Investment Funds Brief Guide
|DEFINITION||Investment fund refers to the asset which is established by portfolio management companies under the fund rules in conformity with the fiduciary ownership principles on the account of the savers, with money or other assets gathered from savers pursuant to the provisions of the Law in return for fund units in order to operate the portfolio or portfolios consisting of assets and transactions specified in this Communiqué and which does not have a legal entity.|
|UMBRELLA FUND||Umbrella fund is the investment fund covering all funds the units of which are issued under a single fund rules.|
|FUND||“Fund” refers to the investment fund the units of which are issued under an umbrella fund|
|LEGAL STRUCTURE||Investment funds are established in the form of open-end investment companies in Turkey. They do not have any legal entity. They are operated in terms of the rules stated in the fund rules of the fund, which includes general terms about management of the fund, custody of the assets, valuation principles and conditions of investing in the fund.|
|TYPES||A investment fund is established as the investment fund under an umbrella fund. There are ten different types of umbrella funds in Turkey, Debt Instruments Umbrella Fund, Share Umbrella Fund, Precious Metals Umbrella Fund, Fund Of Funds Umbrella Fund, Money Market Umbrella Fund, Participation Umbrella Fund, Variable Umbrella Fund, Hedge Umbrella Fund, Capital Guaranteed Umbrella Fund, Capital Protected Umbrella Fund.|
|FOUNDERS||Only portfolio management companies can establish investment funds.|
|PORTFOLIO MANAGEMENT||Only portfolio management companies manage the portfolios of the funds. It is obligatory that assets of the fund are managed in conformity with the fund management strategy and in favor of investors and by protecting interests of investors and within the framework of regulations of the Board pertaining to portfolio management services, by portfolio managers who have adequate knowledge about assets investable by the fund and have at least five years’ experience in capital markets field.The portfolio manager is subject to numerous legal restrictions between the fund and itself.|
|PORTFOLIO RESTRICTIONS||In order to ensure that investment funds' portfolios are sufficiently liquid and well diversified, law and regulations enforce some limitations on their portfolios. Some of the portfolio restrictions of the funds are as follows; |
- More than 10% of fund net asset value cannot be invested in money and capital market instruments of a single issuer and in derivatives based on such instruments.
- Total value of money and capital market instruments of issuers in which an investment is made in excess of 5% of fund net asset value cannot exceed 40% of fund net asset value.
- More than 20% of fund net asset value cannot be invested in money and capital market instruments of the same group defined in the regulations of the Board pertaining to financial reporting standards.
- More than 10% of total issue of debt instruments of an issuer in circulation cannot be included in the fund portfolio.
- The fund cannot alone own more than 10% of capital or all voting rights of any issuer,
- Total sum of investments made in covered and corporate warrants and certificates cannot exceed 10% of fund net asset value.
- Maximum 10% of fund net asset value may be invested in deposit/participation accounts opened and in deposit certificates held by banks, provided that their maturity is no longer than 12 months.
- Total value of units of funds and exchange traded funds and shares of securities investment companies cannot exceed 20% of fund net asset value,
- Not to invest in non-listed securities, with a limited exception for the securities, the founder or the portfolio manager of the fund underwrites.
|FUND COSTS||Fund costs can be of two types. First type concerns the buying/selling commissions that are directly taken from investors. Second type concerns the cost that are paid out directly from the fund assets. All of these costs are disclosed at the fund rules, fund prospectus. Also, they are disclosed at the web site of Board and disclosure web sites of funds.|
|POWERS AND RESPONSİBİLİTİES OF FOUNDER||Founder is responsible for representation, management and supervision of management of the fund in such manner to protect rights of fund unit holders, and for conduct of its activities in accordance with provisions of fund rules and prospectus. Founder is authorized to dispose of the fund assets in its own name and in the account of the fund and to use the rights arising therefrom in accordance with the applicable laws and the fund rules.|
|VALUATION||The assets of investment funds are subject to valuation on a daily basis. They are valued at weighted average prices or rates of the market in case such a price or rate exists. In case not, the valuation is based on the last existing market price for stocks and the internal rate of return for fixed income securities. After valuation is done for each of the assets, they are summed up to find the portfolio value. Finally, by including the credits and excluding the debts and other costs of the fund, the net asset value of the fund is reached.|
|FUND UNİT||Fund unit refers to a type of dematerialized capital market instrument which carries the rights of investors and proves participation in the Fund;. Investors invest in the fund by buying and selling these units.. The price of a unit - the unit price for a fund - is calculated every workday, by dividing the net asset value of the fund to the outstanding number of units. Thus, it daily reflects the income that is generated in the fund. That means an investor of a fund receives the profit that corresponds to his units during the period he has invested in the fund when he sells his certificates back to the fund and no other dividend is paid.|
|DISCLOSURE||After being approved by the CMB the fund rules of funds are announced in the Turkish Commercial Registry Journal (TTRG). As well as that; funds have to prepare prospectus in the case of issuance and public offering of the units. Prospectus and key investor information document are published in Public Disclosure Platform (PDP) and in the founder’s official internet website within 10 business days following the date of receipt of the letter of permission by the company, and are not separately registered in trade registry and announced in TTRG. However, the place of publishing of prospectus is registered in trade registry and announced in TTRG. Said date of registration is mentioned in key investor information document.|
|PROTECTION OF INVESTORS||Apart from the disclosure liabilities stated above, the founder is responsible for the protection and safekeeping of the fund's assets; |
- Assets of the fund are segregated from the assets of its founder and portfolio custodian.
- It is obligatory that assets of the fund are managed in conformity with the fund management strategy and in favor of investors and by protecting interests of investors and within the framework of regulations of the Board pertaining to portfolio management services, by portfolio managers who have adequate knowledge about assets investable by the fund and have at least five years’ experience in capital markets field.
- Assets in fund portfolio are required to be kept in custody in portfolio custodians within the framework of regulations of the Board pertaining to portfolio depositary services.
- The fund assets cannot be used as collateral or be pledged, other than being used for taking credits, derivative instrument transactions, short selling transactions, or similar transactions realised as a party in the name of the fund, provided that these transactions are on the account of the fund and that a provision exists in the fund rules and the prospectus. The fund assets cannot be disposed of for any other purpose, even when the management or supervision of the portfolio management company or of the portfolio custodian is transferred to public institutions, cannot be attached including the purpose of collecting public receivables, cannot be included in the bankrupt’s estate and cannot be subject to cautionary injunction.
- Debts and liabilities of founder to third parties and the receivables of the funds from the same third persons cannot be set off against each other.
|TAXATION||As an incentive, Funds are exempted from corporate tax. On the other hand, divident income derived from fund units of marketable securities investment funds are subject to 10% withholding tax.|