July 2020Rule
Calculation of Net Asset Values- Registered Private Funds

1. Statutory Authority
1.1. These Rules are issued pursuant to section 34 of the Monetary Authority
Law ( 2020 Revision) (“MAL”), which provides that the Cayman Islands
Monetary Authority (the “Authority”) may, after private sector
consultation, issue or amend rules or statements of principle or guidance
concerning the conduct of licensees and their officers and employees, andany other persons to whom and to the extent that the regulatory laws may
apply.
1.2. These Rules should also be read in conjunction with the Authority’s Rules
on Contents of Marketing Material of Registered Private Funds.

2. Objective
2.1. To set out the Authority’s rules on the Calculation of Net Asset Values for
Registered Private Funds (each subparagraph of paragraph 5 below
referred to as a “Rule,” and collectively, the “Rules”), pursuant to the MAL.

3. Scope
3.1. These Rules apply to all Private Funds registered under section 7 of thePrivate Funds Law, 2020 (the “PFL”) other than Alternative Investment
Vehicles.

4. Definitions
4.1. Fund means any Private Fund registered under section 7 of the PFL thatis not an Alternative Investment Vehicle.
4.2. NAV (Net Asset Value) means the value of a Fund’s total assets(including accrued interest, dividends and other receivables), minus thevalue of the Fund’s total liabilities (including accrued expenses (includingfees) and other payables).
4.3. NAV Calculation Policy means the pricing and valuation practices,

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policies, and procedures to calculate a Fund’s NAV that are established andmaintained in accordance with the requirements of the PFL and the Rules.
4.4. Fair Value means the price that would be received for the sale of an asset
or paid to transfer a liability in an orderly transaction between market
participants at the measurement date.
4.5. Hard-to-Value Assets means investments for which there is no active
market price for identical assets or liabilities that the fund can access at
the NAV calculation date.
4.6. Pricing Models include any pricing models or determination methods
used to value investments.
4.7. Section 16 Person means a person appointed by a Fund under section
16 of the PFL to perform valuations of its assets.
4.8. All other capitalised terms used in the Rules shall have the meanings
ascribed to them in the PFL.

5. NAV Calculation Policy
5.1. A Fund must establish, implement, and maintain a NAV Calculation Policythat ensures a Fund’s NAV is fair, reliable, complete, neutral and free frommaterial error and is verifiable.
5.2. The NAV Calculation Policy shall be calculated in accordance with theInternational Financial Reporting Standards, or generally accepted
accounting principles of the United States of America, Japan or Switzerland
or a Non-High Risk Jurisdiction.
5.3. The methodology used to perform the NAV calculation must be consistent
with the accounting principles or reporting standards used to prepare theFund’s audited financial statements.
5.4. The NAV Calculation Policy must:
5.4.1 be written and disclosed in the Fund’s constitutional documents orMarketing Materials or other form of Investor communication
typically used by the Fund;5.4.2 describe the Fund’s practical and workable pricing and valuation
policies, practices, and procedures;

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5.4.3 require the valuing of assets regularly, at least annually;
5.4.4 state the value of assets, how it will be used, and when and how itwill be published;
5.4.5 state the accounting principles or reporting standards that will befollowed;
5.4.6 define the role and responsibilities of the Section 16 Person in thevaluation process;5.4.7 identify the price sources for each investment type and a practicalescalation of resolution procedure for the management ofexceptions; and5.4.8 incorporate internal controls that are appropriate to thesize, complexity, and nature of the Fund’s operations.
5.5. Unless otherwise required by the financial reporting frameworks set out in
5.3, the NAV Calculation Policy must require the Fund to value theinvestments within its portfolio(s) using Fair Value.
5.6. In estimating the Fair Value for an investment, the Fund should apply atechnique or techniques that is or are appropriate considering the nature,facts, and circumstances of the investment.
5.7. A Fund may use Pricing Models to determine a Fair Value for Hard-toSecurities.
5.7.1 A Fund must, to the extent appropriate to address the risk of material
error, calibrate Pricing Models, by verifying the inputs used in thePricing Model and testing whether the Pricing Model reflects current
market conditions, for example, by applying the model and inputs toa similar instrument for which pricing information is available or otherappropriate means.
5.7.2 Any Pricing Models must be capable of practical implementation bythe Section 16 Person.
5.8. The Fund must require the Section 16 Person to apply the Fund’s NAV
Calculation Policy; unless there is satisfactory reason not to do so,
deviations from the NAV Calculation Policy must be disclosed in the Fund’s
Marketing Materials. Where they are likely to have an effect on thereported NAV, they must be disclosed to the Fund’s investors and agreed
by the Operator(s) in advance of the determination or production of theNAV.

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5.9. In addition to any disclosure required by Rule 5.8, a Fund’s constitutional
documents or Marketing Materials or other form of Investor
communication must explicitly describe the inherent limitations potential
limitations and conflicts of the NAV Calculation Policy, and any material
involvement by the Fund’s investment manager / advisor in the pricing of
the Fund’s portfolio, or otherwise in the calculation, determination orproduction of the NAV and any conflicts of interest caused by such
involvement.
5.10. The NAV of the Fund shall be communicated directly to the investors (asrecorded on the official register of the entity), including to each particularinvestor their share of the balance or NAV per unit, by the Service Provider
charged in 5.8 with the NAV Calculation. reports must be addressed
directly to the Fund’s investors.
5.11. The Fund’s Operator(s) have ultimate responsibility for oversight of theentire net asset valuation process, and must approve, and review at least
annually, the NAV Calculation Policy and any Pricing Models.

6. Enforcement
6.1. Whenever there has been a breach of the Rules, the Authority’s regulatory
policies and procedures as contained in its Enforcement Manual will apply,in addition to any other powers provided in the PFL and the MAL.