Valuations to be reported on if given in connection with an offer

3.1 The valuation rules are fully set out in the Code Rule 29 – The particular requirements to which the valuer must have regard, in addition to PS 6, are:

(a) The valuation should be by a named independent valuer, who the Code states must be an external valuer as defined in these standards, who also has no connection with other parties to the transaction.

(b) The valuer should be a member of RICS or the Institute of Revenues Rating and Valuation, or some other person approved by the panel, and should satisfy the requirements of PS 1.2 – Knowledge and skills. Where the valuer has insufficient current knowledge assistance may be provided by a person who has such skills and knowledge

(c) Only in exceptional circumstances should the basis of valuation be qualified, and in that event the valuer must explain the meaning of the words used. Special assumptions should not normally be made but, if they are permitted by the panel, they should be fully explained.

(d) The bases of valuation are as follows:

– for non-specialised properties, the basis of valuation will normally be Market Value;

– property that is occupied for the purposes of the business will be valued at existing use value (see UKPS 1.3);

– where a property has been adapted or fitted out to meet the requirements of a particular business, the value should relate to the property after the works have been completed.

Alternatively, the value may relate to the state of the property before the works had commenced and the works of adaptation may be valued separately on a depreciated replacement cost basis, subject to adequate potential profitability;

– properties held as investments or which are surplus to requirements and are held pending disposal should be valued at Market Value.

(e) Where land is already being developed, or has immediate development potential, the valuations reported should include:

– MV in the state existing at the date of valuation;

– the value after the development has been completed;

– the value after the development has been completed and let;

– the estimated total cost, including carrying charges, of completing the development and the anticipated dates of completion and of letting or occupation;

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– a statement as to whether planning consent has been obtained and, if so, the date thereof and the nature of any conditions attaching to the consent which affect the value.

(f) In some exceptional cases it will not be possible for the valuer to complete a full valuation of every property. If this is the case:

– the valuer may carry out a valuation of a representative sample of properties and report those valuations;

– the valuer must have knowledge of the portfolio as a whole and certify the representative nature of the sample;

– the directors must take sole responsibility for an estimate, based on the sample, to cover the remaining properties.

The document sent to the shareholders should distinguish between properties valued professionally and those where the directors have made estimates based on the sample. It should also compare such estimates with the book value.

3.2 If the valuation is not current the valuer must state that a current valuation would not be materially different. If this statement cannot be made the valuation must be updated.

3.3 With regard to PS 6.11 – Publication statement, the document containing the asset valuation must state that the valuer has given and not withdrawn consent to the publication of the valuation report

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UK appendix 2.3

Collective investment schemes

1. Introduction

1.1 This appendix provides an outline of the land and property valuation requirements in paragraph 5 of the New Collective Investment Schemes Sourcebook.

1.2 To avoid confusion, the valuer should be aware that the sourcebook uses the term ‘scheme property’ in a very wide sense, which is not restricted to real estate.

1.3 For more detailed information about collective investment schemes, the full text of the sourcebook is available on the FSA website (www.fsa.gov.uk). There is also a Collective Investment Schemes Information Guide on the same website, which provides some general background material on the regulatory structure surrounding scheme regulation in the UK.

2. Definitions

2.1 Qualified investor schemes

Qualified investor schemes are authorised funds, which may only be sold or marketed to sophisticated investors. Qualified investor schemes have a more relaxed set of rules governing their operation than for retail schemes, particularly their investment powers. A qualified investor scheme is essentially a mixed asset type of scheme where different types of permitted asset may be included as part of the scheme property, depending on the investment objectives and policy of that scheme and within any restrictions in the rules.

2.2 Investment in property

Any investment in land or a building held within the scheme property of a qualified investor scheme must be in an immovable as defined.

2.3 Immovable

An immovable must have a good marketable title and:

(a) be situated in a country or territory identified in the prospectus; and

(b) if situated in:

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(i) England and Wales or Northern Ireland, be a freehold or leasehold interest; or

(ii) Scotland, be any interest or estate in or over land or heritable right including a long lease; or

(c) if not situated in the jurisdictions referred to in (b)(i) or (ii), be equivalent to any of the interests in (b)(i) or (ii).

2.4 Appropriate valuer

An appropriate valuer must be a person who:

(a) has knowledge of and experience in the valuation of immovables of the relevant kind in the relevant area;

(b) is qualified to be the standing independent valuer of an authorised fund or is considered by the scheme’s standing independent valuer to hold an equivalent qualification;

(c) is independent of the investment company with variable capital (ICVC), the depositary and each of the directors of the ICVC or of the manager and the trustee of the authorised unit trust scheme (AUT); and

(d) has not engaged himself or any of his associates in relation to the finding of the immovable for the scheme or the finding of the scheme for the immovable.

2.5 Standing independent valuer

The standing independent valuer is an appropriate valuer appointed by the authorised fund manager with the approval of the depositary.