAP as supplemented by the Statement of Recommended Practice (SORP).
A Fund Manager must keep Accounting Records that are sufficient to show and explain transactions and are as such, to:(a) be capable of disclosing the financial position of the Fund on an ongoing basis; and(b) record the financial position of the Fund as at its financial year end.
Accounting Records must be maintained by a Fund Manager such as to enable the Governing Body and, if appointed, the Trustee or any Persons providing the oversight function of the Fund to ensure that any financial statements prepared by the Fund Manager in relation to the Fund comply with the legislation applicable in the Abu Dhabi Global Market.
The Accounting Records must be:(a) retained by the Fund Manager or Fund for at least six years from the date to which they relate;(b) at all reasonable times, open to inspection by the Regulator or the auditor of the Fund; and(c) capable of reproduction, within a reasonable period not exceeding 3 business days, in hard copy and available in English.
FUNDS 16.3 FUNDS 16.3 Auditors of a Fund
Guidance1. Rule 11.1.2 requires every Domestic Fund to have an auditor appointed to it in accordance with Section 189 of the FSMR and any Rules made for the purposes of that Part.
Appointment and termination of auditors
A Fund Manager must:(a) notify the Regulator of the appointment of an auditor to the Fund by completing and submitting the appropriate form (which shall be in such form as the Regulator may prescribe); and(b) prior to the appointment of the auditor, take reasonable steps to ensure that the auditor has the required skills, resources and experience to audit the type of Fund for which the auditor has been appointed.
A Fund Manager must notify the Regulator immediately if the appointment of the auditor is or is about to be terminated, or on the resignation of the Fund's auditor, by completing and submitting the appropriate form (which shall be in such form as the Regulator may prescribe).
A Fund Manager must appoint an auditor to fill any vacancy in the office of auditor and ensure that the replacement auditor can take up office at the time the vacancy arises or as soon as reasonably practicable.
FUNDS 16.3.4 FUNDS 16.3.4(1) A Fund Manager must take reasonable steps to ensure that the auditor and the relevant audit staff of the auditor are independent of, and not subject to, any conflict of interest with respect to the Fund Manager, the Trustee or the Fund.(2) A Fund Manager or Trustee must notify the Regulator if it becomes aware, or has reason to believe, that the auditor or the relevant audit staff of the auditor are no longer independent of the Fund Manager, the Trustee or the Fund, or have a conflict of interest which may affect their judgement in respect of the Fund.
Guidance1. A Fund Manager should consider whether there is any financial or personal relationship between it or any of its relevant Employees and the auditor or any of the relevant Employees of the auditor that may affect the judgement of the auditor when conducting an audit of the Fund or complying with all its legal obligations, including the FSMR, GEN, AML and other relevant Rulebooks made by the Regulator.
Amended on (3 February, 2020).
Co-operation with auditors
A Fund Manager must take reasonable steps to ensure that it and its Employees:(a) provide any information to its auditor that its auditor reasonably requires, or is entitled to receive as auditor;(b) give the auditor right of access at all reasonable times to relevant records and information within its possession;(c) allow the auditor to make copies of any records or information referred to in (b);(d) do not interfere with the auditor's ability to discharge its duties;(e) report to the auditor any matter which may significantly affect the financial position of the Fund; and(f) provide such other assistance as the auditor may reasonably request it to provide.
A Trustee must take reasonable steps to ensure that it and its Employees act in compliance with Rule 16.3.5(a)–(f).
A Fund Manager must, in writing, require any Person to whom the Fund Manager has delegated or outsourced any functions to co-operate with the Fund's auditor in accordance with the provisions specified in Rule 16.3.5.
Function of the Auditor
A Fund Manager must, in writing, require its auditor to:(a) conduct an audit of the Fund's financial statements in accordance with the requirements of the relevant standards published by the International Auditing and Assurance Standards Board (IAASB); and(b) produce a Fund Auditor's Report on the audited financial statements in accordance with GEN Rule 6.6.8.
FUNDS 16.3.9 FUNDS 16.3.9
The requirements in Rules 16.3.8 and 16.4.5(a) for financial statements to be audited and for a Fund Auditor's Report to be produced may be waived by the Regulator, on a case-by-case basis in relation to Exempt Funds and Qualified Investor Funds where the Fund Manager has obtained a Special Resolution of Unitholders in support of such a waiver.
Circumstances in which it may be appropriate for Fund Managers to seek the waiver described in Rule 16.3.9 include:(a) where the Fund is being wound up; or(b) where the Fund holds only a small number of illiquid assets.
FUNDS 16.4 FUNDS 16.4 Periodic Reports
Annual and interim reports
FUNDS 16.4.1(1) In order to provide the Unitholders with relevant and up-to-date information about the performance and management of a Fund, a Fund Manager must, subject to (2), produce one interim report and one annual report in respect of each Fund it operates in accordance with these Rules.(2) The Fund Manager of a Qualified Investor Fund is not required to comply with the requirements in (1) relating to the production of an interim report for that Fund unless there has been a material change relating to the Fund during the relevant period.(3) For the purposes of (2), the relevant period in relation to a Qualified Investor Fund is the 6 month period referred to in Rule 16.4.2.
FUNDS 16.4.2(1) A Fund Manager must produce the required annual report and interim report as follows:(a) an annual report within six months after the end of each annual accounting period; and(b) an interim report within three months after the end of each interim accounting period.(2) For the purposes of (1), the first annual accounting period of a Fund begins:(a) in the case of a Public Fund, on the date of registration by the Regulator; or(b) in the case of an Exempt Fund or a Qualified Investor Fund, on the date of notification to the Regulator; andends on the date stipulated as the annual accounting period end date in the prospectus. Thereafter, annual accounting periods cover the period between each subsequent financial year end.(3) Notwithstanding the requirement in (2), should a Fund’s first accounting period end within less than 6 months, the Fund Manager may notify the Regulator that it has chosen to extend the first accounting period to end on the subsequent accounting period end date, provided that the extended first accounting period is no longer than 18 months in duration.(4) For the purposes of (1), an interim accounting period is the period covering:(a) from the date that the first accounting period begins to the date 6 months prior to the end of the first accounting period; and(b) 6 months after each annual accounting period end date.(5) If a Fund intends to change its annual or interim accounting period, the Fund Manager must:(a) obtain written confirmation from its auditor that the change of its annual accounting period would not result in any significant distortion of the financial position of the Fund; and(b) obtain the Regulator's prior consent before implementing the change.(6) For a Fund which is an Umbrella Fund, the Fund Manager must prepare reports for each Sub-Fund, but need not prepare reports for the Umbrella Fund as a whole, and the remainder of this Chapter 16 should be read accordingly.(7) The Fund Manager must prepare the annual and interim reports of the Fund in accordance with Rule 16.4.2.(8) The reports must:(a) be available free of charge to Unitholders;(b) be available in English,(c) be sent to the Regulator; and(d) if the Fund is a Public Fund, be available for inspection free of charge during ordinary office hours at a place specified.
Amended on (3 February, 2020).
The Fund Manager must take reasonable steps to ensure that the interim and annual reports for a Fund or the Sub-Funds of an Umbrella Fund are clear, complete and true and contain information for the relevant period and:(a) the name of the Fund or Sub-Fund, its stated investment objectives, the policy of achieving those objectives and a brief assessment of its risk profile;(b) a review of the Fund's or Sub-Fund's investment activities and investment performance during the period;(c) sufficient information to enable Unitholders to form a view on where the portfolio is invested at the end of the period and the extent to which that has changed over the period; and(d) any other significant information which would reasonably enable Unitholders to make an informed judgment on the activities of the Fund or Sub-Fund during the period and the results of those activities at the end of the reporting period.
Contents of the interim report
The Fund Manager must produce an interim report which contains:(a) particulars of any material issues raised by the Eligible Custodian and, if applicable, the Trustee, the investment committee or any Person providing oversight in relation to the Fund; and(b) matters required to be included in the Fund Manager's report under Rule 16.4.7.
Contents of the annual report
An annual report of a Fund must contain:(a) the full audited financial statements for the annual accounting period;(b) the report produced by the auditor in accordance with Rule 16.3.8(b);(c) the report of the Fund Manager in accordance with Rule 16.4.7;(d) if the Fund is a Public Fund, the comparative table in accordance with Rule 16.4.8; and(e) if the Fund is a Public Fund, the oversight report in accordance with Rule 13.3.16.
The Fund Manager must ensure that the financial statements give a true and fair view of the net income and the net gains and the losses on the Fund Property of the Fund, or, the Sub-Fund, for the annual accounting period in question and the financial position of the Fund or Sub-Fund as at the end of that period.
Fund Manager's report
The matters set out in (a) to (g) must be included in any Fund Manager's report:(a) a restatement of the investment objectives of the Fund;(b) a restatement of the policy for achieving those objectives;(c) a review of the investment activities, including in relation to (a) and (b), during the period to which the report relates;(d) particulars of any fundamental change requiring prior approval by Unitholder meeting made since the date of the last report;(e) particulars of any significant change requiring pre-event notification since the date of the last report;(f) any other information which would enable Unitholders to make an informed judgement on the development of the activities of the Fund during this period and the results of those activities as at the end of that period; and(g) for a Fund which invests a substantial proportion of its assets in other Funds, a statement as to the maximum proportion of management fees charged to the Fund itself and to other Funds in which that Fund invests.
In presenting past performance information, the Regulator recommends that Fund Managers follow the Global Investment Performance Standards (GIPS) issued by Institute of Chartered Financial Analysts of the USA.
The comparative table for the annual report for a Public Fund must set out:(a) the performance record over the last five calendar years, or if the Fund has not been in existence during the whole of that period, over the whole period in which it has been in existence, showing:(i) the highest and the lowest price of a Unit of each class in issue during each of those years; and(ii) the net income distributed or, for accumulation Units, allocated for a Unit of each class in issue during each of those years, taking account of any subdivision or consolidation of Units that occurred during that period;(b) as at the end of each of the last three annual accounting periods or all of the Fund's annual accounting periods, if less than three:(i) the total net asset value of the Fund Property at the end of each of those years;(ii) the net asset value per Unit of each class; and(iii) for a report of the directors of an Investment Company, the number of Units of each class in issue; or(iv) for a report of the Fund Manager of any other Fund, the number of Units of each class in existence or treated as in existence; and(c) if, in the period covered by the table:(i) the Fund Manager has been the subject of any event such as a transfer scheme having a material effect on the size of the Fund, but excluding any issue or cancellation of Units for cash; or(ii) there have been changes in the investment objectives of the Fund;an indication, related in the body of the table to the relevant year in the table, of the date of the event or change in the investment objectives and a brief description of its nature.
FUNDS 16.5 FUNDS 16.5 Table illustrating content of the annual report
Type of Report Rule Ref Public Funds Exempt Funds QIF Annual and interim reports 16.4.2 ✓ ✓ Annual Report only. An interim report is required only if there has been a material change during the interim accounting period Fund Manager's Report 16.4.7 ✓ ✓ Fund Auditor's Report 16.3.8(b), 16.3.9 ✓ Rule 16.3.8(b) need not be complied with if a waiver is obtained pursuant to Rule 16.3.9 Rule 16.3.8(b) need not be complied with if a waiver is obtained pursuant to Rule 16.3.9 Oversight Report 13.3.16 ✓ Not applicable Not applicable Comparative Table 16.4.8 ✓ Not applicable Not applicable
This table illustrates the different content requirements for reports of a Domestic Fund.