Property Fund Valuation function.

Valuation function

33. The Fund Manager of a Property Fund must, subject to the approval of the Trustee, appoint a Person who is able to provide professional valuation services in accordance with the Rules set out herein.
34. The Fund Manager must ensure that the Person appointed under paragraph 33. values each Real Property prior to its acquisition and disposal.
35. The Fund Manager must commission the Person referred to in paragraph 33. to produce a valuation report of the Property Fund each year in accordance with paragraph 40. below. The net asset value of the Fund following this valuation must be reported in the annual report of the Fund.
36. For these purposes, a Fund Manager must appoint a Person:
a. who carries on the business of valuing Real Property;
b. who is not Related to the Fund Manager; and
c. whom the Fund Manager, and if appointed the Trustee, have reasonable grounds to believe would be capable of providing objective valuation of Real Property. A Fund Manager, and where appointed the Trustee, in this opinion, should be satisfied that the Person to be engaged for providing valuation of Real Property meets if not all, at least most of the following criteria:
(i) the Person 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;
(ii) the Person 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;
(iii) the Person 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;
(iv) the Person has adequate professional insurance to cover its usual risks;
(v) the Person does not have ownership or other commercial links with any other Persons carrying on Regulated Activities in relation to the Fund (such as investment advisers or investment managers appointed to the Fund), which would impair that Person's ability to provide independent and objective valuation services to the Fund; and
(vi) the Person or any of his associates has not been instrumental in relation to the finding of the Real Property for the Fund.
37. A Fund Manager must ensure that any valuation by the Person appointed to provide valuation services to the Fund is carried out on the basis of a 'market value' as defined in the Constitution and the most recent Prospectus of the Fund. This valuation report must confirm that if the Real Property was acquired for the Property Fund it could be disposed of at that valuation within a reasonable period.
38. The Fund Manager must ensure that the property is acquired within a reasonable time from the date of the valuation report.
39. The Regulator would expect the Fund Manager to define 'market value' to be based on an authoritative text such as the current edition of the Royal Institute of Chartered Surveyors' Appraisal and Valuation Standards ("Red Book"); or similar practitioners text used by surveyors; or International Valuation Standards issued from time to time by the International Valuation Standards Committee.

Valuation Report

40. A Fund Manager must ensure that any valuation report prepared by the Person 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 Fund 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.
41. A Fund Manager must ensure that whenever a valuation report is prepared for the Fund, the date of the valuation report must be:
a. the date the Fund 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 three 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 Unitholder approval.

Retirement of valuer

42. A Fund Manager must ensure that where a Person appointed pursuant to paragraph 36 has conducted valuations of the Real Property for the Fund for five consecutive years, that Person is retired.
43. A Person retired under paragraph 42. must not be re-appointed by the Fund Manager to perform Fund valuation unless a period of two years has elapsed from the date of the retirement of that Person.
44. The Fund Manager, and if appointed the Trustee on instructions of the Fund Manager, may at any time remove the Person appointed to provide the valuation services by notice in writing in any of the following events:
a. the Person enters into liquidation, becomes bankrupt or has a receiver appointed over its assets; or
b. the Fund Manager, in consultation with the Trustee, determines on reasonable grounds that it is necessary to remove that Person in the interests of the Fund and the Unitholders; or
c. an ordinary resolution is passed by the Unitholders to dismiss that Person.
45. Upon the retirement or dismissal of the Person appointed to provide the valuation services to the Fund, the Fund Manager must appoint another Person to provide valuation services to the Fund where the Fund Manager and where appointed the Trustee are satisfied that the Person meets the requirements specified in paragraph 36.