Income

Part

CIS Collective Investment Schemes

Chapter

Income

Printed on: 30/11/2024

Rulebook at: 06/04/2006

CIS 9

Income

CIS 9.1

Introduction

01/12/2004

Application

CIS 9.1.1

The rules and guidance in this chapter apply in accordance with CIS 9.1.3 R (Table of application).

01/12/2004

Purpose

CIS 9.1.2

This chapter assists in achieving the regulatory objective of protecting consumers, in particular by providing common standards relating to the periodic distribution of income (or, in the case of accumulation shares or accumulation units, the credit of the income to capital), and the calculation of the amount of that income.

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CIS 9.1.3

Table of application

This table belongs to CIS 9.1.1 R

Paragraph or section number

ICVC

ACD

Any other directors of the ICVC

Depositary of the ICVC

Manager

Trustee

9.1

9.2.1R-9.2.2R

9.2.3R(1)-(2)

9.2.3R(3)

9.2.3R(4)-(6)

9.2.4R

9.2.5R(1)

9.2.5R(2)

9.2.5R(3)

9.2.6R

9.2.7G

9.2.8R

9.2.9R(1)

9.2.9R(2)

9.2.10R

9.2.11R

Note: "X" means "applies".

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CIS 9.2

Requirements

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Accounting period

CIS 9.2.1

(1) An authorised fund must have an annual accounting period and a half-yearly accounting period, in accordance with (3) to (7).

(2) An authorised fund must also have an accounting reference date.

(3) The first annual accounting period must begin:

(a) where the authorised fund makes an initial offer, on the first day of the period of the initial offer; or

(b) in any other case, on the date on which an authorisation order for the authorised fund comes into effect;

and each subsequent period must begin immediately after the end of the one before.

(4) Each annual accounting period must end either at the end of the day determined under (5) or, if the authorised fund manager so decides, at the valuation point last preceding the end of that day.

(5) The day for the end of the annual accounting period referred to in (4) is:

(a) the next accounting reference date after the beginning of the period in question; or

(b) the next but one accounting reference date if:

(i) that period is the first period, or a period in the course of which a change in the accounting reference date takes place;

(ii) the next accounting reference date is less than six months after the beginning of the period; and

(iii) the authorised fund manager so determines after consulting the auditor.

(6) A half-yearly accounting period is a period beginning with the first day of an annual accounting period and ending on the day which is:

(a) six months before the next accounting reference date; or

(b) if the next accounting reference date is less than six months after that first day, six months before the next accounting reference date but one after that first day.

(7) If 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 (4), (5) and (6), that notice is to have effect provided it was given before the day on which the period would otherwise end.

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Annual income allocation date

CIS 9.2.2

(1) An authorised fund must have an annual income allocation date, which is the date in any year stated in the most recently published prospectus as the date on or before which, in respect of each annual accounting period, an allocation of income is to be made.

(2) The annual income allocation date must be a date within four calendar months after the relevant accounting reference date.

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Annual allocation of income

CIS 9.2.3

(1) As at the end of each annual accounting period:

(a) in the case of an ICVC, the directors must arrange for the depositary to transfer;

(b) in the case of an AUT the trustee must transfer;

the income property of the authorised fund to the distribution account.

(2) In the case of an ICVC, the directors, and in the case of an AUT, the trustee (after consulting the manager), need not comply with (1) if it appears to them, or it, that the average of the allocations of income to the holders (disregarding holders of bearer certificates and holders who are the authorised fund manager or the depositary or associates of either of them) would be less than £10 (or the equivalent amount in the base currency).

(3) Any income that, under (2), is not transferred to the distribution account must either:

(a) be carried forward to the next accounting period and be regarded as received at the start of that period; or

(b) be credited to capital, as determined by, in the case of an ICVC, its directors, or, in the case of an AUT, the manager.

(4) On or before each annual income allocation date the authorised fund manager must calculate the amount available for income allocation for the immediately preceding annual accounting period and must inform the depositary of that amount.

(5) The amount available for income allocations is calculated by:

(a) taking the aggregate of the income property received or receivable for the account of the authorised fund in respect of the period;

(b) for an ICVC:

(i) deducting the charges and expenses of the ICVC paid or payable out of income property in respect of the period; and

(ii) adding the ACD's best estimate of any relief from tax on those charges and expenses;

(i) deducting the aggregate of the manager's and trustee's remuneration and other payments properly paid or payable out of the income account in accordance with CIS 8.5.7 R (Allocation of payments to capital or income - for AUTs) in respect of the period; and

(ii) adding the manager's best estimate of any relief from tax on that remuneration and those other payments;

(d) making such other adjustments as the authorised fund manager considers appropriate (in the case of (i) and (ii) below, after consulting the auditors) in relation to:

(i) taxation;

(ii) the proportion of the prices received or paid for units that is related to income (taking account of any provisions in the instrument constituting the scheme relating to income equalisation);

(iii) potential income which is unlikely to be received until 12 months after the income allocation date;

(iv) income which should not be accounted for on an accrual basis because of lack of information about how it accrues;

(v) any transfer between income and capital account under CIS 8.3.5 R (Allocation payments to capital or income - for ICVCs) or CIS 8.5.7 R (Allocation of payments to capital or to income - for AUTs); and

(e) making any other adjustments (including, in the case of an ICVC, for amortisation under CIS 8.3.4 R (Set-up costs) or any reimbursement of set-up costs that the authorised fund manager considers appropriate after consulting the auditors.

(6) On or before the annual income allocation date, the authorised fund manager must allocate the available income to the units of each class in issue taking account of the provisions of CIS 9.2.4 R and CIS 9.2.5 R, and:

(a) for an ICVC, the provisions of its instrument of incorporation relating to the proportion of available income attributable to each class;

(b) for an AUT with both income and accumulation units in issue, the number of undivided shares represented by units of each class in accordance with CIS 2.6.1 R (Units and classes of units in AUTs).

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Annual allocation to accumulation shares or accumulation units

CIS 9.2.4

(1) The amount of income allocated to accumulation shares or accumulation units, with effect from the end of the annual accounting period, becomes part of the capital property and, if shares or units of any other class were in issue during that period, the interests of the holders of accumulation shares or accumulation units in that amount must be satisfied by an adjustment, as at the end of the period:

(a) for an ICVC, in the proportion of the value of the scheme property to which the price of an accumulation share of the relevant class is related;
(b) for an AUT, in the number of undivided shares in the scheme property which an accumulation unit represents.

(2) The adjustment under (1) must be such as will ensure that the price (for a dual-priced AUT, the issue price) of an accumulation share or accumulation unit (in the case of an ICVC, of the relevant class) remains unchanged despite the transfer of income to the capital property.

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Annual distribution to holders of income shares or income units

CIS 9.2.5

(1) Where the shares in issue in an ICVC are, or include, income shares, on or before each annual income allocation date, the ACD must give the depositary timely instructions sufficient to enable the depositary to distribute the income allocated to income shares among their holders and the ACD in proportion to the number of such shares held, or treated as held, by them respectively at the end of the relevant annual accounting period. The depositary must pay the distribution in accordance with the instructions.

(2) Where the units in issue of an AUT are, or include, income units, on or before each annual income allocation date, the trustee must distribute the income allocated to income units amongst their holders and the manager in proportion to the numbers of such units held, or treated as held, by them respectively at the end of the relevant annual accounting period.

(3) In calculating the amount to be distributed under (1) or (2), the ACD under (1), or the trustee under (2), must:

(a) deduct any amounts previously allocated by way of interim allocation of income for that annual accounting period; and

(b) deduct and carry forward in the income account such amount as is necessary to adjust that allocation of income to the nearest one-hundredth of a penny (or the equivalent amount in the base currency) per income share or income unit, or such lesser fraction as the directors of the ICVC, or the manager of the AUT, may determine.

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Interim allocations of income

CIS 9.2.6

(1) This rule (CIS 9.2.6 R) applies if at any time the most recently published prospectus:

(a) states that an allocation of income will be made before the annual income allocation date in any year in respect of an interim accounting period within the annual accounting period; and

(b) specifies a date as the interim income allocation date in relation to that interim accounting period.

(2) When (1) applies, CIS 9.2.3 R to CIS 9.2.5 R apply so as to secure the making of an interim allocation of income as if:

(a) the interim accounting period in question and all previous interim accounting periods in the same annual accounting period, taken together, were the annual accounting period;

(b) the interim income allocation date were the annual income allocation date; and

(c) in the case of an ICVC, the directors, and in the case of an AUT, the manager, were to treat as the available amount of income for the interim allocation a sum which may be less than, but does not exceed, the amount which, in the opinion of the ACD or the manager, would be available for allocation of income if the interim accounting period and all previous interim accounting periods in the same annual accounting period, taken together, were an annual accounting period.

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Income equalisation

CIS 9.2.7

The instrument constituting the scheme may provide that an allocation of income (whether annual or interim) be made in respect of each unit issued or sold during the accounting period in respect of which that income allocation is made, and may include income equalisation. An allocation of income should not include income equalisation except in accordance with any such provision.

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Tax certificates

CIS 9.2.8

The authorised fund manager must ensure that tax certificates for the income available for allocation are sent or given in accordance with the requirements for the time being of HM Revenue and Customs, but in any event not less than once for every annual accounting period.

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Unclaimed distributions

CIS 9.2.9

Any distribution payment that remains unclaimed must:

(1) for an ICVC, not be forfeited and revert to the ICVC, except in accordance with a provision of the instrument of incorporation for forfeiture and reversion to the ICVC of a distribution unclaimed during the period of six years (or such longer period as may be stated in the provision) after the distribution became due for payment; or

(2) for an AUT, after a period of six years from the date of payment, be transferred to and become part of the capital property and thenceforth neither the payee nor the holder nor any successor in title to it will have any right except as part of the capital property.

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Payment of distributions to joint holders (AUTs only)

CIS 9.2.10

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

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Income derived from stock lending (AUTs only)

CIS 9.2.11

(1) Where the scheme property of an AUT is used in stock lending transactions under CIS 5.4 or CIS 5A.14, any income derived from the transaction must form part of the scheme property, after deduction of:

(a) any income payable, immediately or otherwise, to the counterparty or for his account according to the transaction; and

(b) any reasonable expenses of the trustee or manager (or reasonable charges of any custodian) associated with the transaction.

01/11/2002