Section 16-38-11.7 - Real estate investment trusts(a) Applications to register securities issued or issuable by a real estate investment trust shall substantially meet the requirements of this section.(b) For purposes of this section, a "real estate investment trust" or "trust" means an unincorporated trust or association which intends to comply with sections 856, 857, and 858 of the Code.(c) The declaration of trust, or other instrument forming the trust, among other things, shall ordinarily contain provisions as set forth in subsections (d) to (l).(d) A majority of the trustees shall not be affiliated with the adviser of the trust or any organization affiliated with the adviser of the trust. The trustees shall be elected by the shareholders of the trust annually.(e) No trustee, officer, or adviser of a trust, or any person affiliated with any trustee, officer, or adviser of a trust, shall sell any property or assets to the trust or purchase any property or assets from the trust, directly or indirectly, nor shall any trustee, officer, or adviser of a trust receive any commission or other remuneration, directly or indirectly, in connection with the purchase or sale of trust assets, except pursuant to transactions that are fair and reasonable to the shareholders of the trust and that relate to: (1) The acquisition of property or assets at the formation of the trust or shortly thereafter that is fully disclosed in the prospectus;(2) The acquisition by the trust of federally insured or guaranteed mortgages at prices not exceeding the currently quoted prices at which the Federal National Mortgage Association is purchasing comparable mortgages;(3) The acquisition of other mortgages on terms not less favorable to the trust than similar transactions involving unaffiliated parties; or(4) The acquisition by the trust of other property at prices not exceeding the fair value thereof as determined by independent appraisal. All transactions and all other transactions in which a person has any direct or indirect interest shall be approved by a majority of the trustees, including a majority of the independent trustees. All commissions or remuneration received by any trustee, officer, or adviser of a trust in connection with any transactions shall be deducted from the advisory fee.
(f) The aggregate annual expenses of every character paid or incurred by the trust, excluding interest, taxes, expenses in connection with the issuance of securities, shareholder relations, and acquisition, operation, maintenance, protection, and disposition of trust properties, but including advisory fees and mortgage servicing fees and all other expenses, shall not exceed the greater of: (1) One and one-half per cent of the average net assets of the trust. For purposes of the section, "net assets" means the total invested assets at cost before deducting depreciation reserves, less total liabilities, calculated at least quarterly on a basis consistently applied; or(2) Twenty-five per cent of the net income of the trust, excluding provision for depreciation and realized capital gains and losses and extraordinary items, and before deducting advisory and servicing fees and expenses, calculated at least quarterly on a basis consistently applied; but in no event shall aggregate annual expenses exceed one and one-half per cent of the total invested assets of the trust. The adviser shall reimburse the trust at least annually for the amount by which aggregate annual expenses paid or incurred by the trust as defined herein exceed the amounts herein provided.
(g) The aggregate borrowings of the trust, secured and unsecured, shall not be unreasonable in relation to the net assets of the trust, as defined in subsection (f), and the maximum amount of borrowings in relation to the net assets shall be stated in the prospectus.(h) A real estate investment trust shall ordinarily have a net capital of not less than $100,000 represented by outstanding shares or certificates of beneficial interest.(i) A trust shall not: (1) Engage in any material trading activities with respect to its properties;(2) Issue redeemable equity securities or equity securities of more than one class;(3) Issue debt securities to the public unless the historical cash flow of the trust or the substantiated future cash flow of the trust, excluding extraordinary items, is sufficient to cover the interest on the debt securities; or(4) Issue options or warrants to purchase its securities to the adviser of the trust or any person affiliated with the adviser, or to any other persons at exercise prices less than the fair market value of the securities on the date of grant.(j) Any advisory contract entered into by the trust prior to the initial public offering shall be for a period not longer than three years, and any contract entered into thereafter shall be for a period not longer than one year. Any advisory contract shall provide that it may be terminated at any time without penalty, by the trustees or a majority of the holders of outstanding shares of beneficial interest, upon not less than sixty days' written notice to the adviser.(k) The trust shall prepare an annual report concerning its operations for each fiscal year ending after the public offering of its securities, including financial statements prepared in accordance with generally accepted accounting principles applied on a consistent basis and by independent certified public accountants. The annual report shall be delivered to each public shareholder and debenture holder within one hundred twenty days after the end of the fiscal year. There shall be an annual meeting of the holders of outstanding shares of beneficial interest of the trust, upon reasonable notice, following delivery of the annual report.(l) The investment policies intended to be followed by the trustees shall be stated with reasonable particularity and shall contain express statements of policy with respect to unimproved real estate and junior mortgages, including the risks inherent with the policies.Haw. Code R. § 16-38-11.7
[Eff 6/4/70; am 8/8/71; am and ren § 16-38-11, 7/30/81; am, ren § 16-38-11.7 and comp 10/12/85; am and comp 4/14/03] (Auth: HRS § 485-2) (Imp: HRS §§ 485-2, 485-10)