COBS 18.5 Residual CIS operators, UCITS management companies and AIFMs6

(1)

Regulator

The firm statutory status in accordance with GEN 4 Annex 1 R (Statutory status disclosure);

(2)

Services

the nature of the services that the firm will provide6;

(3)

Payments for services

details of any payment for services payable by the fund or from the property of the fund6 or investors in the fund to the firm6, including where appropriate:

(a)

the basis of calculation;

(b)

how it is to be paid and collected;

(c)

how frequently it is to be paid; and

(d)

whether or not any other payment is receivable by the firm6 (or to its knowledge by any of its associates) in connection with any transactions effected by the firm6 with or for the fund6, in addition to or in lieu of any fees;

(4)

Commencement

when and how the firm6 is appointed;

(5)

Accounting

the arrangements for accounting to the fund or investors in the fund6 for any transaction effected;

(6)

Termination method

how the appointment of the firm6 may be terminated;

(7)

Complaints procedure

how to complain to the firm6 and a statement that the investors in the fund6 may subsequently complain direct to the Financial Ombudsman Service;

(8)

Compensation

whether or not compensation may be available from the compensation scheme should the firm6 be unable to meet its liabilities, and information about any other applicable compensation scheme; and, for each applicable compensation6 scheme, the extent and level of cover and how further information can be obtained;

(9)

Investment objectives

the investment objectives for the portfolio of the fund6;

(10)

Restrictions

(a)

any restrictions on:

(i)

the types of investments or property which may be included in the portfolio of the fund6;

(ii)

the markets on which investments or property may be acquired for the portfolio of the fund6;

(iii)

the amount or value of any one investment or asset, or on the proportion of the portfolio of the fund6 which any one investment or asset or any particular kind of investment or asset may constitute; or

(b)

that there are no such restrictions;

(11)

Holding fund6 assets

(a)

if it is the case, that the firm6 will:

(i)

hold money on behalf of the fund6 or be the custodian of investments or other property of the fund6; or

(ii)

arrange for some other person to act in either capacity and, if so, whether that person is an associate of the firm6 identifying that person and describing the nature of any association; and

(b)

in either case:

(i)

how any money is to be deposited;

(ii)

the arrangements for recording and separately identifying registrable investments of the fund6 and, where the registered holder is the firm's6 own nominee, that the firm6 will be responsible for the acts and omissions of that person;

(iii)

the extent to which the firm6 accepts liability for any loss of the investment of the fund6;

(iv)

the extent to which the firm6 or any other person mentioned in (11)(a)(ii), may hold a lien or security interest over investments of the fund6;

(v)

where investments of the fund6 will be registered collectively in the same name, a statement that the entitlements of the fund6 may not be identifiable by separate certificates or other physical documents of title, and that, should the firm6 default, any shortfall in investments of the fund6 registered in that name may be shared proportionately among all fund6 and any other customers of the firm6 whose investments are so registered;

(vi)

whether or not investments or other property of the fund6 can be lent to, or deposited by way of collateral with, a third party and whether or not money can be borrowed on behalf of the fund6 against the security of those investments or property and, if so, the terms upon which they may be lent or deposited;

(vii)

the arrangements for accounting to the fund6 for investments of the fund6, for income received (including any interest on money and any income earned by lending investments or other property) of the fund6, and for rights conferred in respect of investments or other property of the fund6;

(viii)

the arrangements for determining the exercise of any voting rights conferred by investments of the fund6; and

(ix)

where investments of the fund6 may be held by an eligible custodian outside the United Kingdom, a general statement that different settlement, legal and regulatory requirements, and different practices relating to the segregation of those investments, may apply;

(12)

Clients' money outside the United Kingdom

if it is the case, that the firm6 may hold the money of the fund6 in a client bank account outside the United Kingdom;

(13)

Exchange rates

if a liability of the fund6 in one currency is to be matched by an asset in a different currency, or if the services to be provided to the firm for the fund6 may relate to an investment denominated in a currency other than the currency in which the investments of the fund6 are valued, a warning that a movement of exchange rates may have a separate effect, unfavourable or favourable, on the gain or loss otherwise made on the investments of the fund6;

(14)

Stabilised investments

if it is the case, that the firm6 is to have the right under the fund6 documents to effect transactions in investments the prices of which may be the subject of stabilisation;

(15)

Conflict of interest and material interest

if it is the case, that the firm6 is to have the right under the agreement or instrument constituting the fund6 to effect transactions on behalf of the fund6 in which the firm6 has directly or indirectly a material interest (except for an interest arising solely from the investment of the firm6 as agent for the fund6), or a relationship of any description with another party which may involve a conflict with the firm6 duty to the fund6, together with a disclosure of the nature of the interest or relationship;

(16)

Use of dealing commission

if the firm6 receives goods or services in addition to the execution of its customer orders in accordance with the section on the use of dealing commission, the prior disclosure required by the rule on prior disclosure (see COBS 11.6.2 R);

(17)

Acting as principal

if it is the case, that the firm6 may act as principal in a transaction with the fund6;

(18)

Stock lending

if it is the case, that the firm6 may undertake stock lending activity with or for the fund6 specifying the type of assets of the fund6 to be lent, the type and value of relevant collateral from the borrower and the method and amount of payment due to the fund6 in respect of the lending;

(19)

Transactions involving contingent liability investments

(a)

if it is the case, that the agreement orinstrument constituting the fund6 allows the firm6 to effect transactions involving contingent liability investments for the account of the portfolio of the fund6;

(b)

if applicable, whether there are any limits on the amount to be committed by way of margin and, if so, what those limits are; and

(c)

if applicable, that the firm6 has the authority to effect transactions involving contingent liability investments otherwise than under the rules of a recognised investment exchange and in a contract traded thereon;

(20)

Periodic statements

(a)

the frequency of any periodic statement (this should not be less than once every 12 months) except where a periodic statement is not required (see COBS 18.5.13R); and

(b)

whether those statements will include some measure of performance, and, if so, what the basis of that measurement will be;

(21)

Valuation

the bases on which assets comprised in the portfolio of the fund6 are to be valued;

(22)

Borrowings

if it is the case, that the firm6 may supplement the funds in the portfolio of the fund6 and, if it may do so:

(a)

the circumstances in which the firm6 may do so;

(b)

whether there are any limits on the extent to which the firm6 may do so and, if so, what those limits are; and

(c)

any circumstances in which such limits may be exceeded;

(23)

Underwriting commitments

if it is the case, that the firm6 may for the account of the portfolio of the fund6 underwrite or sub-underwrite any issue or offer for sale of securities, and:

(a)

whether there are any restrictions on the categories of securities which may be underwritten and, if so, what these restrictions are; and

(b)

whether there are any financial limits on the extent of the underwriting and, if so, what these limits are;

(24)

Investments in other funds6

whether or not the portfolio may invest in fund either managed or advised by the firm6 or by an associate of the firm or in a fund6 which is not a regulated collective investment scheme;

(25)

Investments in securities underwritten by the firm6

whether or not the portfolio may contain securities of which any issue or offer for sale was underwritten, managed or arranged by the firm6 or by an associate of the firm6 during the preceding 12 months.

Suitable intervals

(1)

A periodic statement should be provided at least:

(a)

six-monthly; or

(b)

once in any other period, not exceeding 12 months, which has been mutually agreed between the firm and the investor in the fund.6

Adequate information

(2)

(a)

A periodic statement should contain:

(i)

(A)

The information set out in the table of general contents of a periodic statement;

(B)

where the portfolio of the fund6 includes uncovered open positions in contingent liability investments, the additional information in the table listing the contents of a periodic statement (see COBS 18.5.18 E6) in respect of contingent liability investments; or

(ii)

such information as an investor6 who is a retail client ordinarily resident outside the United Kingdom, or a professional client, has on his own initiative agreed with the firm6 as adequate.

(b)

For a firm acting as an outgoing ECA provider, the words 'United Kingdom' is replaced by 'EEA'

1

Contents and value

(a)

As at the beginning of the account period, the total value of the portfolio of the fund6, being either:

(i)

the value of the assets comprised in the portfolio on the date as at which the statement provided for the immediately preceding period of account is made up; or

(ii)

in the case of the first periodic statement, the value of the assets comprised in the portfolio on the date on which the firm6 assumed responsibility for the management of the portfolio.

(b)

As at the end of the account period:

(i)

the number, description and value of each investment held on behalf of the fund6;

(ii)

the amount of cash held on behalf of the fund6; and

(iii)

the total value of the portfolio of the fund6.

2

Basis of valuation

A statement of the basis on which the value of each investment has been calculated and, if applicable, a statement that the basis for valuing a particular investment has changed since the previous periodic statement. Where any investments are shown in a currency other than the usual one used for valuation of the portfolio of the fund6, the relevant currency exchange rates must be shown.

3

Details of any assets loaned or charged

(a)

A summary of those investments (if any) which were, at the closing date, loaned to any third party and those investments (if any) that were at that date charged to secure borrowings made on behalf of the portfolio of the fund6; and

(b)

the aggregate of any interest payments made and income received during the account period in respect of loans or borrowings made during the period.

4

Transactions and changes in composition

Except in the case of a portfolio which aims to track the performance of an external index:

(a)

a statement that summarises the transactions entered into for the portfolio of the fund6 during the period; and

(b)

the aggregate of money and a summary of all investments transferred into and out of the portfolio of the fund6 during the period; and

(c)

the aggregate of any interest payments, dividends and other benefits received by the firm6 for the portfolio of the fund6 during that period.

5

Charges and remuneration

If not previously advised in writing, a statement for the account period:

(a)

of the aggregate charges of the firm6 and its associates; and

(b)

of any remuneration received by the firm6 or its associates or both from a third party in respect of the transactions entered into, or any other services provided, for the portfolio of the fund6.

6

Movement in value of portfolio

A statement of the difference between the value of the portfolio at the closing date and its value at the starting date of the account period, having regard at least, during the account period, to the following:

(a)

the aggregate of assets received from investors of the fund6 and added to the portfolio of the fund6;

(b)

the aggregate of the value of assets transferred, or of amounts paid, to thefund;6

(c)

the aggregate income received on behalf of the fund6 in respect of the portfolio; and

(d)

the aggregate of realised and unrealised profits or gains and losses attributable to the assets comprised in the portfolio of the fund6.

Notes:

For the purposes of Item 1, where the fund6 is a property enterprise trust, it will be sufficient for the periodic statement to disclose the number of properties held in successive valuation bands where this is appropriate to the size and composition of the fund6, rather than the value of each asset in the portfolio. The valuation bands of over £10m, £5-£10m, £2.5-£5m, £1-£2.5m and under £1m would be appropriate, unless a firm6 could show that different bands were justifiable in the circumstances.

The statement to be provided under Item 6 is not intended to be an indicator of the performance of the portfolio of the fund.6

A firm6 may wish to distinguish capital and income, and thereby provide more information than referred to in this table. If the statement includes some measure of performance, the basis of measurement should be stated.

(1)

Changes in value

The aggregate of money transferred into and out of the portfolio of the fund6 during the account period.

(2)

Open positions

In relation to each open position in the portfolio of the fund6 at the end of the account period, the unrealised profit or loss to the portfolio of the fund6 (before deducting or adding any commission which would be payable on closing out).

(3)

Closed positions

In relation to each transaction effected during the account period to close out a position of the fund6, the resulting profit or loss to the portfolio of the fund6 after deducting or adding any commission.

(Instead of the specific detail required by Items 2 or 3, the statement may show the net profit or loss in respect of the overall position of the fund6 in each contract)

(4)

Aggregate of contents

The aggregate of each of the following in, or relating to, the portfolio of the fund6 at the close of business on the valuation date:

(a)

cash;

(b)

collateral value;

(c)

management fees; and

(d)

commissions attributable to transactions during the period or a statement that this information has been separately disclosed in writing on earlier statements or confirmations to the investor.6

(5)

Option account valuations

In respect of each open option comprising the portfolio of the fund6 on the valuation date:

(a)

the share, future, index or other investment or asset involved;

(b)

(unless the valuation statement follows the statement for the period in which the option was opened) the trade price and date for the opening transaction;

(c)

the market price of the contract; and

(d)

the exercise price of the contract.

Options account valuations may show an average trade price and market price in respect of an option series where a number of contracts within the same series have been purchased on behalf of the fund.6