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COLL 4.1 Introduction

Application

COLL 4.1.1 R

This chapter applies to:

  1. (1)

    an authorised fund manager of an AUT, ACS1 or an ICVC;

  2. (2)

    any other director of an ICVC;

  3. (3)

    a depositary of an AUT, ACS1 or an ICVC; and

  4. (4)

    an ICVC,

where such AUT, ACS1 or ICVC is a UCITS scheme or a non-UCITS retail scheme.

Purpose

COLL 4.1.2 G

This chapter helps in achieving the statutory objective of protecting consumers by ensuring consumers have access to up-to-date detailed information about an authorised fund particularly before buying units and thereafter an appropriate level of investor involvement exists by providing a framework for them to:

  1. (1)

    participate in the decisions on key issues concerning the authorised fund; and

  2. (2)

    be sent regular and relevant information about the authorised fund.

COLL 4.2 Pre-sale notifications

Application

COLL 4.2.1 R

This section applies to an authorised fund manager, an ICVC and any other director of an ICVC

Publishing the prospectus

COLL 4.2.2 R
  1. (1)

    A prospectus must be drawn up in English and published as a document by the authorised fund manager and, for an ICVC, it must be approved by the directors.

  2. (2)

    The authorised fund manager must ensure that the prospectus:

    1. (a)

      contains the information required by COLL 4.2.5 R (Table: contents of the prospectus);

    2. (aa)

      29for a non-UCITS retail scheme managed by a full-scope UK AIFM, contains the information required by:

      1. (i)

        29FUND 3.2.2R and FUND 3.2.3R (Prior disclosure of information to investors); and

      2. (ii)

        29FUND 3.2.5R and FUND 3.2.6R (Periodic disclosure), unless the up-to-date information has been published in the scheme’s most recent annual report or half-yearly report;

    3. (b)

      does not contain any provision which is unfairly prejudicial to the interests of Unitholders generally or to the Unitholders of any class of units;

    4. (c)

      does not contain any provision that conflicts with any applicable rule29; and

    5. (d)

      is kept up-to-date and that revisions are made to it, whenever appropriate.

16Provision and filing of the prospectus16

COLL 4.2.3 R
  1. (1)

    The authorised fund manager of an AUT, ACS21 or an ICVC16 must:

    16
    1. (a)

      provide16 a copy of the scheme's most recent prospectus drawn up and published in accordance with COLL 4.2.2 R (Publishing the prospectus) free of charge to any person on request; and

      16
    2. (b)

      file a copy of the scheme's original prospectus, together with all revisions thereto, with the FCA and, where a UCITS scheme is managed by an EEA UCITS management company, with that company's Home State regulator on request.

      1616
  2. (1A)

    16Except where an investor requests a paper copy or the use of electronic communications is not appropriate, the prospectus may be provided in a durable medium or by means of a website that meets the website conditions.

  3. (2)

    [deleted]16

    16
  4. (3)

    An authorised fund manager must, upon the request of a Unitholder in a UCITS scheme that it manages, provide information supplementary to the prospectus of that scheme relating to:

    1. (a)

      the quantitative limits applying to the risk management of that scheme;

    2. (b)

      the methods used in relation to (a); and

    3. (c)

      any recent development of the risk and yields of the main categories of investment.

16[Note: articles 74, 75(1) and 75(2) of the UCITS Directive]

Provision and filing of the prospectus of a master UCITS

COLL 4.2.3A R
  1. (1)

    16The authorised fund manager of a UCITS scheme that is a feeder UCITS must:

    1. (a)

      where requested by an investor, provide a copy of the prospectus of its master UCITS free of charge; and

    2. (b)

      file a copy of the prospectus of its master UCITS and any amendments thereto with the FCA.

  2. (2)

    Except where an investor requests a paper copy or the use of electronic communications is not appropriate, the prospectus of the master UCITS may be provided in a durable medium other than paper or by means of a website that meets the website conditions.

[Note: articles 63(3), 63(5), 75(1) and 75(2) of the UCITS Directive]

Feeder NURS: provision of the prospectus of the qualifying master scheme

COLL 4.2.3B R
  1. (1)

    18The authorised fund manager of a feeder NURS must, where requested by an investor or the FCA , provide such person with a copy of the prospectus of its qualifying master scheme free of charge.

  2. (2)

    18Except where an investor requests a paper copy or the use of electronic communications is not appropriate, the prospectus of the qualifying master scheme may be provided in a durable medium other than paper, or by means of a website that meets the website conditions.20

False or misleading prospectus

COLL 4.2.4 R
  1. (1)

    The authorised fund manager:

    1. (a)

      must ensure that the prospectus of the authorised fund does not contain any untrue or misleading statement or omit any matter required by the rules in this sourcebook to be included in it; and

    2. (b)

      is liable to pay compensation to any person who has acquired any units in the authorised fund and suffered loss in respect of them as a result of such statement or omission; this is in addition to any liability incurred apart from under this rule.

  2. (2)

    The authorised fund manager is not in breach of (1)(a) and is not liable to pay compensation under (1)(b) if, at the time when the prospectus was made available to the public, it had taken reasonable care to determine that the statement was true and not misleading, or that the omission was appropriate, and that:

    1. (a)

      it continued to take such reasonable care until the time of the relevant acquisition of units in the scheme; or

    2. (b)

      the acquisition took place before it was reasonably practicable to bring a correction to the attention of potential purchasers; or

    3. (c)

      it had already taken all reasonable steps to ensure that a correction was brought to the attention of potential purchasers; or

    4. (d)

      the person who acquired the units was not materially influenced or affected by that statement or omission in making the decision to invest.

  3. (3)

    The authorised fund manager is also not in breach of (1)(a) and is not liable to pay compensation under (1)(b) if:

    1. (a)

      before the acquisition a correction had been published in a manner calculated to bring it to the attention of persons likely to acquire the units in question; or

    2. (b)

      it took all reasonable steps to secure such publication and had reasonable grounds to conclude that publication had taken place before the units were acquired.

  4. (4)

    The authorised fund manager is not liable to pay compensation under (1)(b) if the person who acquired the units knew at the time of the acquisition that the statement was untrue or misleading or knew of the omission.

  5. (5)

    For the purposes of this rule a revised prospectus will be treated as a different prospectus from the original one.

  6. (6)

    References in this rule to the acquisition of units include references to contracting to acquire them.

Table: contents of the prospectus

COLL 4.2.5 R

This table belongs to COLL 4.2.2 R (Publishing the prospectus).

Document status

1

A statement that the document is the prospectus of the authorised fund valid as at a particular date (which shall be the date of the document).

Authorised fund

2

A description of the authorised fund including:

(a)

its name;

29(aa)

its FCA product reference number (PRN);

(b)

whether it is an ICVC, ACS21 or an AUT;17

3(ba)

whether it is a UCITS scheme or a non-UCITS retail scheme;

17(bb)

a statement that Unitholders in an AUT, ICVC or co-ownership scheme21 are not liable for the debts of the authorised fund;21

(bc)

a statement that the scheme property of a co-ownership scheme is beneficially owned by the participants as tenants in common (or, in Scotland, is the common property of the participants);21

(bd)

a statement that a Unitholder in a limited partnership scheme is not liable for the debts or obligations of the limited partnership scheme beyond the amount of the scheme property which is available to the authorised contractual scheme manager to meet such debts or obligations, provided that the Unitholder does not take part in the management of the partnership business;21

(be)

a statement that the exercise of rights conferred on limited partners by FCArules does not constitute taking part in the management of the partnership business;21

(c)

for an ICVC, the address of its head office and the address of the place in the United Kingdom for service on the ICVC of notices or other documents required or authorised to be served on it;

(ca)

for an ACS that is a limited partnership scheme, the address of the proposed principal place of business of the limited partnership scheme;21

(d)

the effective date of the authorisation order made by the FCA and relevant details of termination, if the duration of the authorised fund is limited;

(e)

its base currency;

(f)

for an ICVC, the maximum and minimum sizes of its capital;

18

(g)

the circumstances in which it may be wound up under the rules and a summary of the procedure for, and the rights of Unitholders under, such a winding up; and1817

18(h)

if it is not an umbrella, a statement that it is a feeder UCITS, a feeder NURS, a fund of alternative investment funds or a property authorised investment fund22, where that is the case.

22

Umbrella ICVCs or co-ownership schemes 21

2A

The following statements for an ICVC or a co-ownership scheme which is an umbrella:21

21

(a)

for an ICVC, a statement that21its sub-funds are segregated portfolios of assets and, accordingly, the assets of a sub-fund belong exclusively to that sub-fund and shall not be used to discharge directly or indirectly the liabilities of, or claims against, any other person or body, including the umbrella, or any other sub-fund, and shall not be available for any such purpose;

21

(aa)

for a co-ownership scheme, a statement that the property subject to a sub-fund is beneficially owned by the participants in that sub-fund as tenants in common (or, in Scotland, is the common property of the participants in that sub-fund) and must not be used to discharge any liabilities of, or meet any claims against, any person other than the participants in that sub-fund; and21

(b)

for an ICVC or a co-ownership scheme, a statement that21 while the provisions of the OEIC Regulations, and section 261P (Segregated liability in relation to umbrella co-ownership schemes) of the Act in the case of co-ownership schemes,21 provide for segregated liability between sub-funds, the concept of segregated liability is relatively new. Accordingly, where claims are brought by local creditors in foreign courts or under foreign law contracts, it is not yet known how those foreign courts will react to regulations 11A and 11B of the OEIC Regulations or, as the case may be, section 261P of the Act.2118

18 Umbrella Schemes

182B

For a UCITS scheme or non-UCITS retail scheme which is an umbrella:29

22 22 22

29(a)

a statement detailing whether each specific sub-fund is a feeder UCITS, a feeder NURS, a fund of alternative investment funds or a property authorised investment fund, as appropriate; and

29(b)

the FCA product reference number (PRN) of each sub-fund.

Investment objectives and policy

3

The following particulars of the investment objectives and policy of the authorised fund:

(a)

the investment objectives, including its financial objectives;

(b)

the authorised fund's investment policy for achieving those investment objectives, including the general nature of the portfolio and, if appropriate, any intended specialisation;

(c)

an indication of any limitations on that investment policy;22

22(ca)

for an authorised fund that has indicated in its name, investment objectives or fund literature (including in any financial promotions for the fund), through use of descriptions such as 'absolute return', 'total return' or similar, an intention to deliver positive returns in all market conditions (and where there is no actual guarantee of such returns), additional statements in the authorised fund's investment objectives specifying:

(i)

that capital is in fact at risk;

(ii)

the investment period over which the authorised fund aims to achieve a positive return; and

(iii)

there is no guarantee that this will be achieved over that specific, or any, time period;

(d)

the description of assets which the capital property may consist of;

(e)

the proportion of the capital property which may consist of an asset of any description;

(f)

the description of transactions which may be effected on behalf of the authorised fund and an indication of any techniques and instruments or borrowing powers which may be used in the management of the authorised fund;

(g)

a list of the eligible markets through which the authorised fund may invest or deal in accordance with COLL 5.2.10 R (2)(b) (Eligible markets: requirements);

(h)

for an ICVC, a statement as to whether it is intended that the scheme will have an interest in any immovable property or movable property ((in accordance with COLL 5.6.4 R (2) (Investment powers: general) or COLL 5.2.8 R (2) (UCITS schemes: general)) for the direct pursuit of the ICVC's business;

(i)

where COLL 5.2.12 R (3) (Spread: government and public securities) applies:29

29(i)

a prominent statement as to the fact that more than 35% in value29 of the scheme property is or may be invested in transferable securities or approved money-market instruments issued or guaranteed by a single state, local authority or public international body29; and

29(ii)

the names of the individual states, local authorities or public international bodies issuing or guaranteeing the securities in which29 more than 35% in value of the scheme property may be invested29;

(k)

for an authorised fund which may invest in other schemes, the extent to which the scheme property may be invested in the units of schemes which are managed by the authorised fund manager or by its associate;

14

(ka)

where a scheme is a feeder scheme (other than a feeder UCITS or a feeder NURS)18,16 which (in respect of investment in units in collective investment schemes) is dedicated to units in a single collective investment scheme, details of the master scheme and the minimum (and, if relevant, maximum) investment that the feeder scheme may make in it;

16 18

(l)

where a scheme invests principally in scheme units, deposits or derivatives, or replicates an index in accordance with COLL 5.2.31 R or COLL 5.6.23 R (Schemes replicating an index), a prominent statement regarding this investment policy;

(m)

where derivatives transactions may be used in a scheme, a prominent statement as to whether these transactions are for the purposes of efficient portfolio management (including10hedging)10 or meeting the investment objectives or both and the possible outcome of the use of derivatives on the risk profile of the scheme;

(n)

information concerning the profile of the typical investor for whom the scheme is designed;

(o)

information concerning the historical performance of the scheme presented in accordance with COBS 4.6.2 R (the rules on past performance);6

6

(p)

for a non-UCITS retail scheme which invests in immovables, a statement of the countries or territories of situation of land or buildings in which the authorised fund may invest;

(q)

for a UCITS scheme which invests a substantial portion of its assets in other schemes, a statement of the maximum level of management fees that may be charged to that UCITS scheme and to the schemes in which it invests;

5(qa)

where the authorised fund is a qualifying money market fund, short-term money market fund or money market fund, 15a statement identifying it as such a fund 15and a statement that the authorised fund's investment objectives and policies will meet the conditions specified in the definition of qualifying money market fund, short-term money market fund or money market fund, as appropriate;15

15

(r)

where the net asset value of a UCITS scheme is likely to have high volatility owing to its portfolio composition or the portfolio management techniques that may be used, a prominent statement to that effect;

16

(s)

for a UCITS scheme, a statement that any Unitholder may obtain on request the types of information (which must be listed) referred to in COLL 4.2.3R (3) (Availability of prospectus and long report); and16

16(t)

for a UCITS scheme that is or is intended to be a master UCITS, a statement that it is not a feeder UCITS and will not hold units of a feeder UCITS.

Reporting, distributions and accounting dates

4

Relevant details of the reporting, accounting and distribution information which includes:

(a)

the accounting and distribution dates;

(b)

procedures for:

(i)

determining and applying income (including how any distributable income is paid);

(ii)

unclaimed distributions; and

(iii)

if relevant, calculating, paying and accounting for income equalisation; and27

(c)

the accounting reference date and when the long report will be published in accordance with COLL 4.5.14 R (Publication and availability of annual and half-yearly long report).27

(d)

[deleted]27

Characteristics of the units

5

Information as to:

(a)

where there is more than one class of unit in issue or available for issue, the name of each such class and the rights attached to each class in so far as they vary from the rights attached to other classes;

(b)

where the instrument of incorporation of an ICVC29 provides for the issue of bearer certificates, that fact and what procedures will operate for them;

23 23

(c)

how Unitholders may exercise their voting rights and what these amount to;

(d)

where a mandatory redemption, cancellation or conversion of units from one class to another may be required, in what circumstances it may be required; and

(e)

for an AUT, the fact that the nature of the right represented by units is that of a beneficial interest under a trust.

215A

ACSs: UCITS and NURS eligible investors

(a)

A statement that units may not be issued to a person other than a:

(i)

professional ACS investor; or

(ii)

large ACS investor; or

(iii)

person who already holds units in the scheme.

(b)

A statement that the authorised contractual scheme manager must redeem units as soon as practicable after becoming aware that those units are vested in anyone (whether as a result of subscription or transfer of units) other than a person meeting the criteria in paragraph 5A(a).

215B

ACSs: UCITS and NURS transfer of units

(a)

A statement whether the transfer of units in the ACSscheme is either:

(i)

prohibited; or

(ii)

allowed;

by the instrument constituting the fund23 and prospectus.

23

(b)

Where transfer of units is allowed by the instrument constituting the fund23 and prospectus in accordance with (a)(ii), a statement that units may only be transferred in accordance with the conditions specified by FCArules, including that units may not be transferred to a person other than a:

23

(i)

professional ACS investor; or

(ii)

large ACS investor; or

(iii)

person who already holds units in the scheme.

(c)

For a co-ownership scheme which is an umbrella, a statement in accordance with (5B)(a)(i) or (ii) and, where appropriate, a statement in accordance with (5B)(b), must also be made for the sub-funds. Where individual sub-funds have differing policies in relation to transfer of units, separate statements are required.

Authorised fund manager

6

The following particulars of the authorised fund manager:

(a)

its name;

(b)

the nature of its corporate form;

(c)

the date of its incorporation;

(d)

the address of its registered office;

(e)

the address of its head office, if that is different from the address of its registered office;

(f)

if neither its registered office nor its head office is in the United Kingdom, the address of its principal place of business in the United Kingdom;

(g)

if the duration of its corporate status is limited, when that status will or may cease; and

(h)

the amount of its issued share capital and how much of it is paid up.

Directors of an ICVC, other than the ACD

7

Other than for the ACD:

(a)

the names and positions in the ICVC of any other directors (if any); and

(b)

the manner, amount and calculation of the remuneration of such directors.

Depositary

8

The following information and 25particulars concerning 25the depositary:

(a)

its name;

(b)

the nature of its corporate form;

(c)

the address of its registered office;

(d)

the address of its head office, if that is different from the address of its registered office;

(e)

if neither its registered office nor its head office is in the United Kingdom, the address of its principal place of business in the United Kingdom;25

(f)

a description of its duties and conflicts of interest that may arise between the depositary and:25

25(i)

the scheme; or

25(ii)

the Unitholders in the scheme; or

25(iii)

the authorised fund manager;

25(g)

(i)

a description of any safekeeping functions delegated by the depositary;

(ii)

a description of any conflicts of interest that may arise from such delegation; and

(iii)

for a UCITS scheme, a list showing the identity of each delegate and sub-delegate; and

25(h)

for a UCITS scheme, a statement that up-to-date information regarding the points covered under (a),(f) and (g), above, will be made available to Unitholders on request.

Investment adviser

9

If an investment adviser is retained in connection with the business of an authorised fund:

(a)

its name; and

(b)

where it carries on a significant activity other than providing services to the authorised fund as an investment adviser, what that significant activity is.

Auditor

10

The name of the auditor of the authorised fund.

Contracts and other relationships with parties

11

The following relevant details:

(a)

for an ICVC:

(i)

a summary of the material provisions of the contract between the ICVC and the ACD3 which may be relevant to Unitholders including provisions (if any) relating to remuneration, termination, compensation on termination and indemnity;

3

(ii)

the main business activities of each of the directors (other than those connected with the business of the ICVC) where these are of significance to the ICVC's business;

(iii)

if any director is a body corporate in a group of which any other corporate director of the ICVC is a member, a statement of that fact;

3

(iv)

the main terms of each contract of service between the ICVC and a director in summary form; and3

3(v)

for an ICVC that does not hold annual general meetings, a statement that copies of contracts of service between the ICVC and its directors, including the ACD, will be provided to a Unitholder on request;

(b)

the names of the directors of the authorised fund manager and the main business activities of each of the directors (other than those connected with the business of the authorised fund) where these are of significance to the authorised fund's business;

(c)

a summary of the material provisions of the contract between the ICVC or the manager of the AUT and the depositary which may be relevant to Unitholders, including provisions relating to the remuneration of the depositary;

21(ca)

in the case of an ACS, a summary of the material provisions of the contracts between:

(i)

the authorised fund manager and the nominated partner (if any); and

(ii)

the authorised fund manager and depositary;

which may be relevant to Unitholders, including provisions relating to the remuneration of the depositary;

(d)

if an investment adviser retained in connection with the business of the authorised fund is a body corporate in a group of which any director of the ICVC or the authorised fund manager21 of the AUTor ACS21 is a member, that fact;

21

(e)

a summary of the material provisions of any contract between the authorised fund manager or the ICVC and any investment adviser which may be relevant to Unitholders;

(f)

if an investment adviser retained in connection with the business of the authorised fund has the authority of the authorised fund manager or the ICVC to make decisions on behalf of the authorised fund manager or the ICVC, that fact and a description of the matters in relation to which it has that authority;

(g)

a list of:16

16

16(i)

the functions which the authorised fund manager has delegated in accordance with FCArules or, for an EEA UCITS management company, in accordance with applicable Home State measures implementing article 13 of the UCITS Directive; and

16(ii)

the person to whom such functions have been delegated; and

(h)

in what capacity (if any), the authorised fund manager acts in relation to any other regulated collective investment schemes2 and the name of such schemes.

2

Register of Unitholders

12

Details of:

(a)

the address in the United Kingdom where the register of Unitholders, and where relevant the plan register is kept and can be inspected by Unitholders; and

(b)

the registrar's name and address.

Payments out of scheme property

13

In relation to each type of payment from the scheme property, details of:

(a)

who the payment is made to;

(b)

what the payment is for;

(c)

the rate or amount where available;

(d)

how it will be calculated and accrued;

(e)

when it will be paid; and

(f)

where a performance fee is taken, examples of its operation in plain English and the maximum it can amount to.

Allocation of payments

14

If, in accordance with COLL 6.7.10 R4 (Allocation of payments to income or capital), the authorised fund manager and the depositary have agreed that all or part of any income expense payments may be treated as a capital expense:

(a)

that fact;

(b)

the policy for allocation of these payments; and

(c)

a statement that this policy may result in capital erosion or constrain capital growth.

Moveable and immovable property (ICVC only)

15

An estimate of any expenses likely to be incurred by the ICVC in respect of movable and immovable property in which the ICVC has an interest.

Valuation and pricing of scheme property

16

In relation to the valuation of scheme property and pricing of units1:

1

(a)

either:1

1

(i)

in the case of a single-priced authorised fund,1 a provision that there must be only a single price for any unit as determined from time to time by reference to a particular valuation point; or1

(ii)

1in the case of a dual-priced authorised fund, the authorised fund manager's policy for determining prices for the sale and redemption of units by reference to a particular valuation point and an explanation of how those prices may differ;

(b)

details of:

(i)

how the value of the scheme property is to be determined in relation to each purpose for which the scheme property must be valued;

(ii)

how frequently and at what time or times of the day the scheme property will be regularly valued for dealing purposes and a description of any circumstance in which the scheme property may be specially valued;

(iii)

where relevant, how the price of units of each class will be determined for dealing purposes;

1

(iv)

where and at what frequency the most recent prices will be published; and

(v)

1where relevant in the case of a dual-priced authorised fund, an explanation of what is meant by large deals and 29the authorised fund manager's policy in relation to large deals; and

(c)

if provisions in (a) and (b) do not take effect when the instrument constituting the fund23 or (where appropriate) supplemental trust deed takes effect, a statement of the time from which those provisions are to take effect or how it will be determined.

23

Dealing

17

The following particulars:

(a)

the procedures, the dealing periods and the circumstances in which the authorised fund manager will effect:

(i)

the sale and redemption of units and the settlement of transactions (including the minimum number or value of units which one person may hold or which may be subject to any transaction of sale or redemption) for each class of unit in the authorised fund; and

(ii)

any direct issue or cancellation of units by an ICVC or by the depositary of an AUT or ACS21 (as appropriate) through the authorised fund manager in accordance with COLL 6.2.7R (2) (Issue and cancellation of units through an authorised fund manager);

21

(b)

the circumstances in which the redemption of units may be suspended;

(c)

whether certificates will be issued in respect of registered units;

(d)

the circumstances in which the authorised fund manager may arrange for, and the procedure for the issue or cancellation of units in specie;

(e)

the investment exchanges (if any) on which units in the scheme are listed or dealt;

(f)

the circumstances and conditions for issuing units in an authorised fund which limit the issue of any class of units in accordance with 13COLL 6.2.18 R13 (Limited issue);

(g)

the circumstances and procedures for the limitation or deferral of redemptions in accordance with 13COLL 6.2.19 R13 (Limited redemption) or 13COLL 6.2.21 R13 (Deferred redemption);

12

(h)

in a prospectus available during the period of any initial offer:

(i)

the length of the initial offer period;

(ii)

the initial price of a unit, which must be in the base currency;

(iii)

the arrangements for issuing units during the initial offer, including the authorised fund manager's intentions on investing the subscriptions received during the initial offer;

(iv)

the circumstances when the initial offer will end;

(v)

whether units will be sold or issued in any other currency; and12

(vi)

any other relevant details of the initial offer12; and12

(i)

whether a Unitholder may effect transfer of title to units on the authority of an electronic communication and if so the conditions that must be satisfied in order to effect a transfer.12

Dilution

18

In the case of a single-priced authorised fund, details1 of what is meant by dilution including:

(a)

a statement explaining:

(i)

that it is not possible to predict accurately whether dilution is likely to occur; and

(ii)

which of the policies the authorised fund manager is adopting under COLL 6.3.8 (1) (Dilution) together with an explanation of how this policy may affect the future growth of the authorised fund; and

(b)

if the authorised fund manager may require a dilution levy or make a dilution adjustment, a statement of:

(i)

the authorised fund manager's policy in deciding when to require a dilution levy, including what is meant by large deals and 29the authorised fund manager's policy on large deals, or when to make a dilution adjustment;

(ii)

the estimated rate or amount of any dilution levy or dilution adjustment based either on historical data or future projections; and

(iii)

the likelihood that the authorised fund manager may require a dilution levy or make a dilution adjustment and the basis (historical or projected) on which the statement is made.

SDRT provision

19

29

29

29

29

[deleted]29

Forward pricing 29

20

An explanation of forward pricing29 under COLL 6.3.9 (Forward 29pricing).

Preliminary charge

21

Where relevant, a statement authorising the authorised fund manager to make a preliminary charge and specifying the basis for and current amount or rate of that charge.

Redemption charge

22

Where relevant, a statement authorising the authorised fund manager to deduct a redemption charge out of the proceeds of redemption; and if the authorised fund manager makes a redemption charge:

(a)

the current amount of that charge or if it is variable, the rate or method of calculating it;

(b)

if the amount, rate or method has been changed, that details of any previous amount, rate or method may be obtained from the authorised fund manager on request; and

(c)

how the order in which units acquired at different times by a Unitholder is to be determined so far as necessary for the purposes of the imposition of the redemption charge.

9 Property Authorised Investment Funds

922A

For a property authorised investment fund, a statement that:

(1)

[deleted]22

22

(2)

no body corporate may seek to obtain or intentionally maintain a holding of more than19 10% of the net asset value of the fund; and

19

(3)

in the event that the authorised fund manager reasonably considers that a body corporate holds more than 10% of the net asset value of the fund, the authorised fund manager is entitled to delay any redemption or cancellation of units if the authorised fund manager reasonably considers such action to be:

(a)

necessary in order to enable an orderly reduction of the holding to below 10%; and

(b)

in the interests of the Unitholders as a whole.

18
18 18

General information

23

Details of:

(a)

the address at which copies of the instrument constituting the fund,23 any amending instrument and the most recent annual and half-yearly long reports may be inspected and from which copies may be obtained;

23

(b)

the manner in which any notice or document will be served on Unitholders;

(c)

the extent to which and the circumstances in which:

(i)

the scheme is liable to pay or suffer tax on any appreciation in the value of the scheme property or on the income derived from the scheme property; and

(ii)

deductions by way of withholding tax may be made from distributions of income to Unitholders and payments made to Unitholders on the redemption of units;

3

(d)

for a UCITS scheme, any possible fees or expenses not described in paragraphs 13 to 22, distinguishing between those to be paid by a Unitholder and those to be paid out of scheme property; and3

3

3(e)

for an ICVC, whether or not annual general meetings will be held.

Information on the umbrella

24

In the case of a scheme which is an umbrella with two or more sub-funds11, the following information:

(a)

that a Unitholder is entitled to exchange units in one sub-fund for units in any other sub-fund (other than a sub-fund which has limited the issue of units);

(b)

that an exchange of units in one sub-fund for units in any other sub-fund is treated as a redemption and sale and will, for persons subject to United Kingdom taxation, be a realisation for the purposes of capital gains taxation;

(c)

that in no circumstances will a Unitholder who exchanges units in one sub-fund for units in any other sub-fund be given a right by law to withdraw from or cancel the transaction;

(d)

the policy for allocating between sub-funds any assets of, or costs, charges and expenses payable out of, the scheme property which are not attributable to any particular sub-fund;

(e)

what charges, if any, may be made on exchanging units in one sub-fund for units in any other sub-fund; and11

(f)

for each sub-fund, the currency in which the scheme property allocated to it will be valued and the price of units calculated and payments made, if this currency is not the base currency of the scheme which is an umbrella.11

(g)

[deleted]11

11

Application of the prospectus contents to an umbrella

25

For a scheme which is an umbrella, information required must be stated:

(a)

in relation to each sub-fund where the information for any sub-fund differs from that for any other; and

(b)

for the umbrella as a whole, but only where the information is relevant to the umbrella as a whole.16

16 Information on a feeder UCITS

1625A

In the case of a feeder UCITS, the following information:

(a)

a declaration that the feeder UCITS is a feeder of a particular master UCITS and as such permanently invests at least 85% in value of the scheme property in units of that master UCITS;

(b)

the investment objective and policy, including the risk profile; and whether the performance records of the feeder UCITS and the master UCITS are identical, or to what extent and for which reasons they differ, including a description of how the balance of the scheme property which is not invested in units of the master UCITS is invested in accordance with COLL 5.8.3 R (Balance of scheme property: investment restrictions on a feeder UCITS);

(c)

a brief description of the master UCITS, its organisation, its investment objective and policy, including the risk profile, and an indication of how the prospectus of the master UCITS may be obtained;

(d)

a summary of the master-feeder agreement or where applicable, the internal conduct of business rules referred to in COLL 11.3.2 R (2) (Master-feeder agreement and internal conduct of business rules);

(e)

how the Unitholders may obtain further information on the master UCITS and the master-feeder agreement;

(f)

a description of all remuneration or reimbursement of costs payable by the feeder UCITS by virtue of its investment in units of the master UCITS, as well as the aggregate charges of the feeder UCITS and the master UCITS; and

(g)

a description of the tax implications of the investment into the master UCITS for the feeder UCITS.

[Note: article 63(1) of the UCITS Directive]18

18 Information on a feeder NURS

1825B

In the case of a feeder NURS, the following information:

(a)

a declaration that the feeder NURS is a feeder of a particular qualifying master scheme and as such is dedicated to units in a single qualifying master scheme and the minimum (and, if relevant, maximum) investment that the feeder NURS may make in its qualifying master scheme;

(b)

the investment objective and policy of the feeder NURS, including its risk profile; and whether the performance records of the feeder NURS and the qualifying master scheme are identical, or to what extent and for which reasons they differ, including a description of how the balance of the scheme property which is not invested in units of the qualifying master scheme is invested in accordance with COLL 5.6.7 R (6A) (Spread: general);

(c)

a brief description of the qualifying master scheme, its organisation, its investment objective and policy, including the risk profile, and an indication of how the prospectus of the qualifying master scheme may be obtained;

(d)

how the Unitholders may obtain further information on the qualifying master scheme;

(e)

a description of all remuneration or reimbursement of costs payable by the feeder NURS by virtue of its investment in units of the qualifying master scheme, as well as the aggregate charges of the feeder NURS and the qualifying master scheme; and

(f)

a description of the tax implications of the investment into the qualifying master scheme for the feeder NURS.

Marketing in another EEA state

26

A prospectus of a UCITS scheme which is prepared for the purpose of marketing units in a EEA State other than the United Kingdom, must give details as to:

(a)

what special arrangements have been made:

(i)

for paying in that EEA State amounts distributable to Unitholders resident in that EEA State;

(ii)

for redeeming in that EEA State the units of Unitholders resident in that EEA State;

(iii)

for inspecting and obtaining copies in that EEA State of the instrument constituting the fund23 and amendments to it, the prospectus and the annual and half-yearly long report; and

23

(iv)

for making public the price of units of each class; and

(b)

how the ICVC or the authorised fund manager of an AUT or ACS21 will publish in that EEA State notice:

21

(i)

that the annual and half-yearly long report are available for inspection;

(ii)

that a distribution has been declared;

(iii)

of the calling of a meeting of Unitholders; and

(iv)

of the termination of the authorised fund or the revocation of its authorisation.

7 Investment in overseas 8 property through an intermediate holding vehicle

726A

7If investment in an overseas8 immovable is to be made through an intermediate holding vehicle or a series of intermediate holding vehicles, a statement disclosing the existence of that intermediate holding vehicle or series of intermediate holding vehicles and confirming that the purpose of that intermediate holding vehicle or series of intermediate holding vehicle is to enable the holding of overseas8 immovables by the scheme.

Additional information

27

Any other material information which is within the knowledge of the directors of an ICVC or the authorised fund manager of an AUT or ACS, or which the directors or authorised fund manager21 would have obtained by making reasonable enquiries, including but not confined to, the following matters:

21

(a)

information which investors and their professional advisers would reasonably require, and reasonably expect to find in the prospectus, for the purpose of making an informed judgement about the merits of investing in the authorised fund and the extent and characteristics of the risks accepted by so participating;

(b)

a clear and easily understandable explanation of any risks which investment in the authorised fund may reasonably be regarded as presenting for reasonably prudent investors of moderate means;

(c)

if there is any arrangement intended to result in a particular capital or income return from a holding of units in the authorised fund or any investment objective of giving protection to the capital value of, or income return from, such a holding:

(i)

details of that arrangement or protection;

(ii)

for any related guarantee, sufficient details about the guarantor and the guarantee to enable a fair assessment of the value of the guarantee;

(iii)

a description of the risks that could affect achievement of that return or protection; and

(iv)

details of the arrangements by which the authorised fund manager will notify Unitholders of any action required by the Unitholders to obtain the benefit of the guarantee; and

(d)

whether any notice has been given to Unitholders of the authorised fund manager intention to propose a change to the scheme and if so, its particulars.

Remuneration Policy

2528

For a UCITS scheme and in relation to UCITS Remuneration Code staff:

(a)

up-to-date details of the remuneration policy including, but not limited to:

(i)

a description of how remuneration and benefits are calculated; and

(ii)

the identities of persons responsible for awarding the remuneration and benefits, including the composition of the remuneration committee, where such a committee exists; or

(b)

a summary of the remuneration policy and a statement that:

(i)

up-to-date details of the matters set out in (a) above are available by means of a website, including a reference to that website; and

(ii)

a paper copy of that website information will be made available free of charge upon request.

[Note: A transitional provision applies to row 3(ca) of this table: see COLL TP 1.28.]22

Information to be provided on securities financing transactions and total return swaps

COLL 4.2.5A G
  1. (1)

    28The Securities Financing Transactions Regulation sets out the additional information which:

    1. (a)

      an authorised fund manager of a UCITS scheme must include in the UCITS scheme prospectus; and

    2. (b)

      an authorised fund manager who is a full-scope UK AIFM of a non-UCITS retail scheme must make available to investors before they invest.

  2. (2)

    COLL 4.2.5BEU and COLL 4.2.5CEU copy out the relevant provisions of that regulation.

  3. (3)

    An authorised fund manager who is a full-scope UK AIFM of a non-UCITS retail scheme should publish the information in the scheme’s prospectus.

  4. (4)

    An authorised fund manager of a UCITS scheme or a non-UCITS retail scheme that does not use securities financing transactions or total return swaps is not required to include the information in COLL 4.2.5CEU in the prospectus or other pre-sale documents.

[Note: A transitional provision applies to COLL 4.2.5AG: see COLL TP 1.38G]

COLL 4.2.5B EU

28

Transparency of collective investment undertakings in pre-contractual documents

1.

The UCITS prospectus referred to in Article 69 of Directive 2009/65/EC, and the disclosure by AIFMs to investors referred to in Article 23(1) and (3) of Directive 2011/61/EU shall specify the SFT and total return swaps which UCITS management companies or UCITS investment companies, and AIFMs respectively, are authorised to use and include a clear statement that those transactions and instruments are used.

2.

The prospectus and the disclosure to investors referred to in paragraph 1 shall include the data provided for in Section B of the Annex.

[Note: article 14(1) and (2) of the Securities Financing Transactions Regulation and article 3 for relevant definitions]

COLL 4.2.5C EU

28

Information to be included in the UCITS Prospectus and AIF disclosure to investors:

_

General description of the SFTs and total return swaps used by the collective investment undertaking and the rationale for their use.

_

Overall data to be reported for each type of SFTs and total return swaps

_

Types of assets that can be subject to them.

_

Maximum proportion of AUM that can be subject to them.

_

Expected proportion of AUM that will be subject to each of them.

_

Criteria used to select counterparties (including legal status, country of origin, minimum credit rating).

_

Acceptable collateral: description of acceptable collateral with regard to asset types, issuer, maturity, liquidity as well as the collateral diversification and correlation policies.

_

Collateral valuation: description of the collateral valuation methodology used and its rationale, and whether daily mark-to-market and daily variation margins are used.

_

Risk management: description of the risks linked to SFTs and total return swaps as well as risks linked to collateral management, such as operational, liquidity, counterparty, custody and legal risks and, where applicable, the risks arising from its reuse.

_

Specification of how assets subject to SFTs and total return swaps and collateral received are safe-kept (e.g. with fund custodian).

_

Specification of any restrictions (regulatory or self-imposed) on reuse of collateral.

_

Policy on sharing of return generated by SFTs and total return swaps: description of the proportions of the revenue generated by SFTs and total return swaps that is returned to the collective investment undertaking, and of the costs and fees assigned to the manager or third parties (e.g. the agent lender). The prospectus or disclosure to investors shall also indicate if these are related parties to the manager.

[Note: section B of the annex to the Securities Financing Transactions Regulation and article 3 for relevant definitions.]

[Note: AUM means assets under management.]

Guidance on contents of the prospectus

COLL 4.2.6 G
  1. (1)

    In relation to COLL 4.2.5R (3)(b) the prospectus might include:

    1. (a)

      a description of the extent (if any) to which that policy does not envisage the authorised fund remaining fully invested at all times;

    2. (b)

      for a non-UCITS retail scheme which may invest in immovable property:

      1. (i)

        the maximum extent to which the scheme property may be invested in immovables; and

      2. (ii)

        a statement of the policy of the authorised fund manager in relation to insurance of3 immovables forming part of the scheme property; and

        3
    3. (c)

      a description of any restrictions in the assets in which investment may be made, including restrictions in the extent to which the authorised fund may invest in any category of asset, indicating (if appropriate) where the restrictions are more onerous than those imposed by COLL 5 (Investment and borrowing powers).

  2. (2)

    In relation to COLL 4.2.5R (13), the type of payments are likely to include management fees (such as periodic and performance fees), depositary fees, custodian fees, transaction fees, registrar fees, audit fees and FCA fees. Expenses which represent properly incurred costs of the scheme may also be treated as a type of payment for this purpose.

  3. (3)

    In relation to COLL 4.2.5R (27), the prospectus might include a statement of the authorised fund manager's policy in relation to holding units in the scheme as principal, and in particular whether it seeks to make a profit from doing so. It might also include3 a prominent statement of non-accountability referred to in COLL 6.7.16 G (Exemptions from liability to account for profits).

  4. (4)

    1In relation to COLL 4.2.5 R (16)(a), where the prospectus includes provisions for both a single-priced authorised fund and a dual-priced authorised fund, it should state prominently which method of pricing is applicable to which authorised fund, and explain how the differences between them may affect Unitholders (for example if a Unitholder exchanges units in a single-priced authorised fund for units in a dual-priced authorised fund, or vice versa).

  5. (5)

    14Additional matters which are not contained in COLL 4.2.5 R may be required to be included in the prospectus, for example for the purposes of making the scheme eligible under relevant tax legislation.

  6. (6)

    The authorised fund manager of a UCITS scheme should consider the appropriateness of including additional matters in its prospectus as a result of the ESMA Guidelines on ETFs and other UCITS issues, which can be found at

    https://www.esma.europa.eu/sites/default/files/library/2015/11/2012-832en_guidelines_on_etfs_and_other_ucits_issues.pdf26

    24
  7. (7)
    1. (a)

      29A full-scope UK AIFM that is the authorised fund manager of a non-UCITS retail scheme should ensure that the prospectus of the scheme includes the information required under FUND 3.2 (Investor information) and COLL 4.2.5R.

    2. (b)

      29The authorised fund manager need not state the same information twice to satisfy both sets of requirements.

COLL 4.3 Approvals and notifications

Application

COLL 4.3.1 R

This section applies to an authorised fund manager.

Explanation

COLL 4.3.2 G
  1. (1)

    The diagram in COLL 4.3.3 G explains how an authorised fund manager should treat changes it is proposing to a scheme and provides an overview of the rules and guidance in this section.

  2. (2)

    Regulation 21 of the OEIC Regulations (The Authority's approval for certain changes in respect of a company), section 261Q of the Act (Alteration of contractual schemes and changes of operator or depositary)5 and section 251 of the Act (Alteration of schemes and changes of manager or trustee) require the prior approval of the FCA for certain proposed changes to an authorised fund, including a change of the authorised fund manager or depositary or a change to the instrument constituting the fund6 . This should be kept in mind when considering any proposed change.

    6

Diagram: Change event

COLL 4.3.3 G

This diagram belongs to COLL 4.3.2 G.

COLL_4.3.3

Fundamental change requiring prior approval by meeting

COLL 4.3.4 R
  1. (1)

    The authorised fund manager, must, by way of an extraordinary resolution, obtain prior approval from the Unitholders for any proposed change to the scheme which, in accordance with (2), is a fundamental change.

  2. (2)

    A fundamental change is a change or event which:

    1. (a)

      changes the purposes or nature of the scheme; or

    2. (b)

      may materially prejudice a Unitholder; or

    3. (c)

      alters the risk profile of the scheme; or

    4. (d)

      introduces any new type of payment out of scheme property.

Guidance on fundamental changes

COLL 4.3.5 G

  1. (1)

    Any change may be fundamental depending on its degree of materiality and effect on the scheme and its Unitholders. Consequently an authorised fund manager will need to determine whether in each case a particular change is fundamental in nature or not.

  2. (2)

    For the purpose of COLL 4.3.4R (2)(a) to COLL 4.3.4R (2)(c) a fundamental change to a scheme is likely to include:

    1. (a)

      any proposal for a scheme of arrangement referred to in COLL 7.6.2 R (Schemes of arrangement: requirements);

    2. (b)

      a change in the investment policy to achieve capital growth from investment in one country rather than another;

    3. (c)

      a change in the investment objective or policy to achieve capital growth through investment in fixed interest rather than equity investments;

    4. (d)

      a change in the investment policy to allow the authorised fund to invest in derivatives as an investment strategy which increases its volatility;

    5. (e)

      a change to the characteristics of a scheme to distribute income annually rather than monthly; or

    6. (f)

      the introduction of limited redemption arrangements.

Significant change requiring pre-event notification

COLL 4.3.6 R
  1. (1)

    The authorised fund manager must give prior written notice to Unitholders, in respect of any proposed change to the operation of a scheme that, in accordance with (2), constitutes a significant change.

  2. (2)

    A significant change is a change or event which is not fundamental in accordance with COLL 4.3.4 R but which:

    1. (a)

      affects a Unitholder's ability to exercise his rights in relation to his investment; or

    2. (b)

      would reasonably be expected to cause the Unitholder to reconsider his participation in the scheme; or

    3. (c)

      results in any increased payments out of the scheme property to an authorised fund manager or any other director of an ICVC or an associate of either; or

    4. (d)

      materially increases other types of payment out of scheme property.

  3. (3)

    The notice period in (1) must be of a reasonable length (and must not be less than 60 days).

Appointment of a new authorised fund manager

COLL 4.3.6A R
  1. (1)

    3In the case of a UCITS scheme, the appointment of a new ACD of an ICVC under COLL 6.5.3 R (Appointment of an ACD) or the replacement of the authorised fund manager of an AUT or ACS5 who proposes to retire under COLL 6.5.8 R (Retirement of an authorised fund manager of an AUT or ACS)5 must, if in either case the new authorised fund manager is established in a different EEA State to the outgoing authorised fund manager, be treated as a significant change in accordance with COLL 4.3.6 R.

    55
  2. (2)

    Paragraph (1) does not apply:

    1. (a)

      if the appointment of the new authorised fund manager is the subject of an extraordinary resolution approved by a meeting of Unitholders; or

    2. (b)

      following the termination of the appointment of the ACD of an ICVC under COLL 6.5.4 R (2) or COLL 6.5.4 R (3) (Termination of appointment of an ACD), if the directors of the ICVC other than the ACD, or the depositary if there are no such directors, consider that it would be in the best interests of Unitholders to appoint a new ACD without delay.

Guidance on significant changes

COLL 4.3.7 G
  1. (1)

    Changes may be significant depending in each case on their degree of materiality and effect on the scheme and its Unitholders. Consequently the authorised fund manager will need to determine whether in each case a particular change is significant in nature or not.

  2. (2)

    For the purpose of COLL 4.3.6 R a significant change is likely to include:

    1. (a)

      a change in the method of price publication;

    2. (b)

      a change in any operational policy such as dilution policy or allocation of payments policy;

      1
    3. (c)

      an increase in the preliminary charge where units are purchased through a group savings plan; or1

      1
    4. (d)

      1a change in the pricing arrangements for units of the scheme so as to cause a single-priced authorised fund to become a dual-priced authorised fund, or vice versa.

  3. (3)

    Where the directors of an ICVC elect to discontinue holding annual general meetings under paragraph 37A of the OEIC Regulations, they are required to give 60 days' written notice to shareholders. For the purpose of COLL 4.3.6 R this should be treated as a significant change to the operation of the scheme.2

  4. (4)

    3The requirement in COLL 4.3.6A R (1) applies in all cases where the outgoing authorised fund manager (whether established in the United Kingdom or in another EEA State) is to be replaced by an authorised fund manager established in any other EEA State (including the United Kingdom).

Notifiable changes

COLL 4.3.8 R
  1. (1)

    The authorised fund manager must inform Unitholders in an appropriate manner and timescale of any notifiable changes that are reasonably likely to affect, or have affected, the operation of the scheme.

  2. (2)

    A notifiable change is a change or event, other than a fundamental change under COLL 4.3.4 R or a significant change under COLL 4.3.6 R, which a Unitholder must be made aware of unless the authorised fund manager concludes that the change is insignificant.

Guidance on notifiable changes

COLL 4.3.9 G
  1. (1)

    The circumstances causing a notifiable change may or may not be within the control of the authorised fund manager.

  2. (2)

    For the purpose of COLL 4.3.8 R (Notifiable changes) a notifiable change might include:

    1. (a)

      a change of named investment manager where the authorised fund has been marketed on the basis of that individual's involvement;

    2. (b)

      a significant political event which impacts on the authorised fund or its operation;

    3. (c)

      a change to the time of the valuation point;

    4. (d)

      the introduction of limited issue arrangements; or

    5. (e)

      a change of the depositary or a change in the name of the authorised fund.

  3. (3)

    The appropriate manner and timescale of notification would depend on the nature of the change or event. Consequently the authorised fund manager will need to assess each change or event individually.

  4. (4)

    An appropriate manner of notification could include:

    1. (a)

      sending an immediate notification to the Unitholder;

    2. (b)

      publishing the information on a website; or

    3. (c)

      the information being included in the next long report of the scheme.

Appointment of an AFM without prior written notice to Unitholders

COLL 4.3.10 R
  1. (1)

    3In the case of a UCITS scheme, the appointment of a new authorised fund manager as a result of:

    1. (a)

      in the case of an ICVC, the termination of the appointment of the previous ACD under COLL 6.5.4 R (2) or COLL 6.5.4 R (3) (Termination of appointment of an ACD); or

    2. (b)

      in the case of an AUT or ACS5, the replacement of the authorised fund manager5 under COLL 6.5.7 R (2) (Replacement of an authorised fund manager of an AUT or ACS);5

      55

    must, if the new authorised fund manager is established in a different EEA State to the outgoing authorised fund manager, be notified to Unitholders.

  2. (2)

    The new authorised fund manager must immediately notify Unitholders of its appointment under (1) in an appropriate manner.

Change events relating to feeder UCITS and feeder NURS4

COLL 4.3.11 R

3Where the authorised fund manager of either a feeder UCITS or a feeder NURS4 is notified of any change in respect of its master UCITS or qualifying master scheme4which has the effect of a change to the feeder UCITS or feeder NURS4, the authorised fund manager must:

4
  1. (1)

    classify it as a fundamental change, significant change or a notifiable change to the feeder UCITS or feeder NURS4 in accordance with the rules in this section; and

  2. (2)
    1. (a)

      for a fundamental change, obtain approval from the Unitholders by way of an extraordinary resolution; or4

    2. (b)

      for a significant change, give written notice to Unitholders of that change; or

    3. (c)

      for a notifiable change, comply with COLL 4.3.8 R (Notifiable changes)4.

COLL 4.3.12 R

3The actions required by COLL 4.3.11 R (2)(a) and (b) must be carried out as soon as reasonably practicable after the authorised fund manager of the feeder UCITS or feeder NURS4 has been informed of the relevant change to the master UCITS or qualifying master scheme4.

COLL 4.3.13 G
  1. (1)

    3The authorised fund manager of the feeder UCITS or feeder NURS4 should assess the change to the master UCITS or qualifying master scheme4 in terms of its impact on the feeder UCITS or feeder NURS4. For example, a change to the investment objective and policy of the master UCITS or qualifying master scheme4 that alters its risk profile would constitute a fundamental change for the feeder UCITS or feeder NURS4. In order for the feeder UCITS or feeder NURS4 to continue investing in the master UCITS or qualifying master scheme4, the authorised fund manager of the feeder UCITS or feeder NURS4 should obtain the approval of Unitholders by way of an extraordinary resolution, or else make a proposal to invest in a different master UCITS or qualifying master scheme. For a feeder UCITS this should be done4 in accordance with COLL 11.2.2 R (Application for approval of an investment in a master UCITS).

  2. (2)

    Not all changes affecting the master UCITS or qualifying master scheme4 will have the same significance for the feeder UCITS or feeder NURS4 and its Unitholders. For example, a change to how the prices of the units in the master UCITS or qualifying master scheme4 are published might not be a significant change for the feeder UCITS or feeder NURS4 if the prices of its own units continue to be published in the same way.

  3. (3)

    Where the authorised fund manager of the feeder UCITS or feeder NURS4 receives insufficient notice of the intended change to the master UCITS or qualifying master scheme4 to be able to seek the prior approval of Unitholders to any fundamental change or to inform them at least 60 days in advance of any significant change, it should nevertheless use reasonable endeavours to inform them of the change as soon as possible so that they can make an informed judgement about the merits of continuing to invest in the feeder UCITS or feeder NURS4.

COLL 4.4 Meetings of Unitholders and service of notices

Application

COLL 4.4.1 R

This section applies to an authorised fund manager, a depositary and any other director of an ICVC.

General meetings

COLL 4.4.2 R
  1. (1)

    The authorised fund manager, the depositary or the other directors of an ICVC may convene a general meeting of Unitholders at any time.

  2. (2)

    The Unitholders may request the convening of a general meeting by a requisition which must:

    1. (a)

      state the objects of the meeting;

    2. (b)

      be dated;

    3. (c)

      be signed by Unitholders who, at that date, are registered as the Unitholders of units representing not less than one-tenth in value (or such lower proportion stated in the instrument constituting the fund4 ) of all of the units then in issue; and

      4
    4. (d)

      be deposited at the head office of the ICVC or with the depositary of an AUT or ACS.3

      3
  3. (3)

    The authorised fund manager, the depositary or the other directors of an ICVC must on receipt of a requisition that complies with (2), immediately convene a general meeting of the authorised fund for a date no later than eight weeks after receipt of the requisition.

  4. (4)

    5The advisory committee of a charity authorised investment fund may also request the convening of a general meeting of Unitholders by giving notice in accordance with COLL 14.3.5R.

Class meetings

COLL 4.4.3 R

This section applies, unless the context otherwise requires, to class meetings by reference to the units of the class concerned and the Unitholders and prices of such units.

Special meaning of Unitholder in COLL 4.4

COLL 4.4.4 R
  1. (1)

    Unless a unit in the authorised fund is a participating security, in this section "Unitholders" means Unitholders as at a cut-off date selected by the authorised fund manager which is a reasonable time before notices of the relevant meeting are sent out.

  2. (2)

    If any unit in the authorised fund is a participating security, a registered Unitholder of such a unit is entitled to receive a notice of a meeting or a notice of an adjourned meeting under COLL 4.4.5 R (Notice of general meetings), if entered on the register at the close of business on a day to be determined by the authorised fund manager, which must not be more than 21 days before the notices of the meeting are sent out.

  3. (3)

    For the purposes of (2), in COLL 4.4.6 R (Quorum) to COLL 4.4.11 R (Chairman, adjournments and minutes) "Unitholders" in relation to those units means:

    1. (a)

      the persons entered on the register at a time to be determined by the authorised fund manager and stated in the notice of the meeting, which must not be more than 48 hours before the time fixed for the meeting; or

    2. (b)

      in the case of bearer shares in an ICVC, shareholders5 of bearer shares5which were in issue at the time applicable under (a).

Notice of general meetings

COLL 4.4.5 R
  1. (1)

    Where the authorised fund manager, the depositary or the other directors of an ICVC decide to convene a general meeting of Unitholders:

    1. (a)

      each Unitholder must be given at least 14 days written notice, inclusive of the date on which the notice is first served and the day of the meeting; and

    2. (b)

      the notice must specify the place, day and hour of the meeting and the terms of the resolutions to be proposed and a copy of the notice must be sent to the depositary.

  2. (2)

    The accidental omission to give notice to, or the non-receipt of notice by, any Unitholder does not invalidate the proceedings at any meeting.

  3. (3)

    Notice of an adjourned meeting of Unitholders must be given to each Unitholder, stating that while two Unitholders present in person or proxy are required to constitute a quorum at the adjourned meeting, this may be reduced to one in accordance with COLL 4.4.6R (3), should two such Unitholders not be present after a reasonable time of convening of the meeting.

  4. (4)

    Paragraph (1)(a) does not apply to the notice of an adjourned meeting.

Quorum

COLL 4.4.6 R
  1. (1)

    The quorum required to conduct business at a meeting of Unitholders is two Unitholders, present in person or by proxy.

  2. (2)

    If after a reasonable time from the time for the start of the meeting, a quorum is not present, the meeting:

    1. (a)

      if convened on the requisition of Unitholders, must be dissolved; and

    2. (b)

      in any other case, must stand adjourned to:

      1. (i)

        a day and time which is seven or more days after the day and time of the meeting; and

      2. (ii)

        a place to be appointed by the chairman.

  3. (3)

    If, at an adjourned meeting under (2)(b), a quorum is not present after a reasonable time from the time for the meeting, one person entitled to be counted in a quorum present at the meeting shall constitute a quorum.

Resolutions

COLL 4.4.7 R
  1. (1)

    Except where an extraordinary resolution is specifically required or permitted, any resolution of Unitholders is passed by a simple majority of the votes validly cast at a general meeting of Unitholders.

  2. (2)

    In the case of an equality of, or an absence of, votes cast, the chairman is entitled to a casting vote.

  3. (3)

    Where a resolution (including an extraordinary resolution) is required to conduct business at a meeting of Unitholders and every Unitholder is prohibited under COLL 4.4.8R (4) from voting, it shall not be necessary to convene such a meeting and a resolution may, with the prior written agreement of the depositary to the process, instead be passed with the written consent of Unitholders representing 50% or more, or for an extraordinary resolution 75% or more, of the units of the scheme in issue.1

Voting rights

COLL 4.4.8 R
  1. (1)

    On a show of hands every Unitholder who is present in person has one vote.

  2. (2)

    On a poll:

    1. (a)

      votes may be given either personally or by proxy or in another manner permitted by the instrument constituting the fund;4

      4
    2. (b)

      the voting rights for each unit must be the proportion of the voting rights attached to all of the units in issue that the price of the unit bears to the aggregate price or prices of all of the units in issue:

      1. (i)

        if any unit is a participating security, at the time determined under COLL 4.4.4R (2) (Special meaning of Unitholder in COLL 4.4);

      2. (ii)

        otherwise at the date specified in COLL 4.4.4R (1); and

    3. (c)

      a Unitholder need not use all his votes or cast all his votes in the same way.

  3. (3)

    For joint Unitholders, the vote of the most senior who votes, whether in person or by proxy, must be accepted to the exclusion of the votes of the other joint Unitholders. For this purpose seniority must be determined by the order in which the names stand in the register of Unitholders.1

    1
  4. (4)

    No director of the ICVC or the authorised fund manager of an AUT or ACS3 can be counted in the quorum of, and no such director or the authorised fund manager of an AUT or ACS3 nor any of their associates may vote at, any meeting of the authorised fund.

    33
  5. (5)

    The prohibition in (4) does not apply to any units held on behalf of, or jointly with, a person who, if himself the registered Unitholder, would be entitled to vote and from whom the director, the authorised fund manager of an AUT or ACS3 or its associate have received voting instructions.

    3
  6. (6)

    For the purpose of this section, units held, or treated as held, by the authorised fund manager or any other director of the ICVC, must not, except as mentioned in (5), be regarded as being in issue.

Right to demand a poll

COLL 4.4.9 R
  1. (1)

    A resolution put to the vote of a general meeting must be determined on a show of hands unless a poll is (before or on the declaration of the result of the show of hands) demanded by:

    1. (a)

      the chairman;

    2. (b)

      at least two Unitholders; or

    3. (c)

      the depositary.

  2. (2)

    Unless a poll is demanded in accordance with (1), a declaration by the chairman as to the result of a resolution is conclusive evidence of the fact.

Proxies

COLL 4.4.10 R
  1. (1)

    A Unitholder may appoint another person to attend a general meeting and vote in his place.

  2. (2)

    Unless the instrument constituting the fund4 provides otherwise, a Unitholder may appoint more than one proxy to attend on the same occasion but a proxy may vote only on a poll.

    4
  3. (3)

    Every notice calling a meeting of a scheme must contain a reasonably prominent statement that a Unitholder entitled to attend and vote may appoint a proxy.

  4. (4)

    For the appointment to be effective, any document relating to the appointment of a proxy must not be required to be received by the ICVC or any other person more than 48 hours before the meeting or adjourned meeting

Chairman, adjournment and minutes

COLL 4.4.11 R
  1. (1)

    A meeting of Unitholders must have a chairman, nominated:1

    1
    1. (a)

      in the case of an AUT or ACS3, by the depositary;31

      3
    2. (b)

      in the case of an ICVC, by a director other than the ACD or an associate of the ACD or, if no such nomination is made, by the depositary.1

  2. (2)

    If the chairman is not present after a reasonable time from the time for the meeting, the Unitholders present must choose one of them to be chairman.

  3. (3)

    The chairman:

    1. (a)

      may, with the consent of any meeting of Unitholders at which a quorum is present; and

    2. (b)

      must, if so directed by the meeting;

      adjourn the meeting from time to time and from place to place.

  4. (4)

    Business must not be transacted at any adjourned meeting, except business which might have lawfully been transacted at the original meeting.

  5. (5)

    The authorised fund manager must ensure that:

    1. (a)

      minutes of all resolutions and proceedings at every meeting of Unitholders are made and kept; and

    2. (b)

      any minute made in (a) is signed by the chairman of the meeting of Unitholders.

  6. (6)

    Any minute referred to in (5)(b) is conclusive evidence of the matters stated in it.

Notices to Unitholders

COLL 4.4.12 R
  1. (1)

    Where this sourcebook requires any notice or document to be served upon a Unitholder, it is duly served :

    1. (a)

      for units held by a registered Unitholder, if it is:

      1. (i)

        sent by post to or left at1 the Unitholder's address as appearing in the register; or

        1
      2. (ii)

        sent1 by using an electronic medium in accordance with COLL 4.4.13 R (Other notices); or

        1
    2. (b)

      for units represented by bearer certificates, if given in the manner provided for in the prospectus.

  2. (2)

    Any notice or document served by post is deemed to have been served on the second business day following the day on which it is posted.

  3. (3)

    Any document left at a registered address or delivered other than by post is deemed to have been served on that day.

Other notices

COLL 4.4.13 R
  1. (1)

    Any document or notice to be served on or information to be given to, any person, including the FCA , must be in legible form.

  2. (2)

    For the purposes of this rule, any form is legible form which:

    1. (a)

      is consistent with the ICVC's, the directors', the authorised fund manager's or the depositary's knowledge of how the recipient of the document wishes or expects to receive the document;

    2. (b)

      is capable of being provided in hard copy by the authorised fund manager, the depositary or any other director of the ICVC;

    3. (c)

      enables the recipient to know or record the time of receipt; and

    4. (d)

      is reasonable in the context.

  3. (3) 2
    1. (a)

      2In this sourcebook, any requirement that a document be signed may be satisfied by an electronic signature or electronic evidence of assent.

    2. (b)

      In relation to an AUT or ACS3, where transfer of title to units is to be effected on the authority of an electronic communication, the authorised fund manager3 must take reasonable steps to ensure that any electronic communication purporting to be made by the Unitholder or his agent is in fact made by that person.

      3

References to writing and electronic documents

COLL 4.4.14 G

In this sourcebook references to writing and the use of electronic media should be construed in accordance with GEN 2.2.14 R (References to writing) and its related guidance provisions.

Service of notice Regulations

COLL 4.4.15 G

The provisions in this section relating to the service and delivery of notices and documents both to Unitholders and to the FCA , disapply the provisions of The Financial Services and Markets Act 2000 (Service of Notices) Regulations 2001 (SI 2001/1420) under the power in Regulation 1(6) of those Regulations.

COLL 4.5 Reports and accounts

Application

COLL 4.5.1 R

The rules and guidance in this section apply to an authorised fund manager, a depositary and any other director of an ICVC.

Explanation

COLL 4.5.2 G

In order to provide the Unitholders with regular and relevant information about the progress of the authorised fund, the authorised fund manager must:

  1. (1)

    prepare a 15long report half-yearly and annually; and15

  2. (2)

    [deleted]15

  3. (3)

    make the long report available to Unitholders on request.

Full-scope UK AIFM of a non-UCITS retail scheme

COLL 4.5.2A G
  1. (1)

    17A full-scope UK AIFM that is the authorised fund manager of a non-UCITS retail scheme should comply with both:

    1. (a)

      FUND 3.3 (Annual report of an AIF); and

    2. (b)

      this chapter,

    regarding the preparation and publication of annual reports.

  2. (2)

    The authorised fund manager need not state the same information twice to satisfy both sets of requirements.

  3. (3)

    The authorised fund manager, when preparing the half-yearly long report, needs to comply only with this chapter.

Preparation of long reports

COLL 4.5.3 R
  1. (1)

    The authorised fund manager must for each annual accounting period and half-yearly accounting period, prepare a 15long report for a scheme.

  2. (2)

    [deleted]15

  3. (3)

    Where the first annual accounting period of a scheme is less than 12 months, a half-yearly report need not be prepared.

  4. (4)

    [deleted]1

ICVC requirements

COLL 4.5.4 G
  1. (1)

    The OEIC Regulations contain requirements for the preparation of annual and half-yearly reports and make the directors of an ICVC responsible for the preparation of annual and half-yearly reports on the ICVC.

  2. (2)

    Regulations 66 (Reports: preparation), 67 (Reports: accounts) and 68 (Reports: voluntary revision) of the OEIC Regulations also contain a number of other requirements relating to reports and accounts of an ICVC.

COLL 4.5.5 R

[deleted]15

COLL 4.5.6 G

[deleted]15

Contents of the annual long report

COLL 4.5.7 R

  1. (1)

    An annual long report on an authorised fund, other than a scheme which is an umbrella, must contain:

    1. (a)

      the

      3

      accounts for the annual accounting period which must be prepared in accordance with the requirements of the IMA SORP;

    2. (b)

      the report of the authorised fund manager in accordance with COLL 4.5.9 R (Authorised fund manager's report);

    3. (c)

      comparative information12 in accordance with COLL 4.5.10 R (Comparative information12);

      1212
    4. (d)

      the report of the depositary in accordance with COLL 4.5.11 R (Report of the depositary); and

    5. (e)

      the report of the auditor in accordance with COLL 4.5.12 R (Report of the auditor).

  2. (2)

    An annual long report on a scheme which is an umbrella must be prepared for the umbrella as a whole and2 must contain:

    1. (a)

      for each sub-fund:

      1. (i)

        the

        3

        accounts for the annual accounting period which must be prepared in accordance with the requirements of the IMA SORP;

      2. (ii)

        the report of the authorised fund manager in accordance with COLL 4.5.9 R; and

      3. (iii)

        comparative information12 in accordance with COLL 4.5.10 R;

        12
    2. (b)

      [deleted]12

      12
    3. (c)

      the report of the depositary in accordance with COLL 4.5.11 R; and

    4. (d)

      the report of the auditor in accordance with COLL 4.5.12 R.

  3. (3)

    The directors of an ICVC or the authorised fund manager9 of an AUT or ACS9 must ensure that the accounts referred to in (1)(a),2 (2)(a) and (4)(a)2 give a true and fair view of the net

    923

    revenue

    3

    and the net capital

    3

    gains

    3

    or

    3

    losses on the scheme property of the authorised fund, or, in the case of (2)(a) and (4)(a)2, the sub-fund, for the annual accounting period in question and the financial position of the authorised fund or sub-fund as at the end of that period.

  4. (4)

    The authorised fund manager of a scheme which is an umbrella may, in addition to complying with (2), prepare a further annual long report for any one or more individual sub-funds of the scheme, in which case it must contain:2

    1. (a)

      in relation to the sub-fund:2

      1. (i)

        the

        3

        accounts for the annual accounting period which must be prepared in accordance with the requirements of the IMA SORP;2

      2. (ii)

        the report of the authorised fund manager in accordance with COLL 4.5.9 R; and2

      3. (iii)

        comparative information12 in accordance with COLL 4.5.10 R;2

        12
    2. (b)

      the report of the depositary in accordance with COLL 4.5.11 R; and2

    3. (c)

      the report of the auditor in accordance with COLL 4.5.12 R.2

  5. (5)

    4An annual long report of a UCITS scheme which is a feeder UCITS must also include:

    1. (a)

      a statement on the aggregate charges of the feeder UCITS and the master UCITS; and

    2. (b)

      a description of how the annual long report of its master UCITS can be obtained.

[Note: article 63(2) of the UCITS Directive]4

  1. (6)

    An annual long report of a feeder NURS must also include:7

    1. (a)

      a statement on the aggregate charges of the feeder NURS and its qualifying master scheme; and7

    2. (b)

      a description of how the annual long report (or nearest equivalent document for a qualifying master scheme that is a recognised scheme) of its qualifying master scheme can be obtained.7

  2. (7)

    13An annual long report of a UCITS scheme must also include:

    1. (a)
      1. (i)

        the total amount of remuneration paid by the authorised fund manager to its staff for the financial year, split into fixed and variable remuneration;

      2. (ii)

        the number of beneficiaries; and

      3. (iii)

        where relevant, any amount paid directly by the UCITS scheme itself, including any performance fee;

    2. (b)

      the aggregate amount of remuneration broken down by categories of UCITS Remuneration Code staff;

    3. (c)

      a description of how the remuneration and the benefits have been calculated;

    4. (d)

      the outcome of the reviews referred to in SYSC 19E.2.7R(1) and SYSC 19E.2.8R, including any irregularities that have occurred; and

    5. (e)

      details of any material changes to the adopted remuneration policy since the previous annual long report was prepared.

    [Note: article 69(3) second paragraph of the UCITS Directive]

COLL 4.5.7A G
  1. (1)

    13The FCA recognises that the annual long report, including the remuneration related disclosures in COLL 4.5.7R(7), may be required to be made available to Unitholders before the completion of the authorised fund manager’s first annual performance period in which it has to comply with the UCITS Remuneration Code.

  2. (2)

    Under (1), the FCA expects the authorised fund manager to make best efforts to comply with COLL 4.5.7R(7) to the extent possible.

  3. (3)

    The authorised fund manager, having made best efforts to achieve compliance with COLL 4.5.7R(7), may omit to disclose information relating to remuneration where the information:

    1. (a)

      is not available to the authorised fund manager for the relevant annual accounting period; or

    2. (b)

      is available but will not provide materially relevant, reliable, comparable and clear information to Unitholders about the remuneration policy of the authorised fund manager, as it affects the particular UCITS scheme.

  4. (4)

    Where disclosure is omitted, the authorised fund manager should explain the basis for that omission.

COLL 4.5.8-A G

[deleted]18

11 14 16

Contents of the half-yearly long report

COLL 4.5.8 R

  1. (1)

    A half-yearly long report on an authorised fund, other than for a scheme which is an umbrella, must contain:

    1. (a)

      the

      3

      accounts for the half-yearly accounting period which must be prepared in accordance with the requirements of the IMA SORP; and

    2. (b)

      the report of the authorised fund manager in accordance with COLL 4.5.9 R (Authorised fund manager's report).

  2. (2)

    A half-yearly long report on a scheme which is an umbrella must be prepared for the umbrella as a whole and2 must contain:

    1. (a)

      for each sub-fund:

      1. (i)

        the 2

        3

        accounts for the half-yearly accounting period2 which must be prepared in accordance with the requirements of the IMA SORP; and

        2
      2. (ii)

        the report of the authorised fund manager in accordance with COLL 4.5.9 R; and

    2. (b)

      [deleted]12

      12
  3. (3)

    The authorised fund manager of a scheme which is an umbrella may, in addition to complying with (2), prepare a further half-yearly long report for any one or more individual sub-funds of the scheme. Such reports must contain the

    3

    accounts and the report of the authorised fund manager that would be required by (1) if the sub-fund were a separate authorised fund.2

  4. (4)

    4The half-yearly long report of a UCITS scheme which is a feeder UCITS must also include a description of how the half-yearly and annual reports of its master UCITS can be obtained.

[Note: article 63(2) second subparagraph of the UCITS Directive]

  1. (5)

    The half-yearly long report of a feeder NURS must also include a description of how the half-yearly and annual long reports (or nearest equivalent documents for a qualifying master scheme that is a recognised scheme) of its qualifying master scheme can be obtained.7

2Annual and half-yearly long reports for sub-funds of an umbrella

COLL 4.5.8A G

2The authorised fund manager may, but need not, prepare annual and half-yearly long reports for any individual sub-fund of an umbrella in accordance with COLL 4.5.7R (4) and COLL 4.5.8R (3) and make them available on request to any Unitholder investing in the relevant sub-fund. However, if the authorised fund manager does so, this does not relieve it of its duty:

  1. (1)

    to prepare annual and half-yearly long reports on the umbrella as a whole (COLL 4.5.7R (2) and COLL 4.5.8R (2)); and

  2. (2)

    to make available and publish the annual and half-yearly long reports for the umbrella as a whole (COLL 4.5.14 R).

Information to be included in annual and half-yearly reports on securities financing transactions and total return swaps

COLL 4.5.8AA G
  1. (1)

    16The Securities Financing Transactions Regulation sets out the additional information which:

    1. (a)

      an authorised fund manager of a UCITS scheme must include in the scheme’s annual and half-yearly reports; and

    2. (b)

      an authorised fund manager who is a full-scope UK AIFM of a non-UCITS retail scheme must include in the scheme’s annual report.

  2. (2)

    COLL 4.5.8ABEU and COLL 4.5.8ACEU copy out the relevant provisions of that regulation.

  3. (3)

    An authorised fund manager of a UCITS scheme or a non-UCITS retail scheme that has not used securities financing transactions or total return swaps during the relevant annual accounting period or half-yearly accounting period is not required to include the information in COLL 4.5.8ACEU in its reports.

COLL 4.5.8AB EU

16

Transparency of collective investment undertakings in periodical reports

1.

UCITS management companies, UCITS investment companies, and AIFMs shall inform investors on the use they make of SFTs and total return swaps in the following manner:

(a)

for UCITS management companies or UCITS investment companies in the half-yearly and annual reports referred to in Article 68 of Directive 2009/65/EC;

(b)

for AIFMs in the annual report referred to in Article 22 of Directive 2011/61/EU.

2.

The information on SFTs and total return swaps shall include the data provided for in Section A of the Annex.

[Note: article 13(1) and 13(2) of the Securities Financing Transactions Regulation and article 3 for relevant definitions]

COLL 4.5.8AC EU

16

Information to be provided in the UCITS half-yearly and annual reports and the AIF’s annual report

Global data:

-

The amount of securities and commodities on loan as a proportion of total lendable assets defined as excluding cash and cash equivalents;

-

The amount of assets engaged in each type of SFTs and total return swaps expressed as an absolute amount (in the collective investment undertaking’s currency) and as a proportion of the collective investment undertaking’s assets under management (AUM).

Concentration data:

-

Ten largest collateral issuers across all SFTs and total return swaps (break down of volumes of the collateral securities and commodities received per issuer’s name);

-

Top 10 counterparties of each type of SFTs and total return swaps separately (Name of counterparty and gross volume of outstanding transactions).

Aggregate transaction data for each type of SFTs and total return swaps separately to be broken down according to the below categories:

-

Type and quality of collateral;

-

Maturity tenor of the collateral broken down in the following maturity buckets: less than one day, one day to one week, one week to one month, one to three months, three months to one year, above one year, open maturity;

-

Currency of the collateral;

-

Maturity tenor of the SFTs and total return swaps broken down in the following maturity buckets: less than one day, one day to one week, one week to one month, one to three months, three months to one year, above one year, open transactions;

-

Country in which the counterparties are established;

-

Settlement and clearing (e.g., tri-party, Central Counterparty, bilateral).

Data on reuse of collateral:

-

Share of collateral received that is reused, compared to the maximum amount specified in the prospectus or in the disclosure to investors;

-

Cash collateral reinvestment returns to the collective investment undertaking.

Safekeeping of collateral received by the collective investment undertaking as part of SFTs and total return swaps:

Number and names of custodians and the amount of collateral assets safe-kept by each of the custodians

Safekeeping of collateral granted by the collective investment undertaking as part of SFTs and total return swaps:

The proportion of collateral held in segregated accounts or in pooled accounts, or in any other accounts

Data on return and cost for each type of SFTs and total return swaps

broken down between the collective investment undertaking, the manager of the collective investment undertaking and third parties (e.g. agent lender) in absolute terms and as a percentage of overall returns generated by that type of SFTs and total return swaps

[Note: section A of the annex to the Securities Financing Transactions Regulation and article 3 for relevant definitions]

Additional information that may need to be included in the annual and half-yearly long report of a UCITS scheme

COLL 4.5.8AD G

16The annual and half-yearly long reports of a UCITS scheme may be required to contain additional matters not referred to in COLL 4.5.7 R and COLL 4.5.8 R, such as those required by the ESMA Guidelines on ETFs and other UCITS issues, which can be found at

https://www.esma.europa.eu/sites/default/files/library/2015/11/2012-832en_guidelines_on_etfs_and_other_ucits_issues.pdf

Signing of annual and half-yearly reports

COLL 4.5.8B R

3The annual reports in COLL 4.5.7R (1) and (2), and the half-yearly reports in COLL 4.5.8R (1) and (2), must:

  1. (1)

    in the case of an ICVC, if there is:

    1. (a)

      more than one director, be approved by the board of directors and signed on their behalf by the ACD and at least one other director; or

    2. (b)

      no director other than the ACD, be signed by the ACD;

  2. (2)

    in the case of an AUT or ACS9, if the authorised fund manager has:

    1. (a)

      more than one director, be signed by at least two directors of the authorised fund manager; or

    2. (b)

      only one director, be signed by the director of the authorised fund manager.

Authorised fund manager's report

COLL 4.5.9 R

The matters set out in (1) to (13)2 must be included in any authorised fund manager's report, except where otherwise indicated:

2
  1. (1)

    the names and addresses of :

    1. (a)

      the authorised fund manager;

    2. (b)

      the depositary;

    3. (c)

      the registrar;

    4. (d)

      any investment adviser;

    5. (e)

      the auditor; and

    6. (f)

      for a scheme which invests in immovables, the standing independent valuer;

  2. (2)

    (for an ICVC), the names of any directors other than the ACD;

  3. (3)

    a statement of the authorised status of the scheme;

  4. (4)

    (for an ICVC) a statement that the Unitholders of the ICVC are not liable for the debts of the ICVC;

  5. (5)

    the investment objectives of the authorised fund;

  6. (6)

    the policy and strategy pursued

    3

    for achieving those objectives;

  7. (7)

    a review of the investment activities during the period to which the report relates;

  8. (7A)

    a portfolio statement prepared in accordance with the requirements of the IMA SORP;

    3
  9. (7B)

    in the case of an umbrella which has more than one sub-fund, particulars in the form of a table showing, as at the end of the period to which the report relates:12

    1. (a)

      for each sub-fund, the number of units in that sub-fund that were held by a second sub-fund of that umbrella; and

    2. (b)

      the value of each such holding;

    or, alternatively, a statement that there were no such holdings as at the end of that period;

  10. (8)

    particulars of any fundamental changes in accordance with COLL 4.3.4 R (Fundamental change requiring prior approval by meeting) made since the date of the last report;

  11. (9)

    particulars of any significant changes which have occurred in accordance with COLL 4.3.6 R (Significant change requiring pre-event notification) since the date of the last report;

  12. (9A)

    4in the case of a UCITS scheme, the figure for the synthetic risk and reward indicator disclosed in its most recent key investor information document and any changes to that figure that have taken place during the period;

  13. (10)

    any other information which would enable Unitholders to make an informed judgement on the development of the activities of the authorised fund during this period and the results of those activities as at the end of that period;

  14. (11)

    for a report on an umbrella prepared in accordance with COLL 4.5.7R (2)2 or COLL 4.5.8R (2)2 , information required by (1) to (10) must be given for each sub-fund, if it would vary from that given in respect of the umbrella as a whole;5

    225
  15. (12)

    for a UCITS scheme which invests a substantial proportion of its assets in other schemes, a statement as to the maximum proportion of management fees charged to the scheme itself and to other schemes in which that scheme invests; and2

    2
  16. (13)

    for a report on an individual sub-fund of a scheme which is an umbrella prepared in accordance with COLL 4.5.7R (4) or COLL 4.5.8R (3), a statement that the latest long report prepared for the umbrella as a whole is available on request.52

    5

Comparative information12

COLL 4.5.10 R

The comparative information12 required by COLL 4.5.7 R12 (Contents of the annual long report) and COLL 8.3.5A R (Contents of the annual report) must be shown for the last three annual accounting periods (or all of the authorised fund'sannual accounting periods, if fewer than three) and must set out:

12 12
  1. (1)

    [deleted]12

    12
  2. (1A)

    for a unit of each class in issue, a comparative table as at the end of the period to which the report relates, prepared in accordance with the requirements of the IMA SORP and showing at least:12

    1. (a)

      the performance record of a unit of that class;

    2. (b)

      an indication of the actual charges and costs borne by the class;

    3. (c)

      the net income distributed (or, for accumulation units, allocated) for the unit, taking account of any sub-division or consolidation of units that occurred during that period;

    4. (d)

      the net asset value of the unit as at the end of the period;

    5. (e)
      1. (i)

        (for a report of the directors of an ICVC) the number of units of the class in issue as at the end of the period; or

      2. (ii)

        (for a report of the authorised fund manager of an AUT or an ACS) the number of units of the class that are in existence or treated as in existence as at the end of the period; and

    6. (f)

      the highest and the lowest prices of the unit during the period;

  3. (2)

    [deleted]12

    12
  4. (2A)

    for the scheme property, its total net asset value as at the end of the period; and 12

  5. (3)

    if, in the period covered by the information:12

    12
    1. (a)

      the authorised fund has been the subject of any event (such as a scheme of arrangement) having a material effect on the size of the authorised fund, but excluding any issue or cancellation of units for cash; or

    2. (b)

      there have been changes in the investment objective and policy12 of the authorised fund;

      12
    3. (c)

      [deleted]12

      12

an indication, related in the body of the table to the relevant year in the table, of the date of the event or change in the investment objective and policy, and a brief description of its nature.12

COLL 4.5.10A G
  1. (1)

    The figure for the "return before operating charges" shown in the comparative table required by COLL 4.5.10R (1A) should include all costs and charges actually borne by the class of units it describes.

  2. (2)

    The indication of actual costs and charges borne by a class of units should cover pro-rata allocations of the operating charges borne by the scheme (e.g. annual management fee, fees and expenses payable to the depositary, auditors and FCA, costs of buying and selling units in an underlying scheme, etc.), any performance-related fee and direct transaction-related costs where known to the AFM (e.g. dealing commission on equity transactions and stamp duty). Where possible, the operating charges should be presented as a single figure in both pence per unit and as a percentage of net asset value.

Report of the depositary

COLL 4.5.11 R

  1. (1)

    The depositary must make an annual report to Unitholders which must be included in the annual report.

  2. (2)

    The annual report must contain:

    1. (a)

      a description, which may be in summary form, of the duties of the depositary under COLL 6.6.4 (General duties of the depositary) and in respect of the safekeeping of the scheme property; and

    2. (b)

      a statement whether, in any material respect:

      1. (i)

        the issue, sale, redemption and cancellation, and calculation of the price of the units and the application of the authorised fund's revenue

        33

        , have not been carried out in accordance with the rules in this sourcebook and, where applicable, the OEIC Regulations and the instrument constituting the fund;10 and

        10
      2. (ii)

        the investment and borrowing powers and restrictions applicable to the authorised fund have been exceeded.

Report of the auditor

COLL 4.5.12 R

The authorised fund manager must ensure that the report of the auditor to the Unitholders includes the following statements:3

3
  1. (1)

    whether, in the auditor's opinion, the accounts have been properly prepared in accordance with the IMA SORP, the rules in this sourcebook, and the instrument constituting the fund;10

    10
  2. (2)

    whether, in the auditor's opinion, the accounts give a true and fair view of the net revenue3and the net capital 3gains or losses on3the scheme property of the authorised fund (or, as the case may be, the scheme property attributable to the sub-fund) for the annual accounting period in question and the financial position of the authorised fund or sub-fund as at the end of that period;

    33
  3. (3)

    whether the auditor is of the opinion that proper accounting records for the authorised fund (or, as the case may be, sub-fund) have not been kept or whether the accounts are not in agreement with those records;

  4. (4)

    whether the auditor has been given all the information and explanations which, to the best of his knowledge and belief, are necessary for the purposes of his audit; and

  5. (5)

    whether the auditor is of the opinion that the information given in the report of the directors or in the report of the authorised fund manager for that period is consistent with the accounts.

COLL 4.5.13 R

[deleted]15

Publication and availability of annual and half-yearly long report

COLL 4.5.14 R

  1. (1)

    The authorised fund manager must, within four months after the end of each annual accounting period and two months after the end of each half-yearly accounting period respectively, make available and publish the long reports2 prepared in accordance with COLL 4.5.7R (1) to (3)2 (Contents of the annual long report) and COLL 4.5.8R (1) to (2)2 (Contents of the half-yearly long report).

    22
  2. (2)

    The reports referred to in (1) must:

    1. (a)

      be supplied free of charge to any person on request2;

      2
    2. (b)

      be available in English, for inspection by the public free of charge during ordinary office hours at a place specified;

    3. (c)

      for a UCITS scheme, be available for inspection by the public at a place designated by the authorised fund manager in each EEA State other than the United Kingdom in which units in the authorised fund are marketed, in English and in at least one of that other EEA State's official languages; and

    4. (d)

      be sent to the FCA and, if the UCITS scheme is managed by an EEA UCITS management company, to that company's Home State regulator on request.4

[Note: article 74 of the UCITS Directive]4

Provision of annual and half-yearly long reports for master and feeder UCITS

COLL 4.5.15 R
  1. (1)

    4The authorised fund manager of a UCITS scheme which is a feeder UCITS must:

    1. (a)

      where requested by an investor, provide copies of the annual and half-yearly long reports of its master UCITS free of charge; and

    2. (b)

      file copies of the annual and half-yearly long reports of its master UCITS with the FCA .

  2. (2)

    Except where an investor requests paper copies or the use of electronic communications is not appropriate, the annual and half-yearly long reports of its master UCITS may be provided in a durable medium other than paper or by means of a website that meets the website conditions.

[Note: articles 63(3) and 63(5) of the UCITS Directive]

Provision of annual and half-yearly long reports for qualifying master schemes of feeder NURS

COLL 4.5.16 R
  1. (1)

    7The authorised fund manager of a feeder NURS must, where requested by an investor or the FCA , provide to such person copies of the annual and half-yearly long reports (or nearest equivalent documents for a qualifying master scheme that is a recognised scheme) of its qualifying master scheme free of charge.

  2. (2)

    Except where an investor requests paper copies or the use of electronic communications is not appropriate, the annual and half-yearly long reports (or nearest equivalent documents for a qualifying master scheme that is a recognised scheme) of its qualifying master scheme may be provided in a durable medium other than paper, or by means of a website that meets the website conditions.8

COLL 4.6 2Simplified Prospectus provisions

Application

COLL 4.6.1 R

2This section applies to an ICVC, an authorised fund manager of an AUT, ACS9 or ICVC and any other director of an ICVC where, in each case, the AUT, ACS9 or ICVC is a simplified prospectus scheme.

Production and publication of simplified prospectus

COLL 4.6.2 R
  1. (1)

    An operator of a simplified prospectus scheme must, for each simplified prospectus scheme in respect of which it is the operator, produce and publish a simplified prospectus in accordance with the rules in this section and ensure that it contains in summary form each of the matters referred to in the table below that relates to this rule.

  2. (2)

    A simplified prospectus must be incorporated in a written document or in any durable medium.

  3. (3)

    An operator of a simplified prospectus scheme must be satisfied on reasonable grounds that each simplified prospectus which it produces:

    1. (a)

      includes all such information as is necessary to enable an investor to make an informed decision about whether to acquire units in the scheme;

    2. (b)

      does not omit any key item of information;

    3. (c)

      wherever possible is written in plain language which avoids technical language and jargon; and

    4. (d)

      adopts a format and style of presentation which is clear and attractive to the average reader, so that it can be easily understood by him.

  4. (4)

    The simplified prospectus may be attached to the full prospectus as a removable part of it.

Revision of simplified prospectus

COLL 4.6.3 R

An operator of a simplified prospectus scheme must, for each simplified prospectus scheme of which it is the operator, keep its simplified prospectus up-to-date and must revise it immediately on the occurrence of any material change.

COLL 4.6.4 G

It is the FCA's view that any change to a simplified prospectus scheme that would be likely to influence the average investor in deciding whether to invest in the scheme or realise his investment in it should be regarded as a material change for the purposes of revision of a simplified prospectus. Examples would be changes to the scheme's objectives or investment policy. The FCA would expect a simplified prospectus to be updated at least annually.

Filing requirements

COLL 4.6.5 R

A UCITS management company must for each UCITS scheme it manages file the scheme's initial simplified prospectus, together with each revision to it, with:

  1. (1)

    the FCA ; and

  2. (2)

    the competent authority of each EEA state in which its units are to be marketed in the exercise of an EEA right.

UK firms exercising passporting rights in respect of UCITS scheme

COLL 4.6.6 R
  1. (1)

    A UCITS management company must for each UCITS scheme it manages and in respect of which it is marketing units in another EEA State in the exercise of an EEA right, produce a simplified prospectus for the scheme drawn up in accordance with the requirements contained in this section.

  2. (2)

    The simplified prospectus must be drawn up in the, or one of the, official languages of the EEA State for which it was prepared or in a language approved by the competent authority of that EEA State.

  3. (3)

    The simplified prospectus may, without alteration, be used for marketing purposes in the EEA State for which it was prepared and in which the units of the simplified prospectus scheme are to be sold.

COLL 4.6.7 G
  1. (1)

    In translating the simplified prospectus from English into one or more of the official languages of the EEA State in which the simplified prospectus scheme is to be marketed, or into a language approved by the competent authority of that State, it is permissible under article 28.3 of the UCITS Directive, in the FCA's view, for figures expressed in pounds sterling to be converted into the appropriate local currency such as euros. It is not necessary, for example, for the simplified prospectus of a scheme that is to be marketed across the EEA in the exercise of an EEA right, to refer to each amount in pounds sterling, in euros and additionally in every other local currency of an EEA State in which units of the scheme are to be marketed that has not adopted the euro as its currency.

    8
  2. (2)

    Operators considering marketing the units of their simplified prospectus schemes in another EEA State in the exercise of an EEA right should have regard to the local marketing legislation of such country.

Contents of the simplified prospectus

COLL 4.6.8 R

This table belongs to the rule on production and publication of a simplified prospectus (COLL 4.6.2 R and COLL 4.6.6 R)

Contents of simplified prospectus

Note:

By reproducing schedule C (Contents of the simplified prospectus) to the UCITS Directive (as amplified by Commission Recommendation (2004/384/EC)) and cross-referring to other relevant material, this annex details the facts or matters that must included in a simplified prospectus.

Brief presentation of the simplified prospectus scheme (in this Table referred to as "the scheme").

(1)

when the scheme was created and an indication of the EEA State where the scheme has been registered or incorporated;

(2)

in the case of a scheme having different investment compartments (sub-funds), the indication of this circumstance;

(3)

the name and contact details of the operator (when applicable);

(4)

the expected period of existence of the scheme (when applicable);

(5)

the name and contact details of the depositary;

(6)

the name and contact details of the auditors;

(7)

the name and brief details of the financial group (e.g. a bank) promoting the scheme;

Investment information

(8)

a short description of the scheme's objectives including:

(a)

a concise and appropriate description of the outcomes sought for any investment in the scheme;

(b)

a clear statement of any guarantees offered by third parties to protect investors and any restrictions on those guarantees;

6

(c)

a statement, where relevant, that the scheme is intended to track an index or indices, and sufficient information to enable investors both to identify the relevant index or indices and to understand the extent or degree of tracking pursued; and6

(d)

where the scheme is a qualifying money market fund, short-term money market fund or money market fund, a statement identifying it as such a fund and a statement that the scheme's investment objectives and policies will meet the conditions in the definition of qualifying money market fund, short-term money market fund or money market fund, as appropriate;6

Notes:

1.

Information on (8)(a) should include a statement as to whether there is any arrangement intended to result in a particular capital or income return from the units or any investment objective of giving protection to their capital value or income return and, if so, details of that arrangement or protection.

2.

The information disclosed under (8)(b) should include an explanation of what is to happen when an investment is encashed before the expiry of any related guarantee or protection.

(9)

the scheme's investment policy, including:

(a)

the main categories of eligible financial instruments which are the object of investment;

(b)

whether the scheme has a particular strategy in relation to any industrial, geographic or other market sectors or specific classes of assets, e.g. investments in emerging countries' financial instruments;

(c)

where relevant, a warning that, whilst the actual portfolio composition is required to comply with the broad legal and statutory rules and limits, risk-concentration may occur in regard of certain tighter asset classes, economic and geographic sectors;

(d)

if the scheme invests in bonds, an indication of whether they are corporate or government, their duration and the ratings requirements;

(e)

if the scheme uses financial derivative instruments, an indication of whether this is done in pursuit of the scheme's objectives, or for hedging purposes only;

(f)

whether the scheme's management style makes some reference to a benchmark; and in particular whether the scheme has an 'index tracking' objective, with an indication of the strategy to be pursued to achieve this; and

(g)

whether the scheme's management style is based on a tactical asset allocation with high frequency portfolio adjustments;

provided the information is material and relevant;

Note:

The information referred to in paragraphs (8) and (9) may be set out as a single item in the simplified prospectus (e.g. for the information on index tracking), provided that the information so combined does not lead to confusion of the objectives and policies of the scheme. The order of the information items may be adapted to reflect the scheme's specific investment objectives and policy.

(10)

a brief assessment of the scheme's risk profile by investment compartment or sub-fund, including:

(a)

overall structure of the information provided:

(i)

a statement to the effect that the value of investments may fall as well as rise and that investors may get back less than they put in;

(ii)

a statement that details of all the risks actually mentioned in the simplified prospectus may be found in the full prospectus;

(iii)

a description in words of any risk investors have to face in relation to their investment, but only where such risk is relevant and material, based on risk impact and probability; and

(b)

details regarding the description (in words) of the following risks:

(i)

specific risks:

The description referred to in paragraph (10)(a)(iii) should include a brief and understandable explanation of any specific risk arising from particular investment policies or strategies or associated with specific markets or assets relevant to the scheme such as:

A

the risk that the entire market of an asset class will decline thus affecting the prices and values of the assets (market risk);

B

the risk that an issuer or a counterparty will default (credit risk);

C

only where strictly relevant, the risk that a settlement in a transfer system does not take place as expected because a counterparty does not pay or deliver on time or as expected (settlement risk);

D

the risk that a position cannot be liquidated in a timely manner at a reasonable price (liquidity risk);

E

the risk that the investment's value will be affected by changes in exchange rates (exchange or currency risk);

F

only where strictly relevant, the risk of loss of assets held in custody that could result from the insolvency, negligence or fraudulent action of the custodian or of a subcustodian (custody risk); and

G

risks related to a concentration of assets or markets; and

(ii)

horizontal risk factors:

The description referred to in paragraph (10)(a)(iii) should also mention, where relevant and material, the following factors that may affect the product:

A

performance risk, including the variability of risk levels depending on individual fund selections, and the existence, absence of, or restrictions on any guarantees given by third parties;

B

risks to capital, including potential risk of erosion resulting from withdrawals/cancellations of units and distributions in excess of investment returns;

C

exposure to the performance of the provider/third-party guarantor, where investment in the product involves direct investment in the provider, rather than assets held by the provider;

D

inflexibility, both within the product (including early surrender risk) and constraints on switching to other providers;

E

inflation risk; and

F

lack of certainty that environmental factors, such as a tax regime, will persist;

(iii)

possible prioritisation of information disclosure:

In order to avoid conveying a misleading image of the relevant risks, the information items should be presented so as to prioritise, based on scale and materiality, the risks so as to better highlight the individual risk profile of the scheme;

(11)

the historical performance of the scheme (where applicable) and a warning that this is not an indicator of future performance (which may be either included in or attached to the simplified prospectus), including:

(a)

disclosure of past performance:

(i)

the scheme's past performance, as presented using a bar chart showing annual returns for the last ten full consecutive years. If the scheme has been in existence for fewer than ten years but at least for a period of one year, it is recommended that the annual returns, calculated net of tax and charges, be given for as many years as are available; and

(ii)

if a scheme is managed according to a benchmark or if its cost structure includes a performance fee depending on a benchmark, the information on the past performance of the scheme should include a comparison with the past performance of the benchmark according to which the scheme is managed or the performance fee is calculated;

Note:

Comparison should be achieved by representing the past performance of the benchmark and that of the scheme through the use of appropriate graphs to assist the reader to make the comparison.

(b)

disclosure of cumulative performance:

Disclosure should be made of the cumulative performance of the scheme over the ten year period referred to in paragraph (11)(a)(i). A comparison should also be made with the cumulative performance (where relevant) of a benchmark, when comparison to a benchmark is required in accordance with paragraph (11)(a)(ii);

Note:

Where the scheme has been in existence for fewer than ten years but at least for a period of one year, disclosure of the past cumulative performance should be made for as many years as are available.

(c)

exclusion of subscription and redemption fees, subject to appropriate disclosure:

A statement should be made that past performance of the scheme does not include the effect of subscription and redemption fees.

Notes:

1.

Where a comparison is being made with the cumulative performance of a benchmark as required by paragraph (11)(b), the comparison should be achieved by representing the past performance of the benchmark and that of the scheme through the use of appropriate graphs to assist the reader to make the comparison.

2.

The scheme's historical performance may be produced as a separate attachment to the simplified prospectus.

(12)

a profile of the typical investor the scheme is designed for;

Economic information

(13)

the scheme's applicable tax regime, including:

(a)

the tax regime applicable to the scheme in the UK; and

(b)

a statement which explains that the regime of taxation of the income or capital gains received by individual investors depends on the tax law applicable to the personal situation of each individual investor and/or to the place where the capital is invested and that if investors are unclear as to their fiscal position, they should seek professional advice or information from local organisations, where available;

Note:

This information should include a statement in relation to SDRT provision, explaining how the scheme may suffer stamp duty reserve tax as a result of transactions in units and whether the operator's policy is such that an SDRT provision may be imposed.

(14)

details of any entry and exit commissions relating to the scheme and details of the scheme's other possible expenses or fees, distinguishing between those to be paid by the Unitholder and those to be paid from the scheme's or the sub-fund's assets, including:

(a)

overall contents of the information provided:

(i)

disclosure of a total expense ratio (TER), calculated as indicated in Annex 1 to this chapter, except for a newly created fund where a TER cannot yet be calculated;

(ii)

on an ex ante basis, disclosure of the expected cost structure, that is an indication of all costs available according to the list set forth in Annex 1 to this chapter so as to provide investors, in so far as possible, with a reasonable estimate of expected costs;

(iii)

all entry and exit commissions and other expenses directly paid by the investor;

(iv)

an indication of all the other costs not included in the TER, including disclosure of transaction costs;

(v)

as an additional indicator of the importance of transaction costs, the portfolio turnover rate, calculated as shown in Annex 2 to this chapter; and

(vi)

an indication of the existence of fee-sharing agreements and soft commissions;

Note:

1.

In explaining the function of the TER to the reader, appropriate wording should be used in the simplified prospectus. For example, TER might be explained in the following terms: "The TER shows the annual operating expenses of the scheme - it does not include transaction expenses. All European funds highlight the TER to help you compare the annual operating expenses of different schemes."

2.

It is the FCA's understanding that the disclosure of a reasonable estimate of expected costs on an ex ante basis, as required by paragraph (14)(a)(ii), only applies to new schemes where a TER cannot yet be calculated. Where a TER can be calculated for a simplified prospectus scheme, there is no need to have to disclose a reasonable estimate of expected costs on an ex ante basis in accordance with paragraph (14)(a)(ii), in addition to the TER.

3.

Paragraph (14)(a)(vi)) should not be interpreted as a general validation of the compliance of any individual agreement or commission with the provisions of the Handbook . Taking into account current market practice, consideration should be given as to how far the scheme's existing fee-sharing agreements and comparable fee arrangements are for the exclusive benefit of the scheme.

4.

The simplified prospectus should make a reference to the full prospectus for detailed information on these kinds of arrangements, which should allow any investor to understand to whom expenses are to be paid and how possible conflicts of interest will be resolved in his/her best interest. The information provided in the simplified prospectus should remain concise in this respect.

5.

Details of entry and exit commissions relating to the scheme and details of the scheme's other possible expenses or fees, must be presented in the simplified prospectus in the form required by COBS 4.6.9 R (Charges and reduction in yield).4

(b)

information about 'fee sharing agreements' and 'soft commissions':

(i)

identification of 'fee-sharing agreements';

Note:

For the purposes of paragraph (14)(b)(i), fee-sharing agreements should be taken as those agreements whereby a party remunerated, either directly or indirectly, out of the assets of a scheme agrees to split its remuneration with another party and which result in that other party meeting expenses through this fee-sharing agreement that should normally be met, either directly or indirectly, out of the assets of the scheme.

(ii)

identification of soft commissions;

Note:

For the purposes of paragraph (14) (b) (ii), soft commissions should be regarded as any economic benefit, other than clearing and execution services, that an asset manager receives in connection with the scheme's payment of commissions on transactions that involve the scheme's portfolio securities. Soft commissions are typically obtained from, or through, the executing broker.

(c)

presentation of TER and portfolio turnover rate;

Note:

Both the TER and the portfolio turnover rate may be either included in or attached to the simplified prospectus in the same paper as information on past performance.

Commercial information

(15)

how to buy the units;

Note:

This should include an explanation of any relevant right to cancel or withdraw from the purchase, or, where it is the case, that such rights do not apply.

(16)

how to sell the units;

(17)

in the case of a scheme having different investment compartments (sub-funds), an explanation of how to switch from one investment compartment into another and any charges applicable in such cases;

(18)

when and how dividends on units or shares of the scheme (if applicable) are distributed;

(19)

when and where prices of units are published or made available;

Additional information

(20)

A statement that, on request, the full prospectus and the annual and half-yearly reports of the scheme may be obtained free of charge before the conclusion of the contract and afterwards, together with details of how they may be obtained or how a person may gain access to them;

(21)

the name and contact details of the FCA as being the competent authority which has authorised or registered the scheme;

(22)

details of a contact point (person or department, and, if appropriate the times of day etc.) where additional information may be obtained if needed;

(23)

the date of publication of the simplified prospectus;7

7

7Additional information for a feeder NURS: Objectives and investment policy

7(24)

(a)

where the scheme is a feeder NURS, in the description of objectives and investment policy, information about the proportion of the feeder NURS' assets which is invested in the qualifying master scheme; and

(b)

a description of the qualifying master scheme's objectives and investment policy, supplemented by:

(i)

an indication that the investment returns of the feeder NURS will be very similar to those of the qualifying master scheme; or

(ii)

an explanation of how and why the investment returns of the feeder NURS and qualifying master scheme may differ;

7Additional information for a feeder NURS: Risk profile

7(25)

(a)

a description and explanation of any material differences between the risk profile of the feeder NURS and that of the qualifying master scheme; and

(b)

details of:

(i)

any liquidity risk; and

(ii)

the relationship between purchase and redemption arrangements for the qualifying master scheme and feeder NURS;

7Additional information for a feeder NURS: Practical information

7(26)

where the scheme is a feeder NURS, information specific to the feeder NURS, including:

(a)

a statement that the following documents of the qualifying master scheme are available to Unitholders of the feeder NURS upon request, and details of how they may be obtained:

(i)

the prospectus;

(ii)

A

the key investor information document; or

B

where the authorised fund manager of the qualifying master scheme has a dispensation in the form of a general waiver by consent so that it may provide a key investor information document as modified by the general waiver direction, that document (a 'NURS KII document'); or

C

the key features document; or

D

the simplified prospectus; or

E

the nearest equivalent document for a qualifying master scheme that is a recognised scheme; and10

(iii)

the annual and half-yearly long reports (or nearest equivalent documents for a qualifying master scheme that is a recognised scheme); and

(iv)

[deleted]10

(b)

where the qualifying master scheme is not established in the United Kingdom, and where this may affect the feeder NURS' tax treatment, a statement to this effect;

7Feeder NURS: past performance presentations

7(27)

(a)

any past performance presentation in the document of the feeder NURS must be specific to the feeder NURS and must not reproduce the performance record of the qualifying master scheme;

(b)

the requirement in (a) does not apply where the feeder NURS:

(i)

shows the past performance of its qualifying master scheme as a benchmark; or

(ii)

was launched as a feeder NURS at a later date than the qualifying master scheme and where a simulated performance which is based on the past performance of the qualifying master scheme is shown for the years before the feeder NURS existed; or

(iii)

has a performance record from before the date on which it began to operate as a feeder, its own record being retained in the bar chart of the relevant years, with any material change labelled.

General Note:

In making the disclosures required by paragraphs (8) to (19) of this Table, the information must be presented in the form of questions and answers. This format is designed to assist the comprehension of the reader. This requirement will not apply in relation to a simplified prospectus that is to be used to market the units of the scheme in another EEA state or in relation to a simplified prospectus that is to be used to market the units of the scheme exclusively to persons who are not retail clients44.

Charges and reduction in yield1

COLL 4.6.9 R
  1. (1)

    14In disclosing the information required by paragraph 14 of COBS 4.6.8 G (Table: Contents of the simplified prospectus), a firm must include an effect of charges table and a reduction in yield figure prepared in accordance with the rules in sections 2 (Effect of charges table) and 3 (Reduction in yield) of COBS 13 Annex 3.

  2. (2)

    This rule does not apply to a simplified prospectus for units in a simplified prospectus scheme that will be marketed and sold in another EEA State or exclusively to those who are not retail clients.4

  3. (3)

    Note (5) to paragraph (14) of COBS 4.6.8 G, and COBS 4.6.9 R cease to have effect on 30 June 2011,5 unless remade.4

    5

Composite documents for several schemes, sub-funds and classes

COLL 4.6.10 G

3In the FCA's view, a firm may, for the purposes of the rules in COBS 14 requiring a firm to provide a key features document or a simplified prospectus, combine the required information on several simplified prospectus schemes,4 key features scheme44or EEAsimplified prospectus schemes or any combination of them into a composite document, provided the document continues to comply with the general requirements such as being clear. Similarly, the information on different sub-funds or classes within a scheme may be combined into a composite document or provided as separate documents. Where the latter approach is adopted, references in this section to "scheme" or "simplified prospectus scheme " should be taken as referring to the relevant sub-fund or class, as applicable.

Multiclass schemes: use of representative class

COLL 4.6.11 G

In the FCA's view, where a simplified prospectus scheme has more than one class of unit, the simplified prospectus may be prepared on a representative class basis, provided this is made clear and there is no material difference in the classes concerned. The same applies for an umbrella, as regards any sub-fund with more than one class of units.

COLL 4.6.12 R

4An authorised fund manager must ensure that its financial promotions which contain an invitation to purchase units in a UCITS scheme indicate that a simplified prospectus and a full prospectus exist, and the places where they may be obtained by the public or how the public may have access to them.

Use of the "Key facts" logo within a simplified prospectus

COLL 4.6.13 R

4A simplified prospectus may include the "Key facts" logo if:

  1. (1)

    the "Key facts" logo is situated in a prominent position at the top of the document; and

  2. (2)

    The document also contains the following statement in a prominent position:

    "The Financial Conduct Authority is an independent financial services regulator. It requires us, [provider name], to give you this important information to help you to decide whether our [product name] is right for you. You should read this document carefully so that you understand what you are buying, and then keep it safe for future reference".

COLL 4.7 Key investor information and marketing communications

Application

COLL 4.7.1 R

1This section applies to an ICVC, an authorised fund manager of an AUT, ACS2 or ICVC and any other director of an ICVC where, in each case, the AUT, ACS2 or ICVC is a UCITS scheme.

Key investor information

COLL 4.7.2 R
  1. (1)

    An authorised fund manager must, for each UCITS scheme which it manages, draw up a short document in English containing key investor information (a "key investor information document") for investors.

  2. (2)

    The words "key investor information" must be clearly stated in this document.

  3. (3)

    Key investor information must include appropriate information about the essential characteristics of the UCITS scheme which is to be provided to investors so that they are reasonably able to understand the nature and risks of the investment product that is being offered to them and, therefore, to take investment decisions on an informed basis.

  4. (4)

    Key investor information must provide information on the following essential elements in respect of the UCITS scheme:

    1. (a)

      identification of the scheme5 and that the FCA is the competent authority of the scheme4;

    2. (b)

      a short description of its investment objectives and investment policy;

    3. (c)

      past performance presentation or, where relevant, performance scenarios;

    4. (d)

      costs and associated charges; and

    5. (e)

      risk/reward profile of the investment, including appropriate guidance and warnings in relation to the risks associated with investments in the scheme.

  5. (5)

    The essential elements referred to in (4) must be comprehensible to the investor without any reference to other documents.

  6. (6)

    A key investor information document must clearly specify where and how to obtain additional information relating to the proposed investment, including but not limited to where and how the prospectus and the annual and half-yearly reports can be obtained on request and free of charge at any time, and the language in which that information is available to investors.

  7. (6A)

    4A key investor information document must also include:

    1. (a)

      a statement that the details of the up-to-date remuneration policy are available by means of a website, including, but not limited to, the following:

      1. (i)

        a description of how remuneration and benefits are calculated; and

      2. (ii)

        the identities of persons responsible for awarding the remuneration and benefits, including the composition of the remuneration committee, where such a committee exists; and

    2. (b)

      a reference to that website, and that a paper copy of the website information will be made available free of charge upon request.

  8. (7)

    Key investor information must be written in a concise manner and in non-technical language. It must be drawn up in a common format, allowing for comparison, and must be presented in a way that is likely to be understood by retail investors.

  9. (8)

    Key investor information must be used without alterations or supplements, except translation, in each EEA State where a UCITS marketing notification has been made so as to enable the marketing of the scheme'sunits in that State.

[Note: article 78 of the UCITS Directive]

Form and content of a key investor information document

COLL 4.7.3 G

The KII Regulation sets out the form and content of a key investor information document. This Regulation is directly applicable in the United Kingdom and accordingly its articles (but not the preceding recitals) are binding on all firms to which it applies. Under the Regulation an authorised fund manager must ensure that each key investor information document it produces for a UCITS scheme complies with the requirements of the Regulation. For ease of reference the Regulation is reproduced in COLL Appendix 1EU (The KII Regulation).

Translation of a key investor information document

COLL 4.7.4 G

While the original key investor information document is required by COLL 4.7.2 R to be drawn up in English, an authorised fund manager may prepare an accurate translation of it into any language for the purpose of marketing the units of the UCITS scheme in the United Kingdom. Any such translation should be prepared without alterations or supplements.

Pre-contractual information

COLL 4.7.5 R

The key investor information document must:

  1. (1)

    constitute pre-contractual information (see COBS 14.2.1A R (Provision of key investor information document));

  2. (2)

    be fair, clear and not misleading; and

  3. (3)

    be consistent with the relevant parts of the prospectus.

[Note: article 79(1) of the UCITS Directive]

COLL 4.7.6 G
  1. (1)

    Section 90ZA of the Act (Liability for key investor information) provides that a person will not incur civil liability solely on the basis of the key investor information document, including any translation of it, unless it is misleading, inaccurate or inconsistent with the relevant parts of the prospectus.

  2. (2)

    Article 20 of the KII Regulation prescribes the wording of a warning to investors that must be included in the "practical information" section of the key investor information document. It states that an authorised fund manager may be held liable solely on the basis of any statement contained in the document that is misleading, inaccurate or inconsistent with the relevant parts of the prospectus for the UCITS scheme.

Revision and filing of key investor information

COLL 4.7.7 R
  1. (1)

    An authorised fund manager must keep up to date the essential elements

    of the key investor information document for each UCITS scheme which it manages.

  2. (2)

    An authorised fund manager must file the key investor information document for each UCITS scheme which it manages, and any amendments thereto, with the FCA.

  3. (3)

    An authorised fund manager of a feeder UCITS must, in addition to (1) and (2), file the key investor information of its master UCITS, and any amendments thereto, with the FCA.

[Note: articles 63(3) and 82 of the UCITS Directive]

Synthetic risk and reward indicators and ongoing charges disclosures in the KII

COLL 4.7.8 G
  1. (1)

    Authorised fund managers are advised that CESR issued two separate guidelines regarding the methodology that should be used in calculating the synthetic risk and reward indicator and the ongoing charges figure, both of which must be disclosed in the key investor information document for each UCITS scheme which they manage.

  2. (2)

    In line with the KII Regulation, firms in producing their key investor information documents should take account of CESR's methodologies in calculating the figures for the synthetic risk and reward indicators and for ongoing charges to be disclosed in those documents. For ease of reference links to these guidelines are shown below, as follows:

    Methodology for the calculation of the synthetic risk and reward indicator in the KII (CESR/10-673)

    https://www.esma.europa.eu/sites/default/files/library/2015/11/10_673.pdf5

    Methodology for the calculation of the ongoing charges figure in the KII (CESR/10-674)

    https://www.esma.europa.eu/sites/default/files/library/2015/11/10_674.pdf5

  3. (3)

    Firms should note that these methodologies may in due course become directly applicable obligations in the light of the European Securities and Markets Authority's powers to develop implementing technical standards in this area.

COLL 4.7.9 G

Authorised fund managers of a UCITS scheme3 are further advised that CESR, and its successor body, ESMA, have3 issued guidelines in relation to several other matters concerning key investor information. These are:

CESR's guidelines on a common definition of European money market funds, which refer to matters that should be included in the key investor information for money market funds and short-term money market funds (CESR/10-049)

https://www.esma.europa.eu/sites/default/files/library/2015/11/10-049_cesr_guidelines_mmfs_with_disclaimer.pdf 5

that apply to all authorised funds in the UK.3

For UCITS only, ESMA's guidelines on ETFs and other UCITS issues, which refer to matters that should be included in the key investor information for certain types of UCITS (ESMA 2012/832)

https://www.esma.europa.eu/sites/default/files/library/2015/11/2012-832en_guidelines_on_etfs_and_other_ucits_issues.pdf 5

3 3

Marketing communications

COLL 4.7.10 G

COBS 4.13.2R(1)(b) and (c) (Marketing communications relating to UCITS schemes or EEA UCITS schemes) require an authorised fund manager to ensure that its marketing communications that contain an invitation to purchase units in a UCITS scheme or EEA UCITS scheme, indicate that a prospectus and key investor information exist, specifying where they may be obtained by the public or how the public may have access to them.

COLL 4.8 Notifications for UCITS master-feeder arrangements

Application

COLL 4.8.1 R

1This section applies to an ICVC, an authorised fund manager of an AUT, ACS2 or ICVC and any other director of an ICVC where, in each case, the AUT, ACS2 or ICVC is a UCITS scheme.

Purpose

COLL 4.8.2 G

The purpose of this section is to explain the type, form and timing of the notifications that are required before an existing UCITS scheme can begin to operate as a feeder UCITS for the first time, or an existing feeder UCITS can change to a different master UCITS. The process for making those changes is set out in COLL 11.2 (Approval of a feeder UCITS).

Information to be provided to Unitholders

COLL 4.8.3 R
  1. (1)

    An authorised fund manager of a UCITS scheme that has been approved by the FCA to operate as a feeder UCITS, including as a feeder UCITS of a different master UCITS, must provide the following information to its Unitholders at least 30 calendar days before the date when the feeder UCITS is to start to invest in units of the master UCITS or, if it has already invested in them, the date when its investment will exceed the limit applicable under COLL 5.2.11R (9) (Spread: general):

    1. (a)

      a statement that the FCA has approved the investment of the feeder UCITS in units of that master UCITS;

    2. (b)

      the key investor information of the feeder UCITS and the master UCITS;

    3. (c)

      the date when the feeder UCITS is to start to invest in units of the master UCITS or, if it has already invested in them, the date when its investment will exceed the limit applicable under COLL 5.2.11R (9);

    4. (d)

      a statement that the Unitholders have the right, for 30 calendar days from the moment this information is provided, to request the repurchase or redemption of their units without any charges other than those retained by the UCITS scheme to cover disinvestment costs.

  2. (2)

    Where a UCITS marketing notification has been made in relation to a feeder UCITS, the authorised fund manager of the feeder UCITS must ensure that an accurate translation of the information in (1) is provided to Unitholders in:

    1. (a)

      the official language, or one of the official languages, of the feeder UCITS'Host State; or

    2. (b)

      a language approved by the Host State regulator.

[Note: article 64 first and second paragraphs of the UCITS Directive]

Method of providing information

COLL 4.8.4 R

The authorised fund manager of the feeder UCITS must provide to Unitholders the information required under COLL 4.8.3 R in a durable medium.

[Note: article 29 of the UCITS implementing Directive No 2]

COLL 4 Annex 1 Total expense ratio calculation

1This Annex belongs to the rule on the contents of the simplified prospectus in this chapter.

Total expense ratio (TER)

1.

Definition of the TER

The total expense ratio (TER) of a simplified prospectus scheme is the ratio of the scheme's total operating costs to its average net assets calculated according to paragraph 3.

2.

Included/excluded costs

(a)

The total operating costs are all the expenses which come in deduction of a simplified prospectus scheme's assets. These costs are usually shown in a scheme's statement of operation for the relevant fiscal period. They are assessed on an 'all taxes included' basis, which means that the gross value of expenses should be used.

(b)

Total operating costs include any legitimate expenses of the simplified prospectus scheme, whatever their basis of calculation (e.g. flat-fee, asset-based, transaction-based - see note 2 above), such as:

-

management costs including performance fees;

-

administration costs;

-

fees linked to depositary duties;

-

audit fees;

-

payments to shareholder services providers including payments to the simplified prospectus scheme's transfer agent and payments to broker-dealers that are record owners of the scheme's shares and that provide sub-accounting services for the beneficial owners of the scheme's shares;

-

payments to lawyers;

-

any distribution or unit cancellation costs charged to the scheme;

-

registration fees, regulatory fees and similar charges;

-

any additional remuneration of the management company (or any other party) corresponding to certain fee-sharing agreements in accordance with paragraph 4 below.

(c)

The total operating costs do not include:

-

transaction costs which are costs incurred by a simplified prospectus scheme in connection with transactions on its portfolio. They include brokerage fees, taxes and linked charges and the market impact of the transaction taking into account the remuneration of the broker and the liquidity of the concerned assets;

-

interest on borrowing;

-

payments incurred because of financial derivative instruments;

-

entry/exit commissions or any other fees paid directly by the investor;

-

soft commissions in accordance with paragraph 4.

3.

Calculation method and disclosure

(a)

The TER is calculated at least once a year on an ex post basis, generally with reference to the fiscal year of the simplified prospectus scheme. For specific purposes it may also be calculated for other time periods. The simplified prospectus should in any case include a clear reference to an information source (e.g. the scheme's website) where the investor may obtain previous years'/periods' TER figures.

(b)

The average net assets must be calculated using figures that are based on the scheme's net assets at each calculation of the net asset value (NAV), e.g. daily NAVs where this is the normal frequency of NAV calculation as approved by the simplified prospectus scheme'scompetent authorities. Further circumstances or events which could lead to misleading figures have equally to be taken into consideration.

Tax relief should not be taken into account.

The calculation method of the TER must be validated by the simplified prospectus scheme's auditors and/or competent authorities.

4.

Fee-sharing agreements and soft commissions

It regularly results from fee-sharing agreements on expenses that are generally not included in the TER, that the management company or another party is actually meeting, in all or in part, operating costs that should normally be included in the TER. They should therefore be taken into account when calculating the TER, by adding to the total operating costs any remuneration of the management company (or another party) that derives from such fee-sharing agreements.

There is no need to take into account fee-sharing arrangements on expenses that are already in the scope of the TER. Soft commissions should also be left outside the scope of the TER.

Thus:

-

the remuneration of a management company through a fee-sharing agreement with a broker on transaction costs and with other fund management companies in the case of funds of funds (if this remuneration has not already been taken into account in the synthetic TER (see paragraph 6 below) or through other costs already charged to the fund and therefore directly included into the TER) should anyway be taken into account in the TER,

-

conversely, the remuneration of a management company through a fee-sharing agreement with a scheme (except when this remuneration falls under the scope of the specific fund-of-fund case covered in the previous indent) should not be taken into account.

5.

Performance fees:

Performance fees should be included in the TER and should also be disclosed separately as a percentage of the average net asset value.

6.

Simplified prospectus scheme investing in UCITS scheme or in non-UCITS scheme:

When a simplified prospectus scheme invests at least 10% of its net asset value in UCITS schemes or in schemes that are not UCITS schemes which publish a TER in accordance with this Annex, a synthetic TER corresponding to that investment should be disclosed.

The synthetic TER is equal to the ratio of:

-

the simplified prospectus scheme's total operating costs expressed by its TER and all the costs borne by the scheme through holdings in underlying funds (i.e. those expressed by the TER of the underlying funds weighted on the basis of the simplified prospectus scheme's investment proportion), plus the subscription and redemption fees of these underlying funds, divided by

-

the average net assets of the scheme.

As mentioned in the previous subparagraph, subscription fees and redemption fees of the underlying funds should be included in the TER. Subscription and redemption fees may not be charged when the underlying funds belong to the same group in accordance with Article 24 (3) of the UCITS Directive.

When any of the underlying schemes that are not UCITS schemes does not publish a TER in accordance with this Annex, disclosure of costs should be adapted in the following way:

-

the impossibility of calculating the synthetic TER for that fraction of the investment must be disclosed,

-

the maximum proportion of management fees charged to the underlying fund(s) must be disclosed in the simplified prospectus,

-

a synthetic figure of total expected costs must be disclosed, by calculating:

-

a truncated synthetic TER incorporating the TER of each of those underlying funds for which the TER is calculated according to this Annex, weighted on the basis of the simplified prospectus scheme's investment proportion, and

-

by adding, for each of the other underlying funds, the subscription and redemption fees plus the best available maximum estimate of TER-eligible costs. This should include the maximum management fee and the last available performance fee for that fund, weighted on the basis of the simplified prospectus scheme's investment proportion.

7.

Umbrella funds/multiclass funds:

In the case of umbrella funds, the TER should be calculated for each sub-fund. If, in the case of multiclass funds, the TER differs between different share classes, a separate TER should be calculated and disclosed for each share class. Furthermore, in keeping with the principle of equality among investors, where there are differences in fees and expenses across classes, these different fees/expenses should be disclosed separately in the simplified prospectus. An additional statement should indicate that the objective criteria (e.g. the amount of subscription), on which these differences are based, are available in the full prospectus.

Notes:

1.

This Annex sets out the requirements in relation to the TER. It reproduces, and adapts where appropriate for the purposes of the Simplified Prospectus provisions, Annex 1 to Commission Recommendation (2004/384/EC), amplifying Schedule C (Contents of the simplified prospectus) to the Management Company Directive (2004/107/EC).

2.

The non-exhaustive typology of calculation bases referred to in paragraph 2(b) below reflects the diversity of recent commercial practice across Member States (at the end of 2003) and should not be interpreted as a general validation of the compliance of any individual agreement or commission with the provisions of the Handbook.

COLL 4 Annex 2 Portfolio turnover calculation

1This Annex belongs to the rule on the contents of the simplified prospectus in this chapter.

Note:

This Annex sets out the requirements in relation to the portfolio turnover rate. It reproduces Annex II to Commission Recommendation (2004/384/EC), amplifying Schedule C (Contents of the simplified prospectus) to the Management Company Directive (2004/107/EC). This table also includes other material which the FCA considers should be included.

Portfolio turnover rate

A simplified prospectus scheme's or, where relevant, a compartment's (sub-fund's) portfolio turnover rate must be calculated in the following way:

Purchases of securities = X

Sales of securities = Y

Total 1 = total of transactions in securities = X + Y

Issues/Subscriptions of units of the scheme = S

Cancellations/Redemptions of units of the scheme = T

Total 2 = Total transactions in units of the scheme = S + T

Reference average of total net assets = M

Turnover = [(Total 1 - Total 2)/M]*100

The reference average of total net assets corresponds to the average of net asset values calculated with the same frequency as under Annex 1 to this chapter. The portfolio turnover rate disclosed should correspond to the period(s) for which a TER is disclosed. The simplified prospectus should in any case include a clear reference to an information source (e.g. the scheme's website) where the investor may obtain previous periods' performance.

Note

Firms should note that inclusion of the portfolio turnover rate in the simplified prospectus is mandatory. The rate must be calculated according to the formula which is prescribed above. However, because the rate includes both purchases and sales of securities, readers may find it difficult to understand. Consequently firms should consider including an explanation of the formula, such as:

COLL 4 Annex 2rev