Turkey: Turkish Wealth Fund And Turkish Wealth Fund Management Company

Last Updated: 13 June 2017
Article by Umurcan Gago, Alper Onar and Pınar Karamahmutoğlu

Decree on the Process and Principles of the Structure and Operations of Turkish Wealth Fund Management Company and Turkish Wealth Fund

Decree of the Council of Ministers 2016/9429 dated 17.10.2016, regarding the process and principles of the structure and operation of Turkish Wealth Fund Management Company ("TWF Man. Co.", or "the Company") and Turkish Wealth Fund has been published in the Official Gazette dated 9.11.2016 and numbered 29883.

This Decree is prepared based on article 3 of the Establishment of Turkish Wealth Fund Management Company and Amendments in Certain Laws numbered 6741 and dated 19.8.2016 (the "Law").

In a Nutshell

On a high level basis, without much detail, the Decree sets forth

  • the operational principles and the organizational structure of TWF Man. Co. and its committees,
  • rules on conflict of interest, internal systems (risk management system, internal control system, work-flow and emergency and contingency plan),
  • the company directors and staff,
  • financial statements and independent audit, internal audit, books and records,
  • public disclosure requirements,
  • corporate governance,
  • principles regarding the fund (Turkish Wealth Fund, "TWF") and the sub-funds to be established by the TWF Man. Co.
  • fund management,
  • establishment of the fund(s),
  • management agreements,
  • custody and valuation of the fund assets,
  • audit of the funds,
  • liquidation of the funds.

With respect to the strategy, permitted activities, sources of funding for TWF Man. Co. and the funds (TWF and its sub-funds, hereinafter collectively referred to as "Funds"), the Decree does not state much beyond what already have been stated in Law itself.

The key highlights of the Decree are as follows:

Investment Principles and Strategy

The TWF Man. Co. and fund managers shall in their investment decisions comply with the investment principles determined by the Law, strategic plan, prospectus, certificate of incorporation and articles of association of the TWF Man. Co.; shall compose and manage the portfolio of the funds in compliance with the investment strategy determined in the strategic plan, prospectus and certificate of incorporation certificate of the Funds.

The Organizational Structure of the TWF Man. Co.

The necessary units for TWF Man. Co. and Funds, shall be composed by a resolution of the board of directors; an advisory board and execution board shall be composed for TWF Man. Co., the functions and working principles which shall be determined by its board of directors; an investment committee shall be composed for each sub fund (individuals within or outside TWF Man. Co. can be appointed in these investment committees), the duties and authorities which shall be specified in the prospectus of the Funds.

Strategic Investment Plan

For TWF Man. Co. and Funds, a three years strategic investment plan shall be prepared by the board of directors and shall be submitted to the Council of Ministers.

Annual Financial Statements and Activity Reports

TWF Man. Co. and Funds shall prepare their annual financial statements based on the Turkish Accounting Standards/Turkish Financial Reporting Standards published by Public Oversight Accounting and Auditing Standards Authority and if deemed necessary by the board of directors based on the international reporting standards, which shall be audited by independent auditors. TWF Man. Co. shall publish annual activity reports (for itself and the funds) whereby the content shall be determined by the board of directors of TWF Man. Co.. The corporate governance, audit and early detection of risks committees shall be established within TWF Man. Co. in line with the corporate governance regulations of the Capital Markets Board.

Protection of the Assets

The assets of the Funds and the assets and rights transferred to be managed by TWF Man. Co. are separate from the assets of TWF Man. Co.. The assets of the Funds shall not be provided as collateral or pledged, not be disposed for another purpose, cannot be subject to seizure without excepting the purpose to collect public receivables, imposed to an interim injunction or included in a bankrupt's estate for any other purpose other than the businesses and transactions regarding the operations of which the Funds are entitled to engage, including the procurement of finance from money and capital markets provided that such transactions shall be conducted on the account of the Funds. The debts and obligations of TWF Man. Co. to third persons and the receivables of the Funds from the same third persons may not be set off against each other.

The Management of the Funds

For the management of the portfolio of the sub funds, mandates can be given to licensed external management companies.

Custodianship

The information regarding whether the fund assets are going to be held by a custodian, domestically or abroad, shall be included in the prospectus and fund establishment certificate of the sub funds.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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