Investor Relations

Part

COLL Collective Investment Schemes

Chapter

Investor Relations

Printed on: 01/11/2024

Rulebook at: 06/02/2009

COLL 4

Investor Relations

COLL 4.1

Introduction

01/12/2004

Application

COLL 4.1.1

This chapter applies to:

(1) an authorised fund manager of an AUT or an ICVC;

(2) any other director of an ICVC;

(3) a depositary of an AUT or an ICVC; and

(4) an ICVC,

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

01/04/2004

Purpose

COLL 4.1.2

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

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

(2) be sent regular and relevant information about the authorised fund.

01/04/2004

COLL 4.2

Pre-sale notifications

01/12/2004

Application

COLL 4.2.1

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

01/04/2004

Publishing the prospectus

COLL 4.2.2

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

(2) The authorised fund manager must ensure that the prospectus:

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

(b) does not contain any provision which is unfairly prejudicial to the interests of unitholders generally or to the unitholders of any class of units;

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

01/04/2004

Availability of prospectus and long report

COLL 4.2.3

(1) An ICVC or the manager of an AUT must:

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

(b) file a copy of the scheme's original prospectus, together with all revisions thereto, with the FSA .

(2) An ICVC or the manager of an AUT which in either case is a UCITS scheme intending to market units in the territory of another EEA State must:

(a) ensure that the following documents are drawn up in the, or one of the, official languages of the EEA State or a language approved by the Host State regulator:

(i) the prospectus;

(ii) the instrument constituting the scheme; and

(iii) the latest annual and half-yearly long reports of the scheme;

(b) supply copies of the most recent version of the documents in (a) to any purchaser of units free of charge on request, and

(c) file copies of the most recent version of the documents in (a) with the competent authority of each such Host State, provided in the language, or one of the, languages of that State or a language approved by the competent authority of that State.

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

(a) the quantitative limits applying to the risk management of that scheme;

(b) the methods used in relation to (a); and

01/04/2004

False or misleading prospectus

COLL 4.2.4

(1) The authorised fund manager:

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

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

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

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

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

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

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

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

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

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

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

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

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

01/04/2004

Table: contents of the prospectus

COLL 4.2.5

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

Document status

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

Authorised fund

A description of the authorised fund including:

(a)

its name;

(b)

whether it is an ICVC or an AUT and that:

(i)

unitholders are not liable for the debts of the authorised fund;

(ii)

for an ICVC, a statement that the sub-funds of a scheme which is an umbrella are not 'ring fenced' and in the event of the umbrella being unable to meet liabilities attributable to any particular sub-fund out of the assets attributable to that sub-fund, that the remaining liabilities may have to be met out of the assets attributable to other sub-funds;

(ba)

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

(c)

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

(d)

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

(e)

its base currency;

(f)

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

(g)

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

Investment objectives and policy

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

(a)

the investment objectives, including its financial objectives;

(b)

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

(c)

an indication of any limitations on that investment policy;

(d)

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

(e)

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

(f)

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

(g)

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

(h)

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

(i)

where COLL 5.2.12 R (3) (Spread: government and public securities) applies, a prominent statement as to the fact that more than 35% of the scheme property is or may be invested in government and public securities and the names of the individual states, local authorities or public international bodies in whose securities the authorised fund may invest more than 35% of the scheme property;

(j)

the policy in relation to the exercise of borrowing powers by the authorised fund;

(k)

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

(l)

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

(m)

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

(n)

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

(o)

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

(p)

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

(q)

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

(qa)

where the authorised fund is a qualifying money market fund, a statement to that effectand a statement that the authorised fund's investment objectives and policies will meet the conditions specified in the definition of qualifying money market fund;

(r)

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

(s)

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

Reporting, distributions and accounting dates

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

(a)

the accounting and distribution dates;

(b)

procedures for:

(i)

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

(ii)

unclaimed distributions; and

(iii)

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

(c)

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

(d)

when the short report will be sent to unitholders in accordance with COLL 4.5.13 R (Provision of short report).

Characteristics of the units

Information as to:

(a)

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

(b)

where the instrument constituting the scheme provides for the issue of bearer certificates, that fact and what procedures will operate for them;

(c)

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

(d)

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

(e)

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

Authorised fund manager

The following particulars of the authorised fund manager:

(a)

its name;

(b)

the nature of its corporate form;

(c)

the date of its incorporation;

(d)

the address of its registered office;

(e)

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

(f)

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

(g)

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

(h)

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

Directors of an ICVC, other than the ACD

Other than for the ACD:

(a)

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

(b)

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

Depositary

The following particulars of the depositary:

(a)

its name;

(b)

the nature of its corporate form;

(c)

the address of its registered office;

(d)

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

(e)

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

(f)

a description of its principal business activity.

Investment adviser

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

(a)

its name; and

(b)

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

Auditor

The name of the auditor of the authorised fund.

Contracts and other relationships with parties

The following relevant details:

(a)

for an ICVC:

(i)

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

(ii)

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

(iii)

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

(iv)

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

(v)

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

(b)

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

(c)

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

(d)

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

(e)

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

(f)

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

(g)

what functions (if any) the authorised fund manager has delegated and to whom; and

(h)

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

Details of:

(a)

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

(b)

the registrar's name and address.

Payments out of scheme property

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

(a)

who the payment is made to;

(b)

what the payment is for;

(c)

the rate or amount where available;

(d)

how it will be calculated and accrued;

(e)

when it will be paid; and

(f)

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

Allocation of payments

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

(a)

that fact;

(b)

the policy for allocation of these payments; and

(c)

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

Moveable and immovable property (ICVC only)

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

Valuation and pricing of scheme property

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

(a)

either:

(i)

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

(ii)

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

(b)

details of:

(i)

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

(ii)

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

(iii)

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

(iv)

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

(v)

where relevant in the case of a dual-priced authorised fund, the authorised fund manager's policy in relation to large deals; and

(c)

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

Dealing

The following particulars:

(a)

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

(i)

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

(ii)

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

(b)

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

(c)

whether certificates will be issued in respect of registered units;

(d)

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

(e)

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

(f)

the circumstances and conditions for issuing units in an authorised fund which limit the issue of any class of units in accordance with COLL 6.2.21 (Limited issue);

(g)

the circumstances and procedures for the limitation or deferral of redemptions in accordance with COLL 6.2.16 (Limited redemption) or COLL 6.3.8 (Deferred redemption);

(h)

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

(i)

the length of the initial offer period;

(ii)

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

(iii)

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

(iv)

the circumstances when the initial offer will end;

(v)

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

(vi)

any other relevant details of the initial offer; and

(i)

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

Dilution

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

(a)

a statement explaining:

(i)

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

(ii)

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

(b)

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

(i)

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

(ii)

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

(iii)

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

SDRT provision

An explanation of:

(a)

what is meant by stamp duty reserve tax, SDRT provision and large deals; and

(b)

the authorised fund manager's policy on imposing an SDRT provision including its policy on large deals, and the occasions, and the likely frequency of the occasions, in which an SDRT provision may be imposed and the maximum rate of it (a usual rate may also be stated).

Forward and historic pricing

The authorised fund manager's normal basis of pricing under COLL 6.3.7 (Forward and historic pricing).

Preliminary charge

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

Redemption charge

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

(a)

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

(b)

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

(c)

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

Property Authorised Investment Funds

22A

For a property authorised investment fund, a statement that:

(1)

it is a property authorised investment fund;

(2)

no body corporate may seek to obtain or intentionally maintain a holding of more that10% of the net asset value of the fund; and

(3)

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

(a)

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

(b)

in the interests of the unitholders as a whole.

General information

Details of:

(a)

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

(b)

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

(c)

the extent to which and the circumstances in which:

(i)

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

(ii)

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

(d)

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

(e)

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

Information on the umbrella

In the case of a scheme which is an umbrella, the following information:

(a)

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

(b)

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

(c)

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

(d)

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

(e)

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

(f)

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

(g)

if there are units for less than two sub-funds in issue, the effect of COLL 3.2.7 R (Umbrella scheme with only one sub-fund).

Application of the prospectus contents to an umbrella

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

(a)

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

(b)

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

Marketing in another EEA state

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

(a)

what special arrangements have been made:

(i)

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

(ii)

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

(iii)

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

(iv)

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

(b)

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

(i)

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

(ii)

that a distribution has been declared;

(iii)

of the calling of a meeting of unitholders; and

(iv)

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

Investment in overseas property through an intermediate holding vehicle

26A

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

Additional information

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

(a)

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

(b)

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

(c)

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

(i)

details of that arrangement or protection;

(ii)

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

(iii)

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

(iv)

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

(d)

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

06/02/2009

Guidance on contents of the prospectus

COLL 4.2.6

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

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

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

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

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

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

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

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

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

06/10/2006

COLL 4.3

Approvals and notifications

01/12/2004

Application

COLL 4.3.1

This section applies to an authorised fund manager.

01/04/2004

Explanation

COLL 4.3.2

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

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

01/04/2004

Diagram: Change event

COLL 4.3.3

This diagram belongs to COLL 4.3.2 G.

01/04/2004

Fundamental change requiring prior approval by meeting

COLL 4.3.4

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

(2) A fundamental change is a change or event which:

(a) changes the purposes or nature of the scheme; or

(b) may materially prejudice a unitholder; or

(d) introduces any new type of payment out of scheme property.

01/04/2004

Guidance on fundamental changes

COLL 4.3.5

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

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

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

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

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

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

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

(f) the introduction of limited redemption arrangements.

01/04/2004

Significant change requiring pre-event notification

COLL 4.3.6

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

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

(a) affects a unitholder's ability to exercise his rights in relation to his investment; or

(b) would reasonably be expected to cause the unitholder to reconsider his participation in the scheme; or

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

(d) materially increases other types of payment out of scheme property.

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

01/04/2004

Guidance on significant changes

COLL 4.3.7

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

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

(a) a change in the method of price publication;

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

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

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

06/10/2006

Notifiable changes

COLL 4.3.8

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

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

01/04/2004

Guidance on notifiable changes

COLL 4.3.9

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

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

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

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

(d) the introduction of limited issue arrangements; or

(e) a change of the depositary or a change in the name of the authorised fund.

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

(4) An appropriate manner of notification could include:

(a) sending an immediate notification to the unitholder;

(b) publishing the information on a website; or

01/04/2004

COLL 4.4

Meetings of unitholders and service of notices

01/12/2004

Application

COLL 4.4.1

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

01/04/2004

General meetings

COLL 4.4.2

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

(2) The unitholders may request the convening of a general meeting by a requisition which must:

(a) state the objects of the meeting;

(b) be dated;

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

(d) be deposited at the head office of the ICVC or with the trustee.

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

01/04/2004

Class meetings

COLL 4.4.3

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

01/04/2004

Special meaning of unitholder in COLL 4.4

COLL 4.4.4

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

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

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

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

(b) in the case of bearer units, unitholders of bearer units which were in issue at the time applicable under (a).

01/04/2004

Notice of general meetings

COLL 4.4.5

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

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

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

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

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

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

01/04/2004

Quorum

COLL 4.4.6

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

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

(a) if convened on the requisition of unitholders, must be dissolved; and

(b) in any other case, must stand adjourned to:

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

(ii) a place to be appointed by the chairman.

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

01/04/2004

Resolutions

COLL 4.4.7

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

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

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

06/04/2006

Voting rights

COLL 4.4.8

(1) On a show of hands every unitholder who is present in person has one vote.

(2) On a poll:

(a) votes may be given either personally or by proxy or in another manner permitted by the instrument constituting the scheme;

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

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

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

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

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

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

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

06/04/2006

Right to demand a poll

COLL 4.4.9

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

(a) the chairman;

(b) at least two unitholders; or

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

01/04/2004

Proxies

COLL 4.4.10

(1) A unitholder may appoint another person to attend a general meeting and vote in his place.

(2) Unless the instrument constituting the scheme provides otherwise, a unitholder may appoint more than one proxy to attend on the same occasion but a proxy may vote only on a poll.

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

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

01/04/2004

Chairman, adjournment and minutes

COLL 4.4.11

(1) A meeting of unitholders must have a chairman, nominated:

(a) in the case of an AUT, by the trustee;

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

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

(3) The chairman:

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

(b) must, if so directed by the meeting;
adjourn the meeting from time to time and from place to place.

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

(5) The authorised fund manager must ensure that:

(a) minutes of all resolutions and proceedings at every meeting of unitholders are made and kept; and

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

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

06/04/2006

Notices to unitholders

COLL 4.4.12

(1) Where this sourcebook requires any notice or document to be served upon a unitholder, it is duly served :

(a) for units held by a registered unitholder, if it is:

(i) sent by post to or left at the unitholder's address as appearing in the register; or

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

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

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

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

06/04/2006

Other notices

COLL 4.4.13

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

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

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

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

(d) is reasonable in the context.

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

(b) In relation to an AUT, where transfer of title to units is to be effected on the authority of an electronic communication, the manager must take reasonable steps to ensure that any electronic communication purporting to be made by the unitholder or his agent is in fact made by that person.

06/02/2009

References to writing and electronic documents

COLL 4.4.14

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

01/04/2004

Service of notice Regulations

COLL 4.4.15

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

01/04/2004

COLL 4.5

Reports and accounts

01/12/2004

Application

COLL 4.5.1

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

01/04/2004

Explanation

COLL 4.5.2

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

(1) prepare a short report and a long report half-yearly and annually;

(2) send the short report to all unitholders; and

(3) make the long report available to unitholders on request.

01/04/2004

Preparation of long and short reports

COLL 4.5.3

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

(2) For a scheme which is an umbrella, the authorised fund manager must prepare a short report for each sub-fund but this is not necessary for the umbrella as a whole.

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

(4) [deleted]

06/10/2006

ICVC requirements

COLL 4.5.4

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

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

01/04/2004

Contents of a short report

COLL 4.5.5

(1) The short report for an authorised fund, or for a scheme which is an umbrella, its sub-fund, must contain for the relevant period:

(a) the name of the scheme or sub-fund, its stated investment objectives and policy for achieving those objectives, a brief assessment of its risk profile and the name and address of the authorised fund manager;

(b) a review of the scheme or sub-fund's investment activities and investment performance during the period;

(c) a performance record consistent with COLL 4.5.10R (1) (Comparative table) so as to enable a unitholder to put into context the results of the investment activities of the scheme during the period;

(d) sufficient information to enable unitholders to form a view on where the portfolio is invested at the end of the period and the extent to which that has changed over the period;

(e) any other significant information which would reasonably enable unitholders to make an informed judgement on the activities of the scheme or sub-fund during the period and the results of those activities at the end of the period; and

(f) a statement that the latest long report is available on request.

(2) The authorised fund manager must take reasonable steps to ensure that the short report is structured and written in such a way that it can be easily understood by the average investor.

(3) The short report must form a separate stand-alone document which must not include any extraneous material.

(4) The inclusion in a single document of the short reports of more than one of an authorised fund manager's schemes with the same accounting periods, or of more than one sub-fund in an umbrella, is not a contravention of (3) if each such report is discrete and easily identifiable.

(5) The authorised fund manager must ensure that the information given in the short report is consistent with the long report for the relevant accounting period prepared under COLL 4.5.7 R (Contents of the annual long report) or COLL 4.5.8 R(Contents of the half-yearly long report).

01/04/2004

Significant information to be contained in the short report

COLL 4.5.6

For the purpose of COLL 4.5.5R (1)(d) and COLL 4.5.5R (1)(e) the authorised fund manager should consider including the following as sufficient and significant information:

(1) particulars of any fundamental change to the scheme which required unitholder approval by meeting during the period;

(2) particulars of any significant change to the operation of the scheme requiring pre-notification, but this need only be given if the change impacts on the unitholders' ability to make an informed judgement on the activities of the scheme;

(3) particulars of any other developments in relation to the investment policy of the scheme or the instruments used by it during the period;

(4) the total expense ratio at the end of the period;

(5) particulars of any qualification of the reports of the auditor and depositary; and

(6) particulars of any income or distribution relating to the period.

01/04/2004

Contents of the annual long report

COLL 4.5.7

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

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

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

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

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

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

(a) for each sub-fund:

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

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

(iii) the comparative table in accordance with COLL 4.5.10 R;

(b) the aggregation of the accounts required by (a)(i) for each sub-fund;

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

(3) The directors of an ICVC or the manager of an AUT must ensure that the accounts referred to in (1)(a), (2)(a) and (4)(a) give a true and fair view of the net income and the net gains and the losses on the scheme property of the authorised fund, or, in the case of (2)(a) and (4)(a), the sub-fund, for the annual accounting period in question and the financial position of the authorised fund or sub-fund as at the end of that period.

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

(a) in relation to the sub-fund:

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

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

(iii) the comparative table in accordance with COLL 4.5.10 R;

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

06/04/2006

Contents of the half-yearly long report

COLL 4.5.8

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

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

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

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

(a) for each sub-fund:

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

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

(b) the aggregation of the accounts in (a)(i) for each sub-fund.

(3) The authorised fund manager of a scheme which is an umbrella may, in addition to complying with (2), prepare a further half-yearly long report for any one or more individual sub-funds of the scheme. Such reports must contain the full accounts and the report of the authorised fund manager that would be required by (1) if the sub-fund were a separate authorised fund.

06/04/2006

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

COLL 4.5.8A

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

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

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

06/04/2006

Authorised fund manager's report

COLL 4.5.9

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

(1) the names and addresses of :

(a) the authorised fund manager;

(b) the depositary;

(d) any investment adviser;

(e) the auditor; and

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

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

(3) a statement of the authorised status of the scheme;

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

(5) the investment objectives of the authorised fund;

(6) the policy for achieving those objectives;

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

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

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

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

(11) for a report on an umbrella prepared in accordance with COLL 4.5.7R (2) or COLL 4.5.8R (2) :

(a) (for an ICVC), a statement to the effect that, as a sub-fund is not a legal entity, if the assets attributable to any sub-fund were insufficient to meet the liabilities attributable to it, the shortfall might have to be met out of the assets attributable to one or more other sub-funds of the ICVC; and

(b) information required by (1) to (10) must be given for each sub-fund, if it would vary from that given in respect of the umbrella as a whole;

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

(13) for a report on an individual sub-fund of a scheme which is an umbrella prepared in accordance with COLL 4.5.7R (4) or COLL 4.5.8R (3):

(a) (for an ICVC) a statement corresponding to that required by (11)(a) making it clear that if the liability relates to another sub-fund of the umbrella, the shortfall or any part of it might have to be met out of the assets of the sub-fund to which the report relates; and

(b) a statement that the latest long report prepared for the umbrella as a whole is available on request.

06/04/2006

Comparative table

COLL 4.5.10

The comparative table required by COLL 4.5.7R (1)(c) (Contents of the annual long report) must set out:

(1) a performance record over the last five calendar years, or if the authorised fund has not been in existence during the whole of that period, over the whole period in which it has been in existence, showing:

(a) the highest and the lowest price of a unit of each class in issue during each of those years; and

(b) the net income distributed (or, for accumulation units, allocated) for a unit of each class in issue during each of those years, taking account of any sub-division or consolidation of units that occurred during that period;

(2) as at the end of each of the last three annual accounting periods (or all of the authorised fund's annual accounting periods, if less than three):

(a) the total net asset value of the scheme property at the end of each of those years;

(b) the net asset value per unit of each class; and

(c)

(i) (for a report of the directors of an ICVC) the number of units of each class in issue; or

(ii) (for a report of the manager of an AUT) the number of units of each class in existence or treated as in existence; and

(3) if, in the period covered by the table:

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

(b) there have been changes in the investment objectives of the authorised fund;

(c) an indication, related in the body of the table to the relevant year in the table, of the date of the event or change in the investment objectives and a brief description of its nature.

01/04/2004

Report of the depositary

COLL 4.5.11

(1) The depositary must make an annual report to unitholders which must be included in the annual report.

(2) The annual report must contain:

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

(b) a statement whether, in any material respect:

(i) the issue, sale, redemption and cancellation, and calculation of the price of the units and the application of the authorised fund's income, have not been carried out in accordance with the rules in this sourcebook and, where applicable, the OEIC Regulations and the instrument constituting the scheme; and

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

01/04/2004

Report of the auditor

COLL 4.5.12

The authorised fund manager must ensure that the report of the auditor to the unitholders must include a statement:

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

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

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

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

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

01/04/2004

Provision of short report

COLL 4.5.13

(1) The authorised fund manager must, within four months after the end of each annual accounting period and within two months after the end of each half-yearly accounting period, respectively provide free of charge the short report in accordance with (2).

(2) The authorised fund manager must send a copy of the report:

(a) to each unitholder (or to the first named of joint unitholders) entered in or entitled to be entered in the register at the close of business on the last day of the relevant accounting period;

(b) to each unitholder of bearer units at his request; and

(3) Unitholders in a scheme which is an umbrella must be provided with a report relating to the particular sub-fund in which they hold units subject to providing the long report on the umbrella on request in accordance with COLL 4.5.14R (2)(a).

06/04/2006

Publication and availability of annual and half-yearly long report

COLL 4.5.14

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

(2) The reports referred to in (1) must:

(a) be supplied free of charge to any person on request;

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

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

(d) be sent to the FSA .

06/04/2006

COLL 4.6

Simplified Prospectus provisions

01/11/2007

Application

COLL 4.6.1

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

01/11/2007

Production and publication of simplified prospectus

COLL 4.6.2

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

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

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

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

(b) does not omit any key item of information;

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

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

01/11/2007

Revision of simplified prospectus

COLL 4.6.3

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

01/11/2007

COLL 4.6.4

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

01/11/2007

Filing requirements

COLL 4.6.5

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

(1) the FSA ; and

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

01/11/2007

UK firms exercising passporting rights in respect of UCITS scheme

COLL 4.6.6

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

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

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

01/11/2007

COLL 4.6.7

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

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

01/11/2007

Contents of the simplified prospectus

COLL 4.6.8

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

Contents of simplified prospectus

Note:

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

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

(1)

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

(2)

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

(3)

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

(4)

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

(5)

the name and contact details of the depositary;

(6)

the name and contact details of the auditors;

(7)

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

Investment information

(8)

a short description of the scheme's objectives including:

(a)

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

(b)

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

(c)

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

Notes:

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

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

(9)

the scheme's investment policy, including:

(a)

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

(b)

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

(c)

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

(d)

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

(e)

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

(f)

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

(g)

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

provided the information is material and relevant;

Note:

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

(10)

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

(a)

overall structure of the information provided:

(i)

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

(ii)

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

(iii)

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

(b)

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

(i)

specific risks:

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

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

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

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

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

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

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

risks related to a concentration of assets or markets; and

(ii)

horizontal risk factors:

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

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

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

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

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

inflation risk; and

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

(iii)

possible prioritisation of information disclosure:

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

(11)

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

(a)

disclosure of past performance:

(i)

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

(ii)

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

Note:

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

(b)

disclosure of cumulative performance:

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

Note:

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

(c)

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

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

Notes:

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

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

(12)

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

Economic information

(13)

the scheme's applicable tax regime, including:

(a)

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

(b)

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

Note:

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

(14)

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

(a)

overall contents of the information provided:

(i)

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

(ii)

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

(iii)

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

(iv)

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

(v)

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

(vi)

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

Note:

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

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

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

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

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

(b)

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

(i)

identification of 'fee-sharing agreements';

Note:

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

(ii)

identification of soft commissions;

Note:

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

(c)

presentation of TER and portfolio turnover rate;

Note:

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

Commercial information

(15)

how to buy the units;

Note:

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

(16)

how to sell the units;

(17)

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

(18)

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

(19)

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

Additional information

(20)

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

(21)

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

(22)

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

(23)

the date of publication of the simplified prospectus.

General Note:

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

01/11/2007

Charges and reduction in yield

COLL 4.6.9

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

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

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

06/11/2008

Composite documents for several schemes, sub-funds and classes

COLL 4.6.10

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

01/11/2007

Multiclass schemes: use of representative class

COLL 4.6.11

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

01/11/2007

COLL 4.6.12

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

01/11/2007

Use of the "keyfacts" logo within a simplified prospectus

COLL 4.6.13

A simplified prospectus may include the "keyfacts" logo if:

(1) the "keyfacts" logo is situated in a prominent position at the top of the document; and

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

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

01/11/2007

COLL 4 Annex 1

Total expense ratio calculation

01/11/2007

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

Total expense ratio (TER)

Definition of the TER

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

Included/excluded costs

(a)

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

(b)

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

management costs including performance fees;

administration costs;

fees linked to depositary duties;

audit fees;

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

payments to lawyers;

any distribution or unit cancellation costs charged to the scheme;

registration fees, regulatory fees and similar charges;

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

(c)

The total operating costs do not include:

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

interest on borrowing;

payments incurred because of financial derivative instruments;

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

soft commissions in accordance with paragraph 4.

Calculation method and disclosure

(a)

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

(b)

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

Tax relief should not be taken into account.

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

Fee-sharing agreements and soft commissions

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

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

Thus:

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

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

Performance fees:

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

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

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

The synthetic TER is equal to the ratio of:

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

the average net assets of the scheme.

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

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

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

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

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

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

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

Umbrella funds/multiclass funds:

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

Notes:

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

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

01/11/2007

COLL 4 Annex 2

Portfolio turnover calculation

01/11/2007

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

Note:

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

Portfolio turnover rate

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

Purchases of securities = X

Sales of securities = Y

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

Issues/Subscriptions of units of the scheme = S

Cancellations/Redemptions of units of the scheme = T

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

Reference average of total net assets = M

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

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

Note

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

01/11/2007