Dual-pricing and dealing

Part

CIS Collective Investment Schemes

Chapter

Dual-pricing and dealing

Printed on: 14/11/2024

Rulebook at: 01/03/2006

CIS 15

Dual-pricing and dealing

CIS 15.1

Introduction

01/12/2004

Application

CIS 15.1.1

(1) This chapter applies in relation to dual-priced AUTs. Accordingly, in this chapter:

(a) references to "AUTs" and to "units" relate only to dual-priced AUTs and to units in them; and
(b) references to "manager" or "trustee" relate only to the manager or trustee of a dual-priced AUT.

(2) This section (CIS 15.1) applies to managers and trustees.
(3)

(a) If, and to the extent that, the authorised fund manager and the depositary so agree, income units and accumulation units are to be treated, for the purposes in (b) as belonging to the same class of units.
(b) The only purposes to which (a) can apply are:

(i) ascertaining the number of units respectively to be issued or cancelled in order for the authorised fund manager to comply with CIS 15.3.4 R (3) (Issue of units to meet authorised fund managers obligation to sell) and CIS 15.3.7 R (3) (Cancellation and payment for cancelled units); and
(ii) Compliance with requirements of this chapter relating to information to be given by the authorised fund manager to the depositary.

(c) Paragraphs (a) and (b) do not apply to the income units and accumulation units of an AUT unless the rights attached to those classes provide for their prices to be calculated by reference to undivided shares (howsoever called) in a manner similar to that resulting from CIS 2.6.1 R (Units and classes of units in AUTS).

01/12/2004

CIS 15.1.2

The persons to whom each respective rule and guidance in this chapter applies are stated either at the beginning of the rule or guidance or at the beginning of the section containing the rule or guidance.

01/12/2004

Purpose

CIS 15.1.3

(1) This chapter helps in achieving the regulatory objective of protecting consumers as envisaged by sections 2 and 5 of the Act. In accordance with Principle 6 (customers' interests), this chapter is intended to ensure the manager pays due regard to its customers' interests and treats them fairly.

(2) A manager is responsible for valuing the scheme property of the AUT it manages and for calculating the prices of units in the AUT. As well as arranging for the issue and the cancellation of units for the account of the AUT, the manager is permitted to sell and redeem units for its own account. The rules in this chapter are intended to ensure that the prices of units are properly related to the net value of the AUT and, in accordance with Principle 6 that the manager deals fairly with investors when they purchase or sell units. This chapter provides common standards for these purposes.

01/08/2002

Explanation

CIS 15.1.4

(1) Units of an AUT are issued or cancelled by the trustee on the manager's instructions. In the case of an issue, payment in cash of the issue price of the units or a transfer of assets of an equivalent value must be made to the trustee for the account of the manager concerned. Payment by the trustee for cancelled units is normally to be made in accordance with CIS 15.3.7 R (Cancellation of units).

(2) A manager may hold units for its own account (in its box): so a purchaser of units from the manager may receive units which have been issued to the manager or that have been redeemed (that is repurchased) by the manager from a previous unitholder. In addition to selling and redeeming units for its own account, the manager may arrange for the trustee to issue units direct to an investor or to cancel a unitholder's units.

(3) The manager must be prepared to redeem units of a unitholder who wishes to realise the value of them. The manager can then retain the units in its box or it can cancel them.

(4) The special provision about initial issues and sales, at the start of an AUT's life, are in CIS 15.2 separately from the rules about issues and sales in an ongoing AUT.

(5) Under this chapter the prices at which units may subsequently be issued or cancelled will be determined in accordance with CIS 15.3.6 R (Issue price) and CIS 15.3.8 R (Cancellation price) respectively and, in broad outline, will be calculated by valuing the scheme property attributable to the class of units in question on an issue basis or a cancellation basis (as appropriate) and dividing that value by the number of those units in issue. The valuation of the scheme property must be in accordance with CIS 15.8 (Valuation).

(6) The prices at which units may be sold or redeemed must be in the price bracket derived from CIS 15.4.4 R (Sale price parameters) and CIS 15.4.9 R (Redemption price parameters).

(7) CIS 15.6.3 R (SDRT provision) provides the manager with the power to require, for the benefit of the AUT, the payment or deduction of a provision for stamp duty reserve tax as an addition to or deduction from (but not part of) the price of the units.

(8) This CIS 15 is to be applied separately to each sub-fund of an umbrella scheme.

01/12/2004

CIS 15.2

Initial offers and unitisations

01/12/2004

Application

CIS 15.2.1

This section applies to managers, except CIS 15.2.7 R (Creation of units: unitisation) which applies to trustees.

01/12/2004

Purpose

CIS 15.2.2

This section helps to protect investors by rules intended to ensure the authorised fund receives the appropriate amounts for units issued as a result of an initial offer and that neither the authorised fund nor the investor will suffer any material loss as a result of fluctuations in the value of the scheme property for so long as units are available at the fixed price.

01/12/2004

Period of initial offer

CIS 15.2.3

(1) The period of the initial offer must not exceed 21 days and an initial offer must, subject to CIS 15.2.6 R (Compulsory termination of initial offer), be kept open for the period of the initial offer.

(2) Where an initial offer is of units of a sub-fund, CIS 15.2.4 R, CIS 15.2.5 R and CIS 15.2.6 R apply as if references in those rules to a unit were to a unit in that sub-fund.

01/12/2004

Issue of units: initial offer

CIS 15.2.4

(1) If units are issued by the trustee during the period of the initial offer, the units must be issued by the trustee under (2) or (4).

(2) If units are to be issued under this paragraph, the manager must instruct the trustee to issue units at the beginning of the first business day in the period.

(3) If units are to be issued under (4), at or before the beginning of the first business day in the period the manager must irrevocably choose, in respect of that initial offer, to proceed either under (4)(a) ("up and running") or under (4)(b) ("pay over and wait") and must notify its choice to the trustee.

(4) Where on any business day during the period the manager assumes any obligation to sell units, it must, depending on its choice under (3), either:

(a) instruct the trustee, at the beginning of the next business day, to issue units in such number at least as will enable the manager immediately to fulfil that obligation, whether from the units so issued or from other units; or

(b) proceed as follows:

(i) pay to the trustee (in any case where the purchaser has sent a remittance) on the day of receipt of the remittance or on the next business day, the total amount (or the total amount less the total of the manager's preliminary charge, if any, in respect of those units); and

(ii) as soon as the period of the initial offer has come to an end, instruct the trustee to issue units in the AUT in such number at least as will enable the manager to fulfil its obligations to sell units whether from the units so issued or from other units.

(5) The instructions given by the manager must state, in relation to each class of unit to be issued, the number to be issued, expressed either as a number of units or as an amount in value (or as a combination of the two).

(6) The trustee must, subject to CIS 15.3.9 R (Trustee's refusal to issue or cancel units), issue units on receipt of instructions by the manager given under this rule, and must not, during an initial offer, issue units otherwise.

01/12/2004

Initial price

CIS 15.2.5

(1) The initial price of a unit must be such amount as is agreed between the manager and the trustee to be the maximum amount (inclusive of any preliminary charge) which may be paid by a potential unitholder to the manager for units on an initial offer.

(2) The price for each unit issued during the period of the initial offer payable by the manager to the trustee must be the initial price of that unit less the amount of any preliminary charge made in respect of that unit.

(3) The amount which may be retained by the manager by way of preliminary charge must not exceed the amount stated in the original prospectus as the current charge.

(4) For the purpose of (2), a unit is treated as issued during the period of the initial offer if the manager had agreed to the sale of it or received an order for it to be sold before the close of the offer, and it was issued only afterwards.

(5) During the period of the initial offer, the manager must not cause units to be issued under CIS 15.5.3 R (Issues and cancellations through the manager) at a price which is greater than the initial price.

(6) The initial price of units must, subject to CIS 12.5.2 R (Base currency), be expressed in the base currency of the AUT: but, during the period of the initial offer, the manager may agree to sell units or cause units to be issued under CIS 15.5.3 R in any other currency.

(7) Nothing in this rule affects the power of the manager to require a payment of SDRT provision under CIS 15.6.3 R (SDRT provision).

(8) Where the initial offer is made in a country outside the United Kingdom, there may be added to the initial price of units offered in that country an amount sufficient to cover additional duty or taxation leviable in that country and the cost of the remittance of money to the United Kingdom.

01/12/2004

Compulsory termination of initial offer

CIS 15.2.6

(1) The period of the initial offer comes to an end immediately if:

(a) the manager does not carry out a valuation immediately if after having exercised reasonable care it determines that, if the current issue price of a unit were to be calculated by reference to an immediate valuation under CIS 15.8.4 R (Valuation), it would be likely to vary from the unit's initial price (excluding any preliminary charge by 2% or more of the initial price (excluding any preliminary charge); or

(b) the manager carries out a valuation immediately after it determines as mentioned in (a) that the valuation shows a variation of 2% or more.

(2) If the period of the initial offer comes to an end under (1), the manager must immediately refrain from:

(a) agreeing to sell units at the initial price; and

(b) instructing the trustee to issue units at the initial price, unless either to fulfil an existing obligation of the manager to sell units at the initial price or to fulfil an order for units at the initial price which the manager received before the initial offer came to an end.

(3) The current issue price of a unit for the purpose of (1) must be calculated on the basis that the number of units of each class in existence immediately before the valuation is the number for which the initial price has been paid, or for which assets have been transferred to the trustee in exchange (or treated for the purpose of the valuation as having been paid or exchanged), to the trustee before the valuation.

01/12/2004

Creation of units: unitisation

CIS 15.2.7

(1) The trustee has the power, not dependent on an instruction by the manager, to issue units, having regard to the terms of any unitisation to which it is a party. For this purpose, the trustee may issue any number of units in exchange for assets other than money but only if it has taken reasonable care to determine that to do so is not likely to result in any material prejudice to the interests of unitholders or potential unitholders.

(2) In exercise of the power, the trustee must only create units in favour of the persons entitled under the unitisation.

01/12/2004

CIS 15.3

Issues and cancellations

01/12/2004

Application

CIS 15.3.1

This section applies in relation to the issue and cancellation of units after the close of any initial offer of units at a fixed price. However, the following rules in this section also apply in relation to initial offers:

(1) CIS 15.3.5 R (3) , (4) and (5) (Issue by trustee), except to the extent that CIS 15.2.4 R (4)(b) applies;

(2) CIS 15.3.9 R (Trustee's refusal to issue or cancel units);

(3) CIS 15.3.10 R (Instructions or notifications between manager and trustee); and

(4) CIS 15.3.12 R (Modification to number of units issued or cancelled)

01/12/2004

Purpose

CIS 15.3.2

This section protects investors by means of rules intended to ensure the trustee receives or pays out the right amount when units are issued or cancelled. Accordingly, it lays down certain procedures for the issue and cancellation of units and sets out how, except for an initial offer, the prices of those units are to be calculated and paid.

01/12/2004

Box management errors

CIS 15.3.3

(1) This guidance (CIS 15.3.3 G) applies to managers.

(2) A manager is not permitted to sell or cancel units that it does not own. To do so would be in breach of CIS 15.3.4 R(3) (Issue of units: manager's instructions) or CIS 15.3.7 R(3) (Cancellation of units). Errors relating to the number of units issued or cancelled can be corrected to the extent permitted by CIS 15.3.12 R (Modification to number of units issued or cancelled).

(3) A manager's holding of units for its own account is commonly known as its "box" of units. Appendix CIS G (Correction of box management errors) contains further guidance on:

(a) controls relating to the management of the authorised fund manager's box of units.

(b) recording and reporting errors in calculating the number of units of each class in the box;

(d) the payment of compensation in relation to particular categories of error.

01/12/2004

Issue of units: manager's instructions

CIS 15.3.4

(1) This rule (CIS 15.3.4 R) applies to managers.

(2) Where the manager wishes new units to be issued, and complies with CIS 15.3.11 R (Timing of instructions to issue or cancel units), it may instruct the trustee to issue them. Any instructions given by the manager must state, in relation to each class of unit to be issued, the number to be issued, expressed either as a number of units or as an amount in value (or as a combination of the two).

(3) If, at any valuation point, the manager has any outstanding obligation to sell units of any class, then it must instruct the trustee, before the earlier of:

(a) the expiry of two hours since the valuation point; or

(b) the next valuation point;

to issue units of the class in such number as will at least enable the manager to fulfil that obligation immediately, (whether from the units so issued or from other units of that class which it owned immediately before the valuation point (or notified point if there is one)).

(4) If the manager wishes regularly to have a notified point, it may notify the trustee of its intention, indicating the period of time not exceeding two hours after the valuation point at which it wishes the notified point to occur; and any change in the period is ineffective unless agreed by the manager and the trustee.

01/11/2002

Issue by trustee

CIS 15.3.5

(1) This rule (CIS 15.3.5 R) applies to managers and trustees.

(2) The trustee must issue units on receipt of and in accordance with instructions given by the manager under CIS 15.3.4 R (Issue of units: managers instructions), and must not, after an initial offer, issue units otherwise, but this is subject to (3) and to CIS 15.3.9 R (Trustee's refusal to create or cancel units).

(3) The trustee may issue units in exchange for assets other than money, but its obligation to comply with an instruction to issue units in such a case arises only:

(a) if it has taken reasonable care to determine that (taking account of any payment that would have been required under CIS 15.6.3 R (SDRT provision) if the units had been issued for cash) the acquisition of the assets in exchange for the number of units to be issued is not likely to result in any material prejudice to the interests of unitholders or potential unitholders;

(b) in a case governed by CIS 11.5.2 R (5) (Schemes of arrangement: requirements) that the resolution concerned in relation to the AUT of which it is the trustee has been duly carried or is not required.

(4) On the issue of units, the manager must, by the close of business on the fourth business day, following the relevant instructions that were given by the manager:

(a) pay to the trustee in cash or in cleared funds the issue price of the units and any payment required under CIS 15.6.3 R (SDRT provision) to the extent that either remains unpaid; or

(b) for an exchange under (3), ensure transfer to the trustee of the assets to be taken in exchange.

(5) For an exchange under (3), the manager must ensure that the beneficial interest in the assets is transferred to the trustee with effect from the issue of the units, even if the legal ownership is not then transferred.

01/12/2004

Issue price

CIS 15.3.6

(1) This rule (CIS 15.3.6 R) applies to managers.

(2) The issue price of a unit is, subject to (3), calculated as follows:

(a) take the proportion, attributable to the units of the class in question, of the value on the issue basis of the scheme property by reference to the most recent valuation of the scheme property;

(b) compute the number of units of the relevant class in issue immediately before the valuation in (a);

(d) express the price in a form that is accurate to at least four significant figures.

(3) If a method of calculation other than that at (2) is used the manager must be sure that it is bound to produce the same result.

01/12/2004

Cancellation of units

CIS 15.3.7

(1) This rule (CIS 15.3.7 R) applies to managers and trustees.

(2) Where the manager wishes units to be cancelled, and complies with CIS 15.3.11 R (Timing of instructions to issue or cancel units), it may instruct the trustee to cancel them. Any instructions given by the manager must state, for each class of unit to be cancelled, the number to be cancelled, expressed either as a number of units or as an amount in value (or as a combination of the two).

(3) Where, at any moment of instruction, the manager has any outstanding obligation to sell units of a class, it may not instruct the trustee to cancel units of that class if or to the extent that its so doing would prevent it immediately from fulfilling any such obligation which had been assumed before the valuation point (or notified point if there is one).

(4) The trustee must (subject to CIS 15.3.9 R (Trustee's refusal to issue or cancel units)) cancel units on receipt of instructions given by the manager, and the trustee may not cancel units otherwise.

(5) Where instructions are given at a time which is less than two hours after the last valuation point, and the trustee has received but not yet executed instructions previously given under (4), the later instructions must enable the trustee to execute both or all sets of instructions simultaneously.

(6) On the cancellation of units and on delivery to the trustee of such evidence of the title to those units as it may reasonably require, the trustee must, within the period specified in (7), pay the cancellation price of the units less any deduction required under CIS 15.6.3 R (SDRT provision):

(a) (except where (b) applies), to, or to the order of, the unitholder or the manager as the case may be; or

(b) In the case of a relevant pension scheme, in accordance with the relevant provisions of the trust deed.

(7) The period expires at the close of business on the fourth business day following the cancellation of the units; but, where the manager has not ensured that the scheme property includes or will include sufficient cash in the appropriate currency (or a sufficient facility to borrow without infringing any restriction in CIS 5.15.3R (General power to borrow) or CIS 5.15.4R (Borrowing limits) within that period, the period is extended, for any relevant currency, until the shortage is rectified by the manager.

(8) Paragraph (6) does not apply where units are cancelled following a cancellation for property transferred or sold under CIS 15.5.4 R (In specie cancellation).

01/12/2004

Cancellation price

CIS 15.3.8

(1) This rule (CIS 15.3.8 R) applies to managers and trustees.

(2) The cancellation price payable for each unit by the trustee under CIS 15.3.7 R (Cancellation of units) is calculated by:

(a) Following steps (a) to (d) set out in CIS 15.3.6 R (2)(Issue price) or else following CIS 15.3.6 R (3); but

(b) for the purposes of CIS 15.3.6 R (2)(a), taking the value of the scheme property on the cancellation basis, not the issue basis.

01/12/2004

Trustee's refusal to issue or cancel units

CIS 15.3.9

(1) This rule (CIS 15.3.9 R) applies to trustees.

(2) If, on receiving instructions to issue or cancel units, the trustee is of the opinion that (in the case of an issue) the issue would be in breach of a restriction on issue relating to a class of limited issue units or that it is not in the interests of unitholders that:

(a) units should be issued; or

(b) units should be cancelled; or

the trustee must give notice to the manager that it refuses to issue or, as the case may be, cancel, all, or a specified number of, the units.

(3) On the giving of such a notice the trustee is relieved of the obligation to issue or cancel the number of units to which the notice relates.

01/11/2002

Instructions or notifications between manager and trustee

CIS 15.3.10

(1) This rule (CIS 15.3.10 R) applies to managers and trustees.

(2) Any instruction or notification given (or report supplied) under this chapter by the manager to the trustee:

(a) must be in writing or in such other form as enables the recipient to know or record the time of receipt and to preserve a legible copy of it;

(b) must be recorded by the manager, at the time when it is given or supplied.

(3) Instructions are given within any period under this chapter if they are received by the trustee within that period, and instructions received by the trustee after the expiry of any period are treated as given after that expiry.

(4) This rule also applies, with the necessary modifications, to any instruction or notification given by the trustee to the manager.

01/12/2004

Timing of instructions to issue or cancel units

CIS 15.3.11

(1) This rule (CIS 15.3.11 R) applies to managers and trustees.

(2) A manager may at any time give instructions to the trustee to issue or to cancel units.

(3) Where instructions are given at a time which is less than two hours after the last valuation point and before the next valuation point, the instructions must be given by reference to the price of the relevant class of units calculated (or being calculated) for the last valuation point.

(4) Where instructions are given at a time which is more than two hours after the last valuation point:

(a) the instructions must be given by reference to the price of the relevant class of units next to be calculated; and

(b) the trustee must issue or cancel the units only after the next valuation point has been reached.

01/12/2004

Modification to number of units issued or cancelled

CIS 15.3.12

(1) This rule (CIS 15.3.12 R) applies to managers and trustees.

(2) The number of units issued or cancelled may be modified by the manager changing an instruction to issue or cancel units which has been complied with provided that:

(a) the manager ensures that any appropriate consequential payment between the manager and the trustee is made; and

(b) the trustee agreed to the modification.

(3) The trustee must not agree to a modification under (2) unless it has taken reasonable care to determine:

(a) that the purpose of the modification is to rectify the consequences of an error in the instruction relating to the number of units held by the manager, or issued or cancelled in connection with the sale or redemption of units to or by, the manager; and

(b) that in view of the quality of the manager's control systems the circumstance that resulted in the error in question is an isolated one which is unlikely to recur.

(4) A modification under (2) is of no effect unless the corrected number of units is calculated by the end of the business day next following the valuation point for the issue or cancellation in question, or, if the trustee agrees, within the payment period applicable to that issue or cancellation under CIS 15.3.5 R (Issue by trustee) or CIS 15.3.7 R (Cancellation of units).

01/12/2004

CIS 15.4

Sale and redemption

01/12/2004

Application

CIS 15.4.1

(1) This section applies to managers. CIS 15.4.8 R (6) (Payment on redemption) and CIS 15.4.10 R (7)(c) (Redemption charge) also apply to trustees.

(2) This section applies to the sale and redemption of units after the close of any initial offer. However, CIS 15.4.3 R (Manager's obligation to sell) also applies to initial offers.

01/12/2004

Purpose

CIS 15.4.2

This section protects investors by means of rules intended to ensure the manager deals fairly with investors when they purchase or redeem units. Accordingly, this section (CIS 15.4) lays down the basic procedures for the sale and redemption of units and sets out how the resulting payments should be calculated and paid.

01/12/2004

Manager's obligation to sell

CIS 15.4.3

(1) The manager must at all times during the dealing day be willing to sell units and, subject to (2), must, at the request in writing of any person, agree to sell to that person units of at least one class or, in the case of an umbrella scheme, one class in respect of each of its sub-funds.

(2) The manager's obligation to sell units under (1) does not apply:

(a) if it has not received payment for the units of an amount complying with CIS 15.4.4 R (Sale price parameters) or, if the sale was at a forward price of a stated number of units, if it has not received payment of an amount estimated by it to be required; or

(b) if the number or value of the units sought to be purchased is less than any number or value stated in the prospectus as the minimum number or value of units, or units of the class concerned, that may be purchased or held; or

(c) (for a property scheme) if the manager believes, on reasonable grounds, that the number or value of units sought to be purchased would lead to any one person (or any one person and any other person who appears to the manager to be acting in concert with that person) holding more than any number or value stated in the prospectus as the maximum number or value to be purchased or held; or

(d) if it has reasonable grounds for refusing to sell units to the person concerned; or

(e) if the sale would be in breach of a provision in the trust deed of any of the types described in paragraphs (j) (Limited categories of unitholders), (m) (Relevant pension schemes) or (n) (Relevant charitable schemes) of CIS 2.2.7 G (Provisions that may be included in the trust deed).

(3) Paragraph (1) does not apply to units of any class:

(a) if no units of that class are in issue; or

(b) if the sale of units of that class:

(i) is prohibited by the rules in CIS 13 (Suspension and resumption of dealings); or

(ii) would breach a restriction on sale applicable to a class of limited issue units.

(4) Units must be sold in the base currency, unless the person concerned requests, and the manager agrees, that the units should be sold in another currency.

01/04/2004

Sale price parameters

CIS 15.4.4

(1) Except in the case of a large deal, the manager's price for the sale of units must not exceed the maximum sale price of the relevant class; that is a price fixed by the manager and notified or to be notified to the trustee in respect of the last valuation point (or, for a sale at a forward price, to be notified in respect of the next valuation point) and that maximum sale price itself must not exceed the total (expressed to at least four significant figures) of:

(a) the issue price; and

(b) the current preliminary charge.

(2) In the case of an initial offer, the manager's price for sale of units must not exceed the initial price.

(3) In the case of a large deal, the manager's price for sale may exceed the maximum sale price, but must not exceed the limit above which the maximum sale price could not have been fixed.

(4) The manager's price for sale must not be less than the minimum redemption price under CIS 15.4.9 R (Redemption price parameters).

01/12/2004

Preliminary charge

CIS 15.4.5

(1) The sale price must not include a preliminary charge unless the trust deed so permits.

(2) The preliminary charge must be expressed as a fixed amount or as a percentage of the issue price and must not exceed an amount or rate calculated in accordance with a statement in the prospectus as to the current charge.

(3) The manager must not make any charge or levy in connection with the sale of units except a preliminary charge in accordance with (1) and (2), but this does not restrict any requirement for a payment under CIS 15.6.3 R (SDRT provision).

(4) Paragraph (1) does not apply on an exchange of units within an umbrella scheme, but nothing in this rule prevents the manager from making a charge on such an exchange in accordance with CIS 15.4.12 R (Exchange of units in umbrella schemes)

01/12/2004

Increase in preliminary charge

CIS 15.4.6

The manager must not introduce a preliminary charge or increase (within the maximum stated in the trust deed) the current amount or rate of a preliminary charge payable under CIS 15.4.5 R unless:

(1) the new preliminary charge is within the maximum stated in the trust deed;

(2) the introduction or increase would not cause an infringement of CIS 15.4.11 R (Control over maximum charges on issue and redemption);

(3) not less than 90 days before the introduction or increase:

(a) the manager gave notice in writing of that introduction or increase and of the date of its commencement to the trustee and to all the persons who ought reasonably to be known to the manager to have made an arrangement for the purchase of units at regular intervals; and

(b) the manager has revised the prospectus to reflect the introduction or new current amount or rate of preliminary charge and the date of its commencement and has made the revised prospectus available.

01/12/2004

Manager's obligation to redeem

CIS 15.4.7

(1) The manager must at all times during the dealing day be willing to redeem units; and, accordingly, must at the request in writing of any unitholder agree to redeem units owned by that unitholder for the amount to be paid under CIS 15.4.8 R (Payment on redemption).

(2) Paragraph (1) does not apply:

(a) if the number or value of the units sought to be redeemed is:

(i) less than the entirety of the unitholders holding of units of the class concerned; and

(ii) less than any number or value stated in the prospectus as the minimum number or value that may be redeemed of units, or units of the class concerned; or

(b) if the number or value of the units sought to be redeemed would result in the unitholder holding less than any number or value stated in the prospectus as the minimum number of units, or units of the class concerned, that may be held; or

(c) if the manager ensures that the unitholder is able to sell his units on an investment exchange at a price not significantly different from the price at which they would have been redeemed; or

(d) where units are redeemed in return for property transferred or sold under CIS 15.5.4 R (In specie cancellation); or

(e) during the period of the initial offer; or

(f) if redemption of the units of the class concerned is prohibited by CIS 13 (Suspension and termination).

01/12/2004

Payment on redemption

CIS 15.4.8

(1) On agreeing to redeem units, the manager must, within the period specified in (3):

(a) (except where (b) applies) pay the unitholder the proceeds of redemption under (3) (less any deduction under (4) and, where applicable, the cost of remitting the sum abroad); or

(b) if a manager of a relevant pension scheme pay or arrange for the payment of the appropriate proceeds of redemption in compliance with the trust deed including, where applicable, any time limit therein for payment which is shorter than the period specified in (2).

(2) The proceeds of redemption paid under (1) must not be less than the manager's price for redemption of units under CIS 15.4.9 R (Redemption price parameters).

(3) The period expires at the close of business on the fourth business day following the later of:

(a) the valuation point immediately after the manager receives the request to redeem; or

(b) the time when the manager has all duly executed instruments and authorisations to effect (or enable the manager to effect) transfer of title to the units.

(4) There may be deducted from the proceeds of redemption to be paid under (1) any redemption charge permitted under CIS 15.4.10 R (Redemption charge) and any payment required under CIS 15.6.3 R (SDRT provision).

(5) Neither this rule CIS 15.4.8 R nor CIS 15.4.9 R (Redemption price parameters) applies where the manager is not redeeming units in accordance with this chapter, but is buying them as principal on an investment exchange in accordance with a power in the trust deed, which envisages that settlement will be in accordance with the rules of that exchange.

(6) Nothing in this rule require a manager or trustee to part with money for a cancellation or redemption of units where any money due on the earlier issue or sale of those has not been received by the person entitled to it under this chapter.

01/12/2004

Redemption price parameters

CIS 15.4.9

(1) Except in the case of a large deal, the manager's price for any redemption of units must not be less than the relevant minimum redemption price of a unit of the relevant class notified, or to be notified to the trustee, in respect of the last valuation point (or, for a redemption at a forward price, next to be notified in respect of the next valuation point).

(2) The minimum redemption price must not be less than the relevant cancellation price.

(3) In the case of a large deal, the manager's price for redemption may be less than the minimum redemption price, but must not be less than the relevant cancellation price.

(4) Subject to CIS 15.4.12 R (Exchange of units in umbrella schemes), in the case of an umbrella scheme, the maximum price at which units in one sub-fund may be acquired in exchange for units in another sub-fund must not exceed the relevant maximum sale price (less any preliminary charge) of the new units; and the minimum price at which the old units may be taken in exchange must not be less than the equivalent minimum redemption price.

(5) The manager's price for redemption of units must not exceed the relevant issue price under CIS 15.3.6 R (Issue price).

01/12/2004

Redemption charge

CIS 15.4.10

(1) If the trust deed so permits, the proceeds of redemption may in accordance with CIS 15.4.8 R (Payment on redemption) be arrived at after deduction of a redemption charge for the benefit of the manager.

(2)

(a) A redemption charge must not exceed the amount or rate of redemption charge stated in the prospectus current at the date when the relevant units were issued, other than to the manager, or sold; and

(b) the amount or rate referred to in (a) may be expressed as diminishing over the time during which the unitholder has held the units, but may not be expressed as liable to vary in any other respect.

(3) In (2) and (7), "issued" or "sold" in the case of units in an AUT which has absorbed the whole or part of the property of another scheme, is (when relevant) a reference to the issue or sale of units in that other scheme so far as it is practicable for the manager to ascertain the timing of that issue or sale as opposed to the issue of other units held by that holder.

(4) The manager must not introduce a redemption charge, or change the rate or method of calculation of a current redemption charge, in a manner which is adverse to unitholders, unless at least 90 days before the introduction or change, the manager:

(a) gave notice in writing of that introduction or change and of the date of its commencement, to the trustee and to all the persons who ought reasonably to be known to the manager to have made an arrangement for the purchase of units at regular intervals; and

(b) has revised the prospectus to reflect the introduction or change and the date of its commencement and has made the revised prospectus available.

(5) A modification of the rate or method which is adverse to redeeming unitholders (or unitholders cancelling units under CIS 15.5.3 R (Issues and cancellations through the manager)) must be limited so as to apply only to units which have been issued (whether at the request of the current unitholder or otherwise) after the date on which the modification takes effect.

(6) Where the trust deed, whenever executed, is modified so as to authorise a redemption charge, the modification must be expressed so as to apply only to units issued after the date on which the modification takes effect.

(7) In deciding whether and to what extent a charge is deductible for the purposes of this rule, units held by a unitholder are to be taken to be redeemed in the order in which they were issued (other than to the manager) or sold, unless:

(a) the manager has the unitholder's instructions to the contrary; or

(b) the manager selects as the units first to be redeemed units which are not subject to the deduction; or

(c) the manager and the trustee have agreed on another way of deciding the order in which units are redeemed which appears to them unlikely materially to prejudice the unitholder concerned.

(8) A manager must not make a redemption charge which might reasonably be regarded as restricting the right of redemption.

01/12/2004

Control over maximum charges on issue and redemption

CIS 15.4.11

(1) In the circumstance envisaged by (2), an introduction of, or change to, either of the charges permitted by CIS 15.4.5 R (Preliminary charge) or CIS 15.4.9 R (Redemption charge) must not take effect unless:

(a) the trust deed is modified under CIS 11.4.3 R (Amendment to trust deed: with meeting); or

(b) as the case may be, the prospectus is amended following approval of the introduction or change by an extraordinary resolution at a meeting of the unitholders called for the purpose.

(2) The circumstance mentioned in (1) is that (for any individual unit notionally issued and redeemed on the same day) the maximum amount or percentage of any preliminary charge and of any redemption charge would in aggregate exceed the maximum amount or percentage for the preliminary charge alone which is stated in the trust deed.

01/12/2004

Exchange of units in umbrella schemes

CIS 15.4.12

For an umbrella scheme, the manager must not make any charge on an exchange of units:

(1) if the exchange is the first to be made by the unitholder during any annual accounting period; or

(2) in the case of a second or subsequent exchange, unless:

(a) such a charge is authorised by the trust deed; and

(b) the amount of the charge is within the maximum for charging on such an exchange stated in the most recently published prospectus.

01/12/2004

Notification of prices to the trustee

CIS 15.4.13

(1) Immediately after completing a valuation under CIS 15.8, (whether regular or otherwise) the manager must notify the trustee of:

(a) the issue price;

(b) the cancellation price;

(d) the minimum redemption price; and

(e) (in the case of an umbrella scheme) the maximum sale price for units in any sub-fund on an exchange of units.

(2) The prices to be notified under (1) must:

(a) relate to units of each class in issue;

(b) be those relevant to deals based on prices determined at the valuation point; and

(3) Each notification under (1) must include a statement of the number of units of each class owned by the manager at the valuation point (or notified point if there is one).

(4) As soon as practicable after each notification under (1), the manager must notify the trustee of the transactions, or types of transaction, for which an SDRT provision is applied and the amounts or rates of those SDRT provisions.

01/12/2004

Publication of prices

CIS 15.4.14

(1) Where the manager holds itself out as willing:

(a) to sell or redeem units of any class; or

(b) to issue or cancel units of any class under CIS 15.5.3 R (Issues and cancellations through the manager);

it must make public the maximum sale and minimum redemption prices of those units and the current preliminary charge (if there is one) in an appropriate manner.

(2) The prices made public under (1) are to be the price or prices last notified to the trustee under CIS 15.4.13 R or, in the case of publication in a newspaper, last notified before the relevant newspaper ceased to accept material for publication in the relevant edition.

(3) [deleted]

(4) Where the manager holds itself out as willing to sell and redeem units (or, as the case may be, to issue or cancel units under CIS 15.5.3 R (Issues and cancellations through the manager) in any other EEA State, it must also comply with (1) in the manner provided for by the law of that EEA State.

(5) Paragraphs (1) to (4) do not apply to units in relation to which the manager is excused from dealing with the public.

(6) The manager must disclose the cancellation price, orally or in writing, to any person who requests it, whether in person at, or by any communication addressed to, the manager's principal place of business in the United Kingdom, and the manager must have arrangements to enable it accordingly to disclose, free of charge, at all times during the dealing day, the cancellation price last notified to the trustee.

01/04/2005

Manner of price publication

CIS 15.4.15

(1) In determining the appropriate manner of making sale and redemption prices and the current preliminary charge (if there is one) (in this provision referred to together as "prices") public under CIS 15.4.14 R (1), the manager should ensure that:

(a) a unitholder or potential unitholder can obtain the prices at a reasonable cost;

(b) prices are available at reasonable times;

(d) the manner of publication is disclosed in the prospectus; and

(e) prices are published in a consistent manner.

(2) Examples of what might be deemed appropriate include:

(a) publication in a national newspaper;

(b) supply through an advertised local rate or freephone telephone number;

(d) inclusion in a database of prices which is publicly available; or

(e) communication to all existing unitholders.

(3) The manager should make previous prices available to any unitholder or potential unitholder.

01/04/2005

CIS 15.5

Issues and cancellations through the manager and in specie cancellations

01/12/2004

Application

CIS 15.5.1

This section applies to managers and trustees.

01/12/2004

Purpose

CIS 15.5.2

(1) CIS 15.5.3 R ensures that investors are able, in certain circumstances, to require direct issues or cancellations of units by the trustee as an alternative to buying units from, or redeeming them with, the manager.

(2) CIS 15.5.4 R protects investors in an AUT by enabling the manager, subject to the conditions in that rule, to require a unitholder who wishes to redeem his units to take, instead of the usual proceeds of redemption, a transfer of assets of the AUT, or if the unitholder requires, to take the net proceeds of the sale of the assets.

01/12/2004

Issues and cancellations through the manager

CIS 15.5.3

(1) At the request of any person, the manager is obliged to instruct the trustee to issue units to that person where the manager would otherwise be obliged to sell them under CIS 15.4.3 R (Manager's obligation to sell).

(2) At the request of any unitholder, the manager is obliged to instruct the trustee to cancel units held by that unitholder where the manager would otherwise be obliged to redeem them under CIS 15.4.7 R (Manager's obligation to redeem).

(3) The price of a unit issued or cancelled under this rule must be the issue or cancellation price of a unit of the relevant class notified to the trustee at the next valuation point after the request referred to in (1) or (2), except for an issue to which CIS 15.2.5 R (Initial price) applies, when it must be the initial price.

(4)

(a) In the case of an issue, the manager may require to be paid in addition to the price under (3):

(i) For the account of the manager, any preliminary charge permitted under CIS 15.4.5 R;

(ii) For the account of the AUT, any SDRT provision required under CIS 15.6.3 R (SDRT provision).

(b) In the case of a cancellation, the manager may require to be deducted from the proceeds:

(i) For the account of the manager, any redemption charge permitted under CIS 15.4.10 R (Redemption charge);

(ii) for the account of the AUT any deduction required under CIS 15.6.3 R.

(5) The manager must pay the trustee in accordance with CIS 15.3.5 R (Issue by trustee), the issue price of any units issued under this rule CIS 15.5.3 R and any payment required under (4)(a)(ii), whether or not the manager has received payment from the investor. However, the manager may defer instructing the trustee to issue the units until full payment for them has been received.

(6) Nothing in this rule requires the trustee or the manager to part with money for a cancellation of units in the circumstances described in CIS 15.4.8 R (6) (Payment on redemption).

(7) Paragraph (1) does not apply if the issue would breach a restriction on issue applicable to a class of limited issue units.

01/11/2002

In specie cancellation

CIS 15.5.4

(1) This applies where a unitholder:

(a) requests redemption, or requests cancellation under CIS 15.5.3 R (Issues and cancellations through the manager), of units representing in value not less than 5% (or any lower percentage stated in the trust deed) of the value of the scheme property of the AUT; and

(b) the transfer to him of scheme property, instead of a payment under CIS 15.4.8 R (Payment on redemption) or CIS 15.5.3 R, is either:

(i) chosen by the manager by a notice of election on the unitholder; or

(ii) requested by the unitholder (in a case where he is permitted to do so under the trust deed) at the same time as his request at (a).

(2) A notice of election under paragraph (1)(b)(i) is invalid if served later than the close of business on the second business day following the day of receipt of the request in paragraph (1)(a);

(3) Where a notice of election is served under paragraph 1b(i), the unitholder may by a notice served on the manager require the manager, instead of arranging for a transfer of property, to arrange:

(a) for a sale of the property; and

(b) for payment to the unitholder of the net proceeds of sale.

(4) A manager must comply with the requirement of a valid notice served on it under (3). A notice under (3) is not valid if served later than the close of business on the fourth business day following the day of receipt of the notice under (1)(b)(i).

(5) Where there is to be transfer of property, whether by election or by request:

(a) the manager must forthwith notify the trustee that redemption (or cancellation under CIS 15.5.3 R) of the units is to be effected by transfer of property; and

(b) the trustee must, on receipt of such evidence of title as he may require:

(i) cancel the units; and

(ii) transfer to the unitholder his proportionate share of the due property.

(6) In (5) in this rule, "proportionate share" means:

(a) such part of each description of asset in the scheme property as is proportionate to or as nearly as practicable proportionate to the unitholder's share; or

(b) such selection from the scheme property as the trustee, after consultation with the manager, decides is reasonable;

having regard to the need to be fair both to the unitholder and to continuing unitholders.

(7) Where there is to be a sale of property under (3):

(a) the manager must immediately notify the trustee of that fact, and must arrange for a sale of the assets that would otherwise have been transferred under (5) (other than any assets which are in cash in the relevant currency for the purposes of the redemption); and

(b) the trustee must, on receipt of such evidence of title as it may require:

(i) cancel the units; and

(ii) pay to the unitholder the net proceeds of the sale and any relevant amount in cash.

(8) The scheme property to be transferred under (6), or the proceeds of sale to be paid under (7), are subject to the retention of scheme property (including cash) of a value or amount equivalent to any deductions permitted by CIS 15.5.3 R (Issues and cancellations through the manager) and which shall be accounted for in the manner provided by that rule. However, those deductions must not be taken into account in the value of units used for the purpose of (1)(a).

(9) This rule does not enable units in a relevant pension scheme other than in accordance with that scheme to be redeemed.

01/12/2004

CIS 15.6

SDRT provision

01/12/2004

Application

CIS 15.6.1

This section applies to managers.

01/12/2004

Purpose

CIS 15.6.2

(1) Certain transactions in units can result in stamp duty reserve tax being paid out of the scheme property of the AUT. Accordingly, with a view to protecting investors from a resulting diminution in the value of their units, and in accordance with Principle 6 (customers' interests) that a firm must pay due regard to the interests of its customers and treat them fairly, a manager is permitted to require the payment of an SDRT provision as an addition to the price of units when they are issued or sold, and as a deduction when they are cancelled (other than certain in specie cancellations) or redeemed.

(2) Any SDRT provision paid or received by deduction is for the account of the AUT. However, there are provisions to prevent an SDRT provision being imposed twice, both on the issue and subsequent sale of a unit, or on the redemption and subsequent cancellation of a unit.

(3) For the purpose of (1) and (2) it does not matter whether the cancellation is under CIS 15.3 (Issues and cancellations) or under CIS 15.5 (Issues and cancellations through the manager and in specie cancellations).

(4) CIS 15.6.3 R(3) (SDRT provision) requires an SDRT provision to be imposed only in a manner that, so far as practicable, is fair to all holders and potential holders. However there are exceptions to this in respect of large deals. In addition, certain transactions (such as transactions in units within an individual pension account) are specifically excluded from a charge to stamp duty reserve tax.

01/08/2002

SDRT provision

CIS 15.6.3

(1) The manager has the power to require either or both of:

(a) the payment of an SDRT provision in respect of the issue or the sale of units; and

(b) the deduction of an SDRT provision in respect of the redemption, or cancellation of units, other than a cancellation of units under CIS 15.5.4 R (In specie cancellation) resulting in a transfer of property that is such part of each description of asset in the scheme property as is proportionate to, or as nearly as practicable proportionate to, the unitholder's share in the scheme property.

(2) Any such payment or deduction becomes due at the same time as payment or transfer of property becomes due in respect of the issue, sale, redemption or cancellation.

(3) An SDRT provision may be imposed only in a manner that is, so far as practicable, fair to all unitholders and potential unitholders. However:

(a) the imposition of an SDRT provision (or a higher SDRT provision) in respect of large deals, in a manner described in the prospectus current at the time of the deal, or

(b) The exclusion from an SDRT provision of any transaction in units where the units are so held that their redemption or cancellation is specifically excluded from a charge to stamp duty reserve tax,

is not unfair

(4) If the manager receives an SDRT provision in respect of any unit sold or to be sold by it, it must immediately upon receipt of that SDRT provision pay it to the trustee to become part of the scheme property of the AUT, except to the extent that it has already been, or will be, paid by the manager to the trustee on the issue of that unit.

(5) If the manager deducts an SDRT provision from the proceeds of a unit it redeemed, it must immediately pay it to the trustee to become part of the scheme property except to the extent that it already has been, or will be, deducted from the payment by the trustee to the manager on cancellation of that unit.

01/12/2004

CIS 15.7

Forward and historic pricing

01/12/2004

Application

CIS 15.7.1

This section applies to managers.

01/12/2004

Purpose

CIS 15.7.2

This section protects investors by means of rules intended to prevent the sale and redemption of units at an historic price where this is liable to be unfair.

01/12/2004

CIS 15.7.3

(1) There are two ways in which a manager may sell or redeem units; these are at forward and historic prices. A forward price is one to be fixed at the next valuation point, while a historic price is one fixed on the basis of the last valuation.

(2) The two pricing systems have different characteristics. The investor knows that a forward deal will be priced at the next valuation point, but if he is investing a specified sum, he does not know until then how many units he will receive (or, if he is seeking to redeem, how much he will receive in cash). The investor knows, by contrast, that a historic deal may well represent a price which is outdated (though not by more than 2%), but is able to know, at the time of the deal, how much he must pay (or will receive) or the time of the valuation which will be relevant to that price.

(3) The rules generally express a preference for forward pricing in that there are numerous occasions when a price must be forward, whether or not the manager chooses to deal in that way. Issues or cancellations through the manager under CIS 15.5.3 R (Issues and cancellations through the manager) are always at a forward price.

(4) The diagram in CIS 15.7.6 G indicates the valuation point relevant for issues and cancellations and for sales and redemptions in the period between one valuation point and the next. In doing so, it takes account of CIS 15.7.5 R and of earlier rules in this chapter, including CIS 15.3.11 R (Timing of instructions to issue or cancel units).

01/12/2004

Forward and historic pricing

CIS 15.7.4

(1) For the sale and redemption of units, the manager may, subject to this rule (CIS 15.7.4 R), operate on the basis of forward or historic prices, but its power to choose, or its duty to operate on one basis only, is governed by CIS 15.7.5 R.

(2) If the prices for the sale and redemption of units related to any sub-fund of an umbrella scheme are on a forward basis, the prices for the sale and redemption of units related to each other sub-fund of that umbrella fund must also be on a forward basis; but this paragraph does not apply merely because of a requirement to price on a forward basis temporarily under Part 2 or Part 3 of CIS 15.7.5 R.

(3) Prices are to be on a forward basis only for the sale and redemption of units in an AUT which is a geared futures and options scheme, a property scheme, a warrant scheme or an umbrella scheme that includes a sub-fund which, if it were the subject of a separate authorisation order, would be an AUT of one of those categories.

(4) CIS 15.7.5 R does not apply during the period of initial offer at a fixed price. In CIS 15.7.5 R:

(a) "F Only" means that any price agreed on must be a forward price;

(b) "H" means that any price agreed on must be an historic price unless the manager is required by the table to deal at a forward price; and

(c) "General dealing" means "in relation to all sales and redemptions agreed on during the remainder of the relevant dealing period (except those that are agreed upon individual deviations)"; and an "individual deviation" is a decision, in relation to a particular transaction, covered by Part 3 of the Table.

01/12/2004

CIS 15.7.5

Explanatory table: Forward or historic pricing. This table belongs to CIS 15.7.4 R.

FORWARD OR HISTORIC PRICING

Part 1: General Dealing

Manager's choice. The prospectus must state the manager's choice for H or else for F Only.

If the manager's current choice under 1 is F Only, all its deals must be at a forward price.

A manager must not choose H if its normal arrangements for valuation envisage valuations more than one business day apart.

The remainder of this table applies to a manager with a current choice of H.

It may at any time elect for F Only in respect of the rest of the then current dealing period.

If the manager binds itself to switch from H to F Only at a certain point in each dealing period, this must be stated in the prospectus.

An election for (or switch to) F Only will last until the end of the dealing period and will then lapse.

For general dealing purposes, redemptions must be on the same basis as sales.

Part 2: General Dealing - Duty To Adopt Forward Pricing

Market movement: F Only applies once the manager having taken reasonable care decides that there would be a difference of 2% or more between the current value of the scheme property, if immediately valued, and its last calculated value (taking that as 100% for this purpose), but decides not to carry out an additional valuation under CIS 15.8.3 R (Valuation of scheme property).

10.

Valuation taking over 2 hours: F Only applies if a new price for units of each class has not been notified to the trustee after 2 hours.

11.

Paragraph (10) does not apply, if within two hours of the valuation point, the manager has notified the trustee of the basis (issue or cancellation) on which the next prices will be fixed, and of the spread (reckoned in percentage or money terms) between the maximum sale price and the minimum redemption price.

12.

F Only under (9) and (10) will start when the relevant moment arrives, will last until the end of the dealing period and will then lapse.

Part 3: Individual Deviations

13.

Paragraphs (14) to (17) apply to an individual transaction without affecting the general position arrived at under Parts 1 and 2.

14.

Request: F Only applies if the applicant for sale or redemption so requests.

15.

Large deals: F Only applies, if the manager so decides, for a large deal.

16.

Postal deals: F Only applies if the order or offer reaches the manager through the post or by any similar form of one-way communication.

17.

Issue or cancellation through the manager: F Only applies in the case of an issue or cancellation under CIS 15.5.3 R (Issues and cancellations through the manager).

Part 4: Notification to Trustee

18.

The manager must notify the trustee of the fact and time of any adoption of F only under (5) or Part 2.

01/12/2004

CIS 15.7.6

Explanatory diagram: Price at and after valuation point (This a diagram referred to in (CIS 15.7.3 G (4)))

01/12/2004

CIS 15.8

Valuation

01/12/2004

Application

CIS 15.8.1

This section applies to managers.

01/12/2004

Purpose

CIS 15.8.2

(1) This section protects investors by providing how the issue, cancellation, sale and redemption prices of units should be calculated. It also deals with the time and method of valuation of the scheme property, with the property that is to be included in a valuation and with the various tax and other adjustments that are either added to or deducted from such a valuation.
(2) CIS 15.8.4 R contains the detailed rules for valuation of the scheme property by the manager. The Table is subject to other rules (see CIS 5.2.5 R (Valuation) or CIS 5A.2.5 R (Valuation) and CIS 12.3 (Property schemes)).

01/11/2002

Frequency of valuation

CIS 15.8.3

(1) Regular valuation: for the purposes of determining in accordance with these rules the prices at which units of either class may be issued, cancelled, sold or redeemed, the manager must regularly carry out a valuation of the scheme property, which must be conducted in accordance with CIS 15.8.4 R.
(2) Additional valuation: the manager must inform the trustee if the manager determines to have an additional valuation point in respect of the AUT or any sub-fund, but this does not prevent the manager carrying out a valuation for another purpose that is not against the interests of the unitholders at a time that is not to be a valuation point.
(3) An additional valuation must be conducted in accordance with CIS 15.8.4 R.
(4) An additional valuation for the purposes of paragraph (9) (market movement) of CIS 15.7.5 R (forward and historic pricing) must be conducted:

(a) in accordance with CIS 15.8.4 R; but
(b) if it is impracticable to conduct a valuation in accordance with that table, the manager determines having taken reasonable care, and the trustee agrees, that an adequate valuation may be obtained in that way, may be conducted by reference to fluctuations in an index of property reflecting in the composition the scheme property the additional valuations may be conducted in that way.

01/12/2004

CIS 15.8.4

Table 15.8R Valuation

This table belongs to CIS 15.8.3 R

Section 1: When?

The manager must carry out valuations under CIS 15.8.3 R (1) (Regular valuations) regularly.

The frequency of regular valuation must be specified in the prospectus.

The frequency specified must be at least twice a calendar month.

If the frequency specified is the minimum frequency, the regular valuations must be two weeks or more apart.

Paragraphs 3. and 4. do not apply to warrant schemes or to a sub-fund which is permitted to invest entirely in warrants and there must be at least one valuation point for them on each business day.

Additional valuations under CIS 15.8.3 R (2) can take place at any time during a dealing day.

There is no need to value during the period of an initial offer (but see CIS 15.2.6 R (Compulsory termination of initial offer)).

Section 2: How?

The valuation takes place as at a valuation point fixed by the manager under Section 1.

The valuation is in base currency.

10.

Prices must be the most recent prices that can reasonably be obtained after the valuation point with a view to giving an accurate valuation as at that point.

11.

A valuation is in two parts, one on an issue basis and one on a cancellation basis.

12.

To convert to base currency the value of property which would otherwise be valued in another currency the manager must either:

(a)

Select a rate of exchange which represents the average of the highest and lowest rates quoted at the relevant time for conversion of that currency into base currency on the market on which the manager would normally deal if it wished to make such a conversion; or

(b)

Invite the trustee to agree that it is in the interests of unitholders to select a different rate, and, if the trustee so agrees, use that other rate.

Section 3: What?

13.

All scheme property is included, subject to adjustments arising from this section, and section 4, and this section is to be applied as at the valuation point.

14.

If the trustee has been instructed to issue or cancel units, assume (unless the contrary is shown) that:

(a)

it has done so;

(b)

it has paid or been paid for them; and

(c)

all consequential action required by these rules or by the trust deed has been taken.

15.

If the trustee has issued or cancelled units but consequential action as at 14(c) is outstanding, assume that it has been taken.

16.

If agreements for the unconditional sale or purchase of property are in existence but uncompleted, assume:

(a)

completion; and

(b)

that all consequential action required by their terms has been taken.

17.

Do not include in 16. any agreement which is:

(a)

A future or contract for differences which is not yet due to be performed; or

(b)

An unexpired option written or purchased for the AUT which has not yet been exercised.

18.

Include in 16 any agreement the existence of which is, or could reasonably be expected to be, known to the person valuing the property, assuming that all other persons in the manager's employment take all reasonable steps to inform it immediately of the making of any agreement.

Section 4: Tax and other adjustments

19.

Deduct an estimated amount for anticipated tax liabilities:

(a)

On unrealised capital gains where the liabilities have accrued and are payable out of the scheme property;

(b)

On realised capital gains in respect of previously completed and current accounting periods;

(c)

On income where the liabilities have accrued;

(d)

Including stamp duty reserve tax and any other fiscal charge not covered under this deduction.

20.

Deduct:

(a)

an estimated amount for any liabilities payable out of the scheme property and any tax on it (treating any periodic items as accruing from day to day);

(b)

the principal amount of any outstanding borrowings whenever payable;

(c)

any accrued but unpaid interest on borrowings;

(d)

the value of any option written (if the premium for writing the option has become part of the scheme property); and

(e)

in the case of a margined contract, any amount reasonably anticipated to be paid by way of variation margin (that is the difference in price between the last settlement price, whether or not variation margin was then payable, and the price of the contract at the valuation point).

21.

Add an estimated amount for accrued claims for repayment of taxation levied:

(a)

on capital (including capital gains); or

(b)

on income.

22.

Add:

(a)

any other credit due to be paid into the scheme property;

(b)

in the case of a margined contract, any amount reasonably anticipated to be received by way of variation margin (that is the difference in price between the last settlement price, whether or not variation margin was then receivable, and the price of the contract at the valuation point);

(c)

any SDRT provision anticipated to be received.

Section 5: Issue Basis

23.

The valuation of property for that part of the valuation which is on a creation basis is as follows:

Property

To be valued at

(a)

Cash

nominal value

(b)

Amounts held in current and deposit accounts

nominal value

(c)

Property which is not within (a), (b) or (d):

(i)

if units in an AUT to which CIS 15 (Dual-pricing and dealing) applies

except where Note 1 applies, the most recent maximum sale price less any expected discount (plus dealing costs) [Note 2]

(ii)

if shares in an ICVC or units of an AUT to which CIS 4 (Single-pricing and dealing) applies

the most recent price (plus dealing costs) [Notes 2 and 3]

(iii)

if any other investment

best available market dealing offer price on the most appropriate market in a standard size (plus dealing costs) [Note 2]

(iv)

if other property, or no price exists under (i), (ii) or (iii).

manager's reasonable estimate of a buyer's price (plus dealing costs) [Notes 2 and 4]

(d)

Property which is a derivative under the terms of which there may be liability to make, for the account of the AUT, further payments (other than charges, and whether or not secured by margin) when the transaction in the derivative falls to be completed or upon its closing out.

(i)

if a written option under rule 20(d)

to be deducted (see 20(d)) at a net valuation of premium. [Notes 5 and 8]

(ii)

if an off-exchange future

net value on closing out [Notes 6 and 8]

(iii)

if any other such property

net value of margin of closing out (whether as a positive or negative figure) [Notes 7 and 8]

Notes

1. The issue price is taken, instead of the maximum sale price if the manager of the AUT whose scheme property is being valued is also the manager, or an associate of the manager, of the AUT whose units form part of that property.

2. In this Section and in Section 6, "dealing costs" means any fiscal charges, commission or other charges payable in the event of the AUT carrying out the transaction in question, assuming that the commission and charges (other than fiscal charges) which would be payable by the AUT are the least that could reasonably be expected to be paid in order to carry out the transaction. On the issue basis, dealing costs exclude any preliminary charge on sale of units in an AUT.

3. Dealing costs under note 2. Include any dilution levy or SDRT provision which would be added in the event of a purchase by the AUT of the units in question but, if the manager of the AUT being valued, or an associate of the manager, is also the manager of the AUT or the ACD of the ICVC whose units are held by the AUT, must not include a preliminary charge which would be payable in the event of a purchase by the AUT of those units.

4 The buyer's price is the consideration which would be paid by a buyer for an immediate transfer or assignment (or, in Scotland, assignation) to him at arm's length.

5. Estimate the premium on writing an option of the same series on the best terms then available on the most appropriate market on which such options are traded; but deduct dealing costs.

6. Estimate the amount of profit or loss receivable or incurable by the AUT on closing out the contract. Deduct minimum dealing costs in the case of profit and add them in the case of loss.

7. Estimate the amount of margin (whether receivable or payable by the AUT on closing out the contract) on the best terms then available on the most appropriate market on which such contracts are traded. If that amount is receivable (for example, the contract is "in the money") deduct minimum dealing costs. If, however, that amount is payable (for example, the contract is "out of the money") then add minimum dealing costs to the margin and the value is that figure as a negative sum.

8. If the property is an OTC transaction in derivatives, use the relevant valuation referred to in CIS 5.2.25 R (OTC transactions in derivatives) or CIS 5A.6.6 R (OTC transactions in derivatives).

Section 6: Cancellation basis

24.

The valuation of property for that part of the valuation which is on a cancellation basis is as follows:

Property

To be valued at

(a)

Cash

nominal value

(b)

Amounts held in current deposit and loan accounts

nominal value

(c)

Property which is not within (a), (b) or (d):

(i)

if units in and AUT to which CIS 15 (Dual-pricing and dealing) applies

except where Note 1 applies, the most recent minimum redemption price (less dealing costs) [Note 2]

(ii)

if shares in an ICVC or units in an AUT to which CIS 4 (Single-pricing and dealing) applies

the most recent price (less dealing costs) [Notes 2 and 3]

(iii)

if any other investment

best available market dealing bid price on the most appropriate market in a standard size (less dealing costs) [Note 2]

(iv)

if other property, or no price exists under (i) or (ii)

manager's reasonable estimate of a seller's price (less dealing costs) [Notes 2 and 4]

(d)

Property of the type described in 23.:

(i)

if a written option under 20.(d)

to be deducted (see 20(d)) at a net valuation of premium [Notes 5 and 8]

(ii)

if an off-exchange future

net value of closing out [Note 8]

(iii)

if any other such property

net value of margin on closing out (whether as a positive or negative figure) [Notes 6 and 8]

Notes

1. The cancellation price is taken instead of the minimum redemption price if the property, if sold in one transaction, would amount to a large deal.

2. For dealing costs see note 2. In 23.. Dealing costs include any charge payable on redemption of units in an AUT (taking account of any expected discount), except where the manager of the AUT whose property is being valued is also the manager, or an associate of the manager, of the AUT whose units form part of that property.

3. Dealing costs under note 2. include any dilution levy or SDRT provision which would be deducted in the event of a sale by the AUT of the units in question and, except when the manager of the AUT being valued, or an associate of the manager, is also the manager of the AUT or the ACD of the ICVC whose units are held by the AUT, include any charge payable on the redemption of those units (taking account of any expected discount).

4. The seller's price is the consideration which would be received by a seller for an immediate transfer or assignment (or, in Scotland, assignation) from him at arm's length, less dealing costs.

5. Estimate the premium on writing an option of the same series on the best terms then available on the most appropriate market on which such options are traded, and add dealing costs.

6. For off-exchange futures, see note 6 in 23.

7. For net value of margin see note 7 in 23.

8. For over the counter transactions in derivatives, see note 8 in 23.

01/11/2002

Valuation under SETS

CIS 15.8.5

(1) CIS 15.8.4 R requires certain property to be valued at the best available market dealing offer or bid price (depending on whether the property is being valued on an issue or cancellation basis) for a deal of standard size on the most appropriate market, after taking account of dealing costs. If no price exists, the manager is required to use a reasonable estimate of a buying or selling price.
(2) Under the Stock Exchange Automated Quotation (SEAQ) System, the best market dealing offer or bid price in a particular security is generally understood to be the "touch" price. Under SETS, the London Stock Exchange publishes an "official best price" for each security, derived from the best prices displayed on the order book. It also publishes a "last trade price". The best bid price is the price of the highest buy order on the order book at any given time, and the best offer price is the price of the lowest sell order on the book. The last trade price for securities traded on SETS is published throughout the day. The "official closing price" is based on the last automatically executed trade taken from the order book.
(3) A manager may wish to use the last trade price as the basis for valuing SETS securities held as part of the scheme property. The last trade price will be a precise figure, not an estimate, and there will be complete certainty that the security in question has traded at that price. Alternatively, a manager may use the best bid and offer price displayed on the order book as the basis of valuation. Either method is acceptable, provided that the manager documents the choice of method and ensures that the procedures are applied consistently and fairly. The basis on which the scheme property is to be valued must be set out in the AUT's prospectus, as required by CIS 3.5.2 R(17) (Valuation of scheme property).
(4) Circumstances may arise where the chosen method may not provide a reliable basis for valuation. Guidance on such instances is provided at CIS 4.8.4 G(4) - (8). Additionally, where the manager imputes a 'spread' in order to arrive at an estimated buying or selling price - for example, in circumstances where there are no buy or sell orders on the order book, it should be able to justify any assumptions made.

01/04/2004