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KIA sets rules regarding Gulf stocks funds

KUWAIT, Feb 7 (KUNA) -- Kuwait Investment Authority (KIA) Thursday announced the specifications and guidelines regarding its contribution to Gulf stocks funds, approved by the executive committee.
A KIA statement said the managing company must be under the concerned audit and monitoring authorities' supervision and must have realized good results and netted profit in the two years preceding set up of the fund.
It is also required for the company to have qualified executive staff to manage the fund at high efficiency, supported by enough experience in managing third party funds or portfolios. The fund manager is to supply written consent to the KIA conditions and regulations.
The fund must include shares of bodies listed with Gulf bourses and must have obtained the final approval on establishment by the concerned bodies and authorities.
Only funds established two years earlier at least with good performance would be considered and subscription and maturity is to be set for not over 30 days. The company is also required to call out public subscription for stakes in the fund.
On monetary stakes in such funds, these should not exceed 50 percent of the fund's subscribed capital or exceed the sum of KD 30 million.
As for material stakes, the same applies, with the addition that selling price of related stocks be set at the average market price for the 30 days prior to subscription or average market price for the last seven days of subscription, whichever is lower.
Combining the two forms is to be within the maximum of 50 percent of the fund capital and a maximum value of KD 30 million, with the monetary stake limited to 50 percent of KIA's share in the fund.
Manager of the fund is to refrain from buying securities on margin, giving loans, or providing services of guarantor or sponsor as well as dealing in commodities and real estate and acting as prime guarantor of issues.
Fund manager is also to refrain from taking mortgage or giving privileges to other parties through fund finances in any form, as well as deduct checks, use the stocks to cast vote in General Assemblies and Extraordinary Assemblies, or take loans for the fund, except in cases specifically mentioned in the fund's bylaws, or to deal in manager companies' funds.
KIA also expects funds to issue a monthly statement on the five biggest companies in which it holds stake, along with charts of net value per unit, with the aim of increasing transparency.
KIA is also not to hold over 50 percent of fund net value in any single state and the manager is not to invest over 15 percent of the net value of the fund's stake in any single company.
Other guidelines on investment in the fund are also applicable.
In addition, the fund's stake in shares of companies with principal shares - those at over 10 percent - of the managing company's shares is not to exceed 20 percent of the overall value of fund assets.
KIA also expects funds to perform above the average of the performance of Gulf funds in which KIA holds stake. This is taken in account upon future deliberation over possible increase of KIA investment. Upon below average performance, the authority is to decide on partial recovery of its contribution in the fund.
Upon recovery of investments by other stock-holders and drop in fund volume, the authority is to take steps to maintain its stake at 50 percent. Upon above average performance, however, fund manager is urged to exert more promotion efforts to encourage others to bring in investments.
The administrative body managing the fund portfolio is also to be independent of the administrative body managing the managing company's own portfolios.
Fund manager is also required to submit a report on fund activity with data and information on KIA stakes, the financial status, and activity in related shares. He is also to forward the reports of the investment secretary and external auditor and supply a comparison of its performance to other indices, along with indices of Gulf bourses.
Should the manager violate any of the rules of establishing funds or the fund's bylaws or KIA's conditions, KIA may consider restricting cooperation with the manager in the future and may even decide to quit the fund.
The manager in turn has right to subscribe in non-listed Gulf stocks if they are put up for subscription by the companies in which the fund contributes.
Also, if the fund deals in shares of sister or subsidiary bodies of the manager, it is not to hold a stake bigger than 15 percent of fund capital.
All such transactions must be reported by the manager on monthly basis to all shareholders.(end) hq.aa.wsa KUNA 071420 Feb 08NNNN