COLL 14.4 Income allocation and distribution

Income reserve account

COLL 14.4.1R

1As an exception to COLL 6.8.3R(3) (Income allocation and distribution), a charity authorised investment fund is not required to transfer income to a distribution account where this is allowed by COLL 14.4.2R.

COLL 14.4.2R
  1. (1)

    The authorised fund manager and the depositary of a charity authorised investment fund may establish an income reserve account for the scheme if this is provided for in:

    1. (a)

      the instrument constituting the fund; and

    2. (b)

      the prospectus.

  2. (2)
    1. (a)

      The authorised fund manager may instruct the depositary to transfer up to 15% of the income available for allocation or distribution on an annual income allocation date to the income reserve account.

    2. (b)

      Any income transferred under (a) remains part of the income property of the scheme but is not available for allocation or distribution.

    3. (c)

      The transfer in (a) must be for the sole purpose of avoiding fluctuations in the income available for allocation or distribution for the annual accounting period.

  3. (3)

    The authorised fund manager may instruct the depositary to transfer income in the income reserve account to the income account.

  4. (4)

    The authorised fund manager and the depositary must treat:

    1. (a)

      any income transferred from the income reserve account to the income account as income available for allocation or distribution at the next annual income allocation date; and

    2. (b)

      any interest or other amounts earned on the income in the income reserve account as income due to the scheme.

COLL 14.4.3R

The authorised fund manager of a charity authorised investment fund with an income reserve account must not allow a payment that has been allocated to income property in the first instance to be made from the capital account if that payment could be met, in whole or in part, by transferring income from the income reserve account to the income account.

COLL 14.4.4R
  1. (1)

    COLL 14.4.1R ceases to apply if the scheme commences winding up or termination in accordance with:

    1. (a)

      COLL 7.3.6R (Consequences of commencement of winding up or termination) for an ICVC; or

    2. (b)

      COLL 7.4.3R (When an AUT is to be wound up or a sub-fund terminated) for an AUT; or

    3. (c)

      COLL 7.4A.4R (When an ACS is to be wound up or a sub-fund of a co-ownership scheme terminated) for an ACS.

  2. (2)

    Any income in the income reserve account must be transferred to the income account as soon as practicable after the winding up or termination commences.

Total return approach

COLL 14.4.5R
  1. (1)

    The authorised fund manager and depositary of a charity authorised investment fund may adopt a total return approach to the allocation or distribution of income where this is provided for in:

    1. (a)

      the instrument constituting the fund; and

    2. (b)

      the prospectus.

  2. (2)

    Under a total return approach the authorised fund manager may make transfers between the capital account and the income account in addition to those in COLL 6.8.3R(3A)(c).

  3. (3)

    The authorised fund manager and depositary must ensure that any transfer under a total return approach:

    1. (a)

      is solely for the purpose of meeting the pre-determined target amount disclosed in the prospectus in accordance with COLL 14.4.6R(1); and

    2. (b)

      is consistent with the explanation given in the prospectus in accordance with COLL 14.4.6R(2).

COLL 14.4.6R

If the charity authorised investment fund has adopted a total return approach to the allocation or distribution of income, the authorised fund manager must ensure that the prospectus contains:

  1. (1)

    the pre-determined target of the income available for allocation or distribution in any annual accounting period; and

  2. (2)

    an explanation of how the target amount is consistent with the investment objective and policy and the distribution policy of the scheme.