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COLL 6.8 Income: accounting, allocation and distribution

Application

COLL 6.8.1R
  1. (1)

    This section applies to an authorised fund manager.

  2. (2)

    COLL 6.8.4 R (1) (Unclaimed, de minimis and joint Unitholder distributions) also applies to the depositary of an authorised fund.

  3. (3)

    Except in the case of COLL 6.8.2 R (1) (Accounting periods) and COLL 6.8.3 R (1) (Income allocation and distribution), COLL 6.8 applies as if each sub-fund were a separate authorised fund.

Accounting periods

COLL 6.8.2R
  1. (1)

    An authorised fund must have:

    1. (a)

      an annual accounting period;3

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    2. (b)

      a half-yearly accounting period; and

    3. (c)

      an accounting reference date.

  2. (2)

    A half-yearly accounting period begins when3 an annual accounting period begins3 and ends on:

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    1. (a)

      the day which is six months before the last day of that annual accounting period; or

    2. (b)

      some other reasonable date as set out in the prospectus of the scheme.1

  3. (3)

    The first annual accounting period of a scheme must begin:

    1. (a)

      on the first day of any period of initial offer; or

    2. (b)

      in any other case, on the date of the relevant authorisation order;

    and in either case must end on the next accounting reference date, except where (4) applies.1

  4. (4)

    When the accounting reference date of a scheme falls less than six months after the beginning of the first annual accounting period, that period may be extended until the subsequent accounting reference date.1

  5. (5)

    Each annual accounting period of a scheme subsequent to the first period must begin immediately after the end of the previous period and must end on the next accounting reference date3, except where (6) or (6A)3 applies.1

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  6. (5A)

    3Each annual accounting period or half-yearly accounting period must end either at the end of the day determined under this rule or, if the authorised fund manager so decides, at the last valuation point on that day.

  7. (6)

    Following a revision to the prospectus of the scheme that includes a change to the accounting reference date, the annual accounting period may be shortened, or extended by up to six months, so as to end on the new accounting reference date.1

  8. (6A)

    3If the authorised fund manager notifies the depositary that a particular annual accounting period or half-yearly accounting period is to end on a specified day, which is not more than seven days after, and not more than seven days before, the day on which the period would otherwise end under this rule, that notice is to have effect provided it is given before the day on which the period would otherwise end.

  9. (7)

    The authorised fund manager must consult the depositary and the scheme's auditor before shortening or extending an accounting period in accordance with (4) or (6).1

COLL 6.8.2AG

1When the annual accounting period of a scheme is extended under COLL 6.8.2 R (4) or (6), resulting in a longer than usual period before the publication of reports to Unitholders, the authorised fund manager should make summary information about the investment activities of the scheme available to Unitholders during that period, in accordance with Principles 6 (Customers' interests) and 7 (Communications with clients).

Income allocation and distribution

COLL 6.8.2BR

5The allocation or distribution of the income of a UCITS scheme must be determined in accordance with its instrument constituting the fund7, its prospectus and the general law of the United Kingdom.

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[Note: article 86 of the UCITS Directive]

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COLL 6.8.3R

  1. (1)

    An authorised fund must have an annual income allocation date, which must be within four months of the end of the relevant annual accounting period.3

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  2. (2)

    An authorised fund may have interim income allocation dates and one or more interim accounting periods for each of those dates2 and, if it does, the interim income allocation date must be within four months of the end of the relevant interim accounting period(s).2

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  3. (3)

    An authorised fund must have a distribution account to which the amount of income allocated to classes of units that distribute income3 is transferred as3 at the end of the relevant accounting period.

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  4. (3A)

    3The amount available for income allocations must be calculated by:

    1. (a)

      taking the net revenue after taxation determined in accordance with the IMA SORP;

    2. (b)

      making any transfers, to the extent permitted by the prospectus, between the income account and the capital account in order that the amount available for income allocations is calculated as if the revenue from debt securities had been determined disregarding the effect of:

      1. (i)

        the change in the Retail Prices Index during the period, provided that the policy is to invest predominantly in index-linked securities and the transfer relates only to amounts in respect of index-linked gilt-edged securities; or

      2. (ii)

        amortisation, provided that the amount available for income allocations is not less than if such transfers had not been made;

    3. (c)

      making any other transfers between the income account and the capital account that are required in relation to:

      1. (i)

        stock dividends;

      2. (ii)

        income equalisation included in income allocations from other collective investment schemes;

      3. (iii)

        the allocation of payments in accordance with COLL 6.7.10 R (Allocation of payments to income or capital);

      4. (iv)

        taxation;

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      5. (v)

        the aggregate amount of income property included in units issued, cancelled and converted6 during the period; and4

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      6. (vi)

        amounts determined by the authorised fund manager to be the reportable income of other collective investment schemes.4

  5. (4)

    If income is allocated during an accounting period:

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    1. (a)

      with effect from the end of the relevant annual or interim accounting period3, the amount of income allocated to classes of units3 that accumulate income becomes part of the capital property and requires an adjustment to the proportion of the value of the scheme property to which they relate if other classes of units are in issue during the period;

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    2. (b)

      the adjustment in (a) must ensure the price of units remains unchanged despite the transfer of income; and

    3. (c)

      the amount of any interim allocation3 may not be more than the amount which, in the opinion of the authorised fund manager, would be available for allocation if the interim accounting period and all previous interim accounting periods in the same annual accounting period, taken together, were an annual accounting period.

      3

Allocation of income to different classes of unit

COLL 6.8.3AG

3In the case of sub-funds with more than one class of units in issue, the proportionate interests of each class of units in the amount available for income allocations should be determined in accordance with the instrument constituting the fund.7

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Unclaimed, de minimis and joint Unitholder distributions

COLL 6.8.4R
  1. (1)

    Any distribution remaining unclaimed after a period of six years, or such longer time specified by the prospectus, must become part of the capital property.

  2. (2)

    The authorised fund manager and the depositary may agree a de minimis amount in respect of which a distribution of income is not required, and how any such amounts are to be treated.

  3. (3)

    Distributions made to the first named joint Unitholder on the register will be as effective a discharge to the trustee and manager, as if the first named joint Unitholder had been a sole Unitholder.

Guidance: contents of the prospectus

COLL 6.8.5G

COLL 4.2.5 R (Table: contents of prospectus) requires the details of COLL 6.8.2 R, COLL 6.8.3 R (1) and COLL 6.8.3 R (2) and COLL 6.8.4 R (1) and COLL 6.8.4 R (2) to be contained in the prospectus as well as when, and how, the distribution will be paid (e.g. by cheque or BACS) and also how any unclaimed distributions are to be processed.