Collective Investment Schemes Rules COLL

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					Collective Investment Schemes
          Rules 2010
            (COLL)


                     Version No. 2

                  Effective: 1 July 2011

             Includes amendments made by
Insurance Mediation Business (Consequential Amendments)
                       Rules 2011
                  QFCRA Rules 2011-4
Collective Investment Schemes Rules
2010
QFCRA Rules 2010-5

made under the
Financial Services Regulations




Contents
                                                                       Page



Chapter 1            General provisions                                   1

Part 1.1             Introductory                                         1
1.1.1      Name of rules                                                   1
1.1.2      Commencement                                                    1
1.1.3      Application of COLL                                             1
1.1.4      Glossary                                                        1




V2                      Collective Investment Schemes Rules 2010   contents 1

                                    Effective: 1/7/11
Contents
                                                                               Page
Part 1.2                Basic concepts and key terms—all schemes                 3
Division 1.2.A          Collective investment schemes                            3
1.2.1        What is a collective investment scheme?                             3
Division 1.2.B          Participants, scheme property, units and unitholders     4
1.2.2        Who is a participant?                                               4
1.2.3        What is the scheme property?                                        4
1.2.4        What is a unit?                                                     5
1.2.5        Who is the unitholder?                                              5
Division 1.2.C          QFC schemes and non-QFC schemes                          5
1.2.6        What is a QFC scheme?                                               5
1.2.7        What is a non-QFC scheme?                                           5
Division 1.2.D          Operator and independent entity                          6
1.2.8        Who is the operator?                                                6
1.2.9        Who is the independent entity?                                      6
Division 1.2.E          Open-ended and closed-ended schemes                      7
1.2.10       What are open-ended and closed-ended schemes?                       7
Division 1.2.F          Umbrella schemes                                         8
1.2.11       What are umbrella schemes and subschemes?                           8
Division 1.2.G          Qualified investors and retail customers                 8
1.2.12       Who is a qualified investor or retail customer?                     8

Part 1.3                Basic concepts and key terms—QFC
                        schemes                                                 10
Division 1.3.A          Types of QFC schemes generally                          10
1.3.1        QFC schemes are qualified investor or retail schemes               10
1.3.2        What is a QFC qualified investor scheme?                           10
1.3.3        What is a QFC retail scheme?                                       10
1.3.4        Types of QFC retail schemes                                        10
1.3.5        What is a QFC UCITS type scheme?                                   10
Division 1.3.B          Legal forms for QFC schemes                             11
1.3.6        Permitted legal forms for QFC schemes                              11

contents 2              Collective Investment Schemes Rules 2010                V2

                                    Effective: 1/7/11
                                                                             Contents
                                                                                   Page
1.3.7      What is a QFC collective investment company (or CIC)?                    11
1.3.8      What is a QFC collective investment partnership (or CIP)?                11
1.3.9      What is a QFC collective investment trust (or CIT)?                      12
1.3.10     What is another permitted form of QFC scheme?                            12
Division 1.3.C        Particular types of QFC schemes                               12
1.3.11     Islamic funds                                                            12
1.3.12     Money-market funds                                                       13
1.3.13     Other types of QFC schemes                                               14

Part 1.4              Basic concepts and key terms—non-QFC
                      schemes                                                       15
1.4.1      What is a non-QFC retail customer scheme?                                15
1.4.2      What is a non-QFC qualified client scheme?                               15


Chapter 2             Registration of schemes in QFC                                16
2.1.1      Schemes established in QFC must be registered                            16
2.1.2      Application for registration of scheme established in QFC                16
2.1.3      Decision on application for registration of scheme established in QFC    17


Chapter 3             Constitutional requirements—QFC schemes                       21

Part 3.1              Constitutional document—QFC schemes                           21
3.1.1      What is the constitutional document for a QFC scheme?                    21
3.1.2      Matters to be included in constitutional document—all QFC schemes        21
3.1.3      Relationship between constitutional document and these rules—all
           QFC schemes                                                              21
3.1.4      Constitutional document and checklist to be filed with registration
           application—all QFC schemes                                              22
3.1.5      Amendments of constitutional document—all QFC schemes                    23
3.1.6      Prohibited amendments of constitutional document—QFC UCITS type
           schemes                                                                  23




V2                       Collective Investment Schemes Rules 2010            contents 3

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Contents
                                                                                     Page
Part 3.2                Units—QFC schemes                                             24
Division 3.2.A          Units—all QFC schemes                                         24
3.2.1        Fractions of units—all QFC schemes                                       24
3.2.2        Smaller and larger denomination shares etc—CICs                          24
3.2.3        Bearer certificates may not be issued—all QFC schemes                    25
Division 3.2.B          Units—QFC qualified investor schemes                          25
3.2.4        Classes of units—QFC qualified investor schemes                          25
3.2.5        Limited issue—QFC qualified investor schemes                             26
Division 3.2.C          Units—QFC retail schemes                                      26
3.2.6        Classes of units—QFC retail schemes                                      26
3.2.7        Currency class units—QFC retail schemes                                  27
3.2.8        Rights of unit classes—QFC retail schemes                                27
3.2.9        Smaller and larger denomination shares—QFC retail schemes                29
3.2.10       Subdivision and consolidation of units—QFC retail schemes                29
3.2.11       Guarantees and capital protection—QFC retail schemes                     30
3.2.12       Switching rights—QFC retail umbrella schemes                             30


Chapter 4               The operator and independent entity—QFC
                        schemes                                                       32

Part 4.1                The operator—all QFC schemes                                  32
4.1.1        Requirements for operator—all QFC schemes                                32
4.1.2        Operator must comply with legal and regulatory requirements—all
             QFC schemes                                                              33
4.1.3        Functions of operator generally—all QFC schemes                          34
4.1.4        Duty of operator to report certain breaches of law—all QFC schemes       35
4.1.5        Particular duties of operator—all QFC schemes                            36
4.1.6        Register of unitholders—all QFC schemes                                  37
4.1.7        Records of operator—all QFC schemes                                      37
4.1.8        Operator must give information etc to independent entity and auditor—
             all QFC schemes                                                          39
4.1.9        Maintenance of capital notification—CIC’s                                39


contents 4             Collective Investment Schemes Rules 2010                       V2

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                                                                               Contents
                                                                                   Page
Part 4.2              The independent entity—QFC schemes                             40
Division 4.2.A        Independent entity generally—QFC schemes                       40
4.2.1      Requirements for independent entity—all QFC schemes                       40
4.2.2      Independent entity must comply with legal and regulatory
           requirements—all QFC schemes                                              43
4.2.3      Oversight functions of independent entity—all QFC schemes                 44
4.2.4      Duty of independent entity to report certain breaches of law etc—all
           QFC schemes                                                               46
4.2.5      Particular duties of independent entity—all QFC schemes                   47
4.2.6      Property safeguarding functions of independent entity—all QFC
           schemes                                                                   47
4.2.7      Records of independent entity—all QFC schemes                             49
4.2.8      Independent entity must give information etc to operator and auditor—
           all QFC schemes                                                           50
Division 4.2.B        Non-QFC independent entities—QFC schemes                       51
4.2.9      Non-QFC independent entities—criteria for Regulatory Authority action 51
4.2.10     Non-QFC independent entities—annual compliance certificate            51
4.2.11     Non-QFC independent entities—oversight of property safeguarding
           functions by operators                                                52
4.2.12     Non-QFC independent entities—removal by operators                     53
4.2.13     Non-QFC independent entities—removal by Regulatory Authority          54

Part 4.3              Operator and independent entity other
                      provisions—QFC schemes                                         57
4.3.1      Duties of officers etc of operator and independent entity—all QFC
           schemes                                                                   57
4.3.2      Provisions of ch 4 do not limit other functions                           57


Chapter 5             Investor relations—QFC schemes                                 59

Part 5.1              Transactions with affected persons—QFC
                      schemes                                                        59
5.1.1      Who is an affected person for a QFC scheme?                               59
5.1.2      Transactions with affected persons—general rule for all QFC schemes       60

V2                       Collective Investment Schemes Rules 2010              contents 5

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Contents
                                                                                        Page
5.1.3        Transactions with affected persons—prior notice to unitholders of QFC
             schemes                                                                     60
5.1.4        Transactions with affected persons—transactions involving 5% or
             more of QFC scheme’s net asset value                                        61
5.1.5        Transactions with affected persons—details required for QFC
             scheme’s annual reports                                                     61
5.1.6        Transactions with affected persons—additional restrictions for QFC
             retail schemes                                                              62

Part 5.2                Prospectus requirements—QFC schemes                              66
5.2.1        Prospectus to be drawn up—all QFC schemes                                   66
5.2.2        Prospectus etc to be made available—all QFC schemes                         66
5.2.3        General information requirements for prospectus—all QFC schemes             67
5.2.4        Other general requirements for prospectus—all QFC schemes                   67
5.2.5        Prospectus, checklist and any translations to be filed with registration
             application—all QFC schemes                                                 68
5.2.6        Revisions of prospectus etc—all QFC schemes                                 69

Part 5.3                Prospectus responsibility—QFC schemes                            72
5.3.1        Persons responsible for prospectus—all QFC schemes                          72
5.3.2        Responsibility for expert statements in prospectus—all QFC schemes          73
5.3.3        Liability for prospectus—all QFC schemes                                    73
5.3.4        Exceptions from liability for prospectus—all QFC schemes                    74

Part 5.4                Unitholder approvals and notice—QFC
                        schemes                                                          78
Division 5.4.A          Unitholder approvals and notice—QFC qualified
                        investor schemes                                                 78
5.4.1        Changes requiring unitholder approval or notice—QFC qualified
             investor schemes                                                            78
Division 5.4.B          Unitholder approvals and notice—QFC retail schemes               79
5.4.2        Fundamental changes requiring prior approval by unitholder meeting—
             QFC retail schemes                                                  79
5.4.3        Significant changes requiring pre-event notification—QFC retail
             schemes                                                             80


contents 6              Collective Investment Schemes Rules 2010                         V2

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                                                                            Contents
                                                                                Page
5.4.4      Notifiable changes—QFC retail schemes                                  81

Part 5.5             Unitholder meetings—QFC schemes                              83
Division 5.5.A       Unitholder meetings—QFC qualified investor schemes           83
5.5.1      Unitholder meetings—QFC qualified investor schemes                     83
Division 5.5.B       Unitholder meetings—QFC retail schemes                       83
5.5.2      Special meaning of unitholder in div 5.5.B—QFC retail schemes          83
5.5.3      Application of div 5.5.B to class meetings—QFC retail schemes          84
5.5.4      General meetings of unitholders—QFC retail schemes                     84
5.5.5      Notice of general meetings of unitholders—QFC retail schemes           85
5.5.6      Quorum for unitholder meetings—QFC retail schemes                      87
5.5.7      Resolutions at unitholder meetings—QFC retail schemes                  87
5.5.8      Voting rights at unitholder meetings—QFC retail schemes                88
5.5.9      Right to demand poll at unitholder meetings—QFC retail schemes         90
5.5.10     Proxies at unitholder meetings—QFC retail schemes                      90
5.5.11     Chair, adjournment and minutes of unitholder meetings—QFC retail
           schemes                                                                91

Part 5.6             Reports, accounts and auditors—QFC
                     schemes                                                      92
Division 5.6.A       Accounting standards and auditors—all QFC schemes            92
5.6.1      Accounting standards—all QFC schemes                                   92
5.6.2      Appointment and removal of auditors etc—all QFC schemes                93
Division 5.6.B       Reports and accounts—QFC qualified investor
                     schemes                                                      94
5.6.3      Reports and accounts generally—QFC qualified investor schemes          94
5.6.4      Contents of annual reports—QFC qualified investor schemes              95
5.6.5      Contents of half-yearly reports—QFC qualified investor schemes         97
5.6.6      Operator’s reports—QFC qualified investor schemes                      97
5.6.7      Independent entity’s reports—QFC qualified investor schemes            97
5.6.8      Auditor’s reports—QFC qualified investor schemes                       98
Division 5.6.C       Reports and accounts—QFC retail schemes                      99
5.6.9      Preparation of long and short reports—QFC retail schemes               99

V2                      Collective Investment Schemes Rules 2010            contents 7

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Contents
                                                                                    Page
5.6.10       Contents of short reports—QFC retail schemes                           100
5.6.11       Contents of annual long reports—QFC retail schemes                     102
5.6.12       Contents of half-yearly long reports—QFC retail schemes                104
5.6.13       Operator’s reports—QFC retail schemes                                  105
5.6.14       Comparative tables—QFC retail schemes                                  107
5.6.15       Independent entity’s reports—QFC retail schemes                        108
5.6.16       Auditor’s reports—QFC retail schemes                                   109
5.6.17       Provision of short reports—QFC retail schemes                          109
5.6.18       Publication and availability of annual and half-yearly long reports—
             QFC retail schemes                                                     110


Chapter 6               Investment and borrowing—QFC qualified
                        investor schemes                                            112

Part 6.1                Investment and borrowing generally—QFC
                        qualified investor schemes                                  112
6.1.1        General duties of operator in relation to investment and borrowing—
             QFC qualified investor schemes                                         112
6.1.2        Investment powers generally—QFC qualified investor schemes             113
6.1.3        Permissible investments generally—QFC qualified investor schemes       113
6.1.4        Spread of risk—QFC qualified investor schemes                          114
6.1.5        Investments by money-market funds—QFC qualified investor schemes       114
6.1.6        Application of ch 6 to umbrella schemes—QFC qualified investor
             schemes                                                                115

Part 6.2                Particular kinds of investments and
                        transactions—QFC qualified investor
                        schemes                                                     116
Division 6.2.A          Collective investments schemes—QFC qualified
                        investor schemes                                            116
6.2.1        Investments in schemes—QFC qualified investor schemes                  116




contents 8             Collective Investment Schemes Rules 2010                      V2

                                    Effective: 1/7/11
                                                                           Contents
                                                                                Page
Division 6.2.B       Derivatives, forward transactions and commodity
                     contracts—QFC qualified investor schemes                   117
6.2.2      Delivery of property under transactions in derivatives etc—QFC
           qualified investor schemes                                           117
6.2.3      Valuation of OTC derivatives—QFC qualified investor schemes          118
6.2.4      Cover for transactions in derivatives and forward transactions—QFC
           qualified investor schemes                                           118
6.2.5      Continuing nature of limits and requirements for derivatives and
           forward positions—QFC qualified investor schemes                     119
Division 6.2.C       Immovables—QFC qualified investor schemes                  119
6.2.6      Standing independent valuer—QFC qualified investor schemes           119
6.2.7      Requirements for making investments in immovables—QFC qualified
           investor schemes                                                     120
6.2.8      Investments in non-Qatari immovables through intermediate holding
           vehicles—QFC qualified investor schemes                              121
6.2.9      Additional requirements for immovables—QFC qualified investor
           schemes                                                              123
6.2.10     Reports on valuation of immovables before acquisition or disposal—
           QFC qualified investor schemes                                       124
6.2.11     Valuation of immovables part of scheme property—QFC qualified
           investor schemes                                                     125
6.2.12     Annual and other periodic valuation reports—QFC qualified investor
           schemes                                                              127
6.2.13     Basis of valuation by standing independent valuer—QFC qualified
           investor schemes                                                     128
6.2.14     Appointment of standing independent valuer—QFC qualified investor
           schemes                                                              129
6.2.15     Standing independent valuer not to deal in immovables etc—QFC
           qualified investor schemes                                           131
6.2.16     Removal of standing independent valuer—QFC qualified investor
           schemes                                                              131

Part 6.3             Stock lending and repos—QFC qualified
                     investor schemes                                           133
6.3.1      Permitted stock lending and repos—QFC qualified investor schemes     133




V2                       Collective Investment Schemes Rules 2010          contents 9

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Contents
                                                                                    Page
Part 6.4                 Borrowing—QFC qualified investor schemes 134
6.4.1         Borrowing—QFC qualified investor schemes                              134


Chapter 7                Investment and borrowing—QFC retail
                         schemes                                                    136

Part 7.1                 Investment and borrowing introduction—QFC
                         retail schemes                            136
7.1.1         Objects of ch 7—QFC retail schemes                                    136
7.1.2         General duties of operator in relation to investment and borrowing—
              QFC retail schemes                                                    137
7.1.3         Treatment of obligations under ch 7—QFC retail schemes                139
7.1.4         Valuation for ch 7—QFC retail schemes                                 139
7.1.5         What is an approved money-market instrument?                          140
7.1.6         What is a transferable security?                                      141
7.1.7         What is an eligible market?                                           143
7.1.8         What is an approved derivative?                                       144
7.1.9         What is an approved security?                                         144
7.1.10        Application of ch 7 to umbrella schemes—QFC retail schemes            144

Part 7.2                 Investments generally—QFC retail schemes                   145
7.2.1         Investment powers generally—QFC retail schemes                        145
7.2.2         Permissible investments generally—QFC retail schemes                  146
7.2.3         Significant influence through transferable securities—UCITS type
              schemes                                                               146
7.2.4         Investments by money-market funds—QFC retail schemes                  147

Part 7.3                 Investment diversification—QFC retail
                         schemes                                                    149
7.3.1         Prudent spread of risk—QFC retail schemes                             149
7.3.2         Spread for certain transferable securities and money-market
              instruments—QFC retail schemes                                        149
7.3.3         Spread for transferable securities and money-market instruments
              issued by single issuer or group—QFC retail schemes                   150


contents 10             Collective Investment Schemes Rules 2010                     V2

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                                                                              Contents
                                                                                 Page
7.3.4      Spread exception for schemes replicating indices—QFC retail
           schemes                                                                152
7.3.5      Spread for government or public securities issued by single issuer—
           QFC retail schemes                                                     153
7.3.6      Spread for units in schemes etc—QFC retail schemes                     155
7.3.7      Spread for OTC derivatives—QFC retail schemes                          155
7.3.8      Spread for deposits—QFC retail schemes                                 157
7.3.9      Spread for certain investments with single person—QFC retail
           schemes                                                                158
7.3.10     Concentration—QFC retail schemes                                       158
7.3.11     Application of pt 7.3—QFC retail schemes                               159

Part 7.4              Particular kinds of investments—QFC retail
                      schemes                                                    160
Division 7.4.A        Transferable securities—QFC retail schemes                  160
7.4.1      General investment requirements for non-approved transferable
           securities—QFC retail schemes                                          160
7.4.2      Investments in closed-ended schemes as transferable securities—
           QFC retail schemes                                                    162
7.4.3      Investments linked etc to other assets as transferable securities—QFC
           retail schemes                                                        163
Division 7.4.B        Money-market instruments—QFC retail schemes                 165
7.4.4      Investments in approved money-market instruments not admitted to
           eligible markets etc—QFC retail schemes                                165
Division 7.4.C        Nil and partly paid securities—QFC retail schemes           168
7.4.5      Investments in nil and partly paid securities—QFC retail schemes       168
Division 7.4.D        Collective investment schemes—QFC retail schemes            168
7.4.6      Investments in collective investment schemes generally —QFC retail
           schemes                                                                168
7.4.7      Investments in associated schemes—QFC retail schemes                   169
Division 7.4.E        Derivatives and forward transactions—QFC schemes            171
7.4.8      Derivatives and forward transactions generally—QFC retail schemes      171
7.4.9      Permitted transactions in derivatives and forward transactions—QFC
           retail schemes                                                         173


V2                       Collective Investment Schemes Rules 2010          contents 11

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Contents
                                                                                   Page
7.4.10        Permitted financial indices—QFC retail schemes                       175
7.4.11        Delivery of property under transactions in derivatives and forward
              transactions—QFC retail schemes                                      177
7.4.12        Requirement to cover sales—QFC retail schemes                        178
7.4.13        OTC transactions in derivatives—QFC retail schemes                   179
7.4.14        Risk management for transactions in derivatives and forward
              transactions—QFC retail schemes                                      181
Division 7.4.F           Deposits—QFC retail schemes                               182
7.4.15        Investments in deposits—QFC retail schemes                           182

Part 7.5                 Exposure for derivatives and forward
                         transactions                                              183
7.5.1         Cover for transactions in derivatives and forward transactions—QFC
              retail schemes                                                       183
7.5.2         Borrowing not available for cover—QFC retail schemes                 184
7.5.3         Continuing nature of limits and requirements for derivatives and
              forward positions—QFC retail schemes                                 185

Part 7.6                 Stock lending and repos—QFC retail
                         schemes                                                   186
7.6.1         Stock lending and repos generally—QFC retail schemes                 186
7.6.2         Stock lending requirements—QFC retail schemes                        187
7.6.3         Treatment of collateral for stock lending—QFC retail schemes         188
7.6.4         No limits on stock lending and repos—QFC retail schemes              190

Part 7.7                 Cash, borrowing, lending and other
                         provisions—QFC retail schemes                             192
7.7.1         Cash and near cash—QFC retail schemes                                192
7.7.2         General power to borrow—QFC retail schemes                           193
7.7.3         Borrowing limits—QFC retail schemes                                  194
7.7.4         Restrictions on lending money—QFC retail schemes                     194
7.7.5         Restrictions on lending property other than money—QFC retail
              schemes                                                              195
7.7.6         General power to accept or underwrite placings—QFC retail schemes    196
7.7.7         Guarantees and indemnities—QFC retail schemes                        197


contents 12             Collective Investment Schemes Rules 2010                    V2

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                                                                           Contents
                                                                                 Page
Chapter 8            Operating duties and responsibilities—QFC
                     schemes                                                     199

Part 8.1             Dealing—QFC schemes                                         199
Division 8.1.A       Dealing—QFC qualified investor schemes                      199
8.1.1      Application of div 8.1.A to umbrella schemes—QFC qualified investor
           schemes                                                               199
8.1.2      Initial offer—QFC qualified investor schemes                          200
8.1.3      How units are issued and redeemed etc—QFC qualified investor
           schemes                                                               200
8.1.4      Controls over issue and redemption of units—QFC qualified investor
           schemes                                                               201
8.1.5      Issue and redemption of units in multiple classes—QFC qualified
           investor schemes                                                      202
8.1.6      Issue and redemption generally—QFC qualified investor schemes         202
8.1.7      When instructions for issue and redemption must be given—QFC
           qualified investor schemes                                            204
8.1.8      Limited issue—QFC qualified investor schemes                          204
8.1.9      Issue only to qualified investors—QFC qualified investor schemes      205
Division 8.1.B       Dealing—QFC retail schemes                                  205
8.1.10     Application of div 8.1.B to umbrella schemes—QFC retail schemes       205
8.1.11     Initial offers—QFC retail schemes                                     206
8.1.12     How units are issued and redeemed etc—QFC retail schemes              206
8.1.13     Controls over issue and redemption of units—QFC retail schemes        207
8.1.14     Issue and redemption of units in multiple classes—QFC retail
           schemes                                                               208
8.1.15     Changes to number of units issued or redeemed—QFC retail schemes      209
8.1.16     Payment for issued units—QFC retail schemes                           209
8.1.17     Issue and redemption generally—QFC retail schemes                     210
8.1.18     When instructions for issue or redemption must be given—QFC retail
           schemes                                                               210
8.1.19     Payment for redeemed units—QFC retail schemes                         211
8.1.20     Issue or redemption otherwise than for cash—QFC retail schemes        212
8.1.21     Deferred redemption—QFC retail schemes                                213


V2                       Collective Investment Schemes Rules 2010         contents 13

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Contents
                                                                                     Page
Part 8.2                 Valuation and pricing—QFC schemes                           214
Division 8.2.A           Valuation and pricing—QFC qualified investor
                         schemes                                                     214
8.2.1         Application of div 8.2.A to umbrella schemes—QFC qualified investor
              schemes                                                                214
8.2.2         Valuation—QFC qualified investor schemes                               214
8.2.3         Valuation points—QFC qualified investor schemes                        215
8.2.4         Prices of units—QFC qualified investor schemes                         216
Division 8.2.B           Valuation and pricing—QFC retail schemes                    216
8.2.5         Application of div 8.2.B to umbrella schemes—QFC retail schemes        217
8.2.6         Duty of operator to rectify breaches of div 8.2.B—QFC retail schemes   217
8.2.7         Valuation requirement——QFC retail schemes                              219
8.2.8         General rules for valuation of scheme property—QFC retail schemes      219
8.2.9         Fair value pricing for securities—QFC retail schemes                   220
8.2.10        Valuation points—QFC retail schemes                                    222
8.2.11        Pricing controls of operator—QFC retail schemes                        222
8.2.12        Review by independent entity of operator’s pricing controls etc—QFC
              retail schemes                                                         224
8.2.13        Recording and reporting incorrect pricing—QFC retail schemes           225
8.2.14        Prices of units—QFC retail schemes                                     225
8.2.15        Issue and redemption prices—QFC retail schemes                         226
8.2.16        Dilution—QFC retail schemes                                            227
8.2.17        Particular duties of independent entity in relation to dilution—QFC
              retail schemes                                                         228
8.2.18        Publication of prices—QFC retail schemes                               228
Division 8.2.C           Valuation—money-market funds                                230
8.2.19        Maintaining value—all money-market funds                               230

Part 8.3                 Title and register—QFC schemes                              231
8.3.1         Unitholder register requirements—all QFC schemes                       231
8.3.2         Transfer of units by act of parties—all QFC schemes                    233
8.3.3         Certificates for units—all QFC schemes                                 234
8.3.4         Conversion of units—all QFC schemes                                    234


contents 14             Collective Investment Schemes Rules 2010                      V2

                                    Effective: 1/7/11
                                                                             Contents
                                                                                  Page
Part 8.4              Operator and independent entity appointment
                      and removal—QFC schemes                     235
8.4.1      Initial appointment of operator and independent entity—all QFC
           schemes                                                                235
8.4.2      Removal of operator—QFC schemes                                        235
8.4.3      Retirement of operator—all QFC schemes                                 237
8.4.4      Consequences of removal or retirement of operator—all QFC
           schemes                                                                238
8.4.5      Removal of independent entity by unitholders—all QFC schemes           238
8.4.6      Removal of independent entity no longer eligible for appointment—all
           QFC schemes                                                            239
8.4.7      Retirement of independent entity—all QFC schemes                       240
8.4.8      Consequences of removal or retirement of independent entity—all
           QFC schemes                                                            241

Part 8.5              Outsourcing—QFC schemes                                     242
8.5.1      What is outsourcing?                                                   242
8.5.2      Outsourcing by operator—all QFC schemes                                243
8.5.3      Outsourcing by independent entity—all QFC schemes                      243
8.5.4      Outsourcing notice and information—all QFC schemes                     244
8.5.5      Provisions applying to outsourcing by operator and independent
           entity—all QFC schemes                                                 245
8.5.6      Outsourcing management—all QFC schemes                                 248
8.5.7      Application of pt 8.5 to further outsourcing—all QFC schemes           250
8.5.8      Systems and controls for outsourcings—all QFC schemes                  250

Part 8.6              Payments—QFC schemes                                        251
Division 8.6.A        Payments—QFC qualified investor schemes                     251
8.6.1      Payments—QFC qualified investor schemes                                251
Division 8.6.B        Payments—QFC retail schemes                                 251
8.6.2      Payments out of scheme property—QFC retail schemes                     251
8.6.3      Performance fees—QFC retail schemes                                    252
8.6.4      Charges on buying and selling units—QFC retail schemes                 254
8.6.5      Redemption charges—QFC retail schemes                                  254


V2                       Collective Investment Schemes Rules 2010           contents 15

                                     Effective: 1/7/11
Contents
                                                                                Page
8.6.6         Charges on exchange of units in umbrella schemes—QFC retail
              schemes                                                           255
8.6.7         Allocation of payments to income or capital—QFC retail schemes    255
8.6.8         Prohibition of promotional payments—QFC retail schemes            256
8.6.9         Expenses in relation to property—QFC retail schemes               256
8.6.10        Payment of liabilities on transfer of assets—QFC retail schemes   257
8.6.11        Attribution of scheme property to subschemes—QFC retail schemes   257

Part 8.7                 Accounting periods—QFC schemes                         259
8.7.1         Accounting periods—all QFC schemes                                259

Part 8.8                 Income allocation and distribution—QFC
                         schemes                                                261
8.8.1         Application of pt 8.8 to umbrella schemes—all QFC schemes         261
8.8.2         Income allocation and distribution—all QFC schemes                261
8.8.3         Unclaimed, minimal and joint unitholders distributions—all QFC
              schemes                                                           264

Part 8.9                 Names—QFC schemes                                      265
8.9.1         Name of scheme etc—all QFC schemes                                265
8.9.2         Use of certain names—all QFC schemes                              268

Part 8.10                Shari’a Supervisory Board—all Islamic funds 270
8.10.1        Islamic fund must have a supervisory board—all Islamic funds      270


Chapter 9                Suspension, winding up and
                         transfer schemes—QFC schemes                           271

Part 9.1                 Suspension and restart of dealings—QFC
                         schemes                                                271
9.1.1         Suspension and restart of dealings—all QFC schemes                271

Part 9.2                 Winding up—QFC schemes                                 275
9.2.1         Application of pt 9.2 to subschemes of QFC umbrella schemes—all
              QFC schemes                                                       275

contents 16             Collective Investment Schemes Rules 2010                 V2

                                    Effective: 1/7/11
                                                                            Contents
                                                                                  Page
9.2.2      When scheme may be wound up—all QFC schemes                            275
9.2.3      Winding-up required by constitutional document—all QFC schemes         276
9.2.4      Winding-up at direction of unitholders—all QFC schemes                 276
9.2.5      Notification to Regulatory Authority that scheme not commercially
           viable etc—all QFC schemes                                             277
9.2.6      Winding-up by operator or independent entity—all QFC schemes           278
9.2.7      Accounting and reports during winding-up—all QFC schemes               281

Part 9.3              Transfer schemes—QFC schemes                                283
9.3.1      Purpose—pt 9.3                                                         283
9.3.2      Transfer schemes—all QFC schemes                                       283


Chapter 10            Financial promotions and investment
                      activities—all schemes                                      285

Part 10.1             Financial promotions generally—all schemes 285
10.1.1     Declaration of non-QFC retail customer schemes                         285
10.1.2     Certain financial promotions only to qualified investors etc—QFC
           qualified investor schemes                                             286
10.1.3     Certain financial promotions only to qualified investors etc—non-QFC
           qualified client schemes                                               286
10.1.4     Pt 10.1 additional to COND                                             287

Part 10.2             Financial promotions—non-QFC schemes                        288
10.2.1     What is a complying disclaimer for a non-QFC scheme?                   288
10.2.2     Restrictions generally on financial promotions—all non-QFC schemes     288
10.2.3     Prospectus and disclaimer must be provided etc—all non-QFC
           schemes                                                                289
10.2.4     Complying disclaimer must be given with other documents under
           COND—all non-QFC schemes                                               290
10.2.5     Authorised firms must pass on documents etc—all non-QFC schemes        290
10.2.6     Quarterly returns for financial promotions etc—all non-QFC schemes     291
10.2.7     Recordkeeping by authorised firms—all non-QFC schemes                  292
10.2.8     Pt 10.2 additional to COND                                             293



V2                       Collective Investment Schemes Rules 2010          contents 17

                                     Effective: 1/7/11
Contents
                                                                                     Page
Part 10.3                 Additional retail customer requirements—
                          non-QFC retail customer schemes                            294
10.3.1        Application—pt 10.3                                                    294
10.3.2        Facilities to be maintained in QFC—non-QFC retail customer schemes     294
10.3.3        Retail customer to be informed about availability of facilities—non-
              QFC retail customer schemes                                            295
10.3.4        Documents to be available in QFC—non-QFC retail customer
              schemes                                                                295
10.3.5        Pricing and redemption facilities to be available in QFC—non-QFC
              retail customer schemes                                                296
10.3.6        Other information facilities to be available in QFC—non-QFC retail
              customer schemes                                                       297
10.3.7        Complaint facilities to be available in QFC—non-QFC retail customer
              schemes                                                                298


Chapter 11                Other provisions                                           299

Part 11.1                 General                                                    299
11.1.1        Restitution orders for breach of relevant requirements—all schemes     299
11.1.2        Service of notices and other documents on unitholders—all QFC
              schemes                                                                299
11.1.3        Notices and other documents to be in legible form etc—all schemes      300

Part 11.2                 Fees—QFC schemes                                           302
11.2.1        Application fees—all QFC schemes                                       302
11.2.2        Annual fees—all QFC schemes                                            303
11.2.3        Waiver etc of fees—all QFC schemes                                     304

Part 11.3                 Providing scheme administration —non-QFC
                          schemes                                  305
11.3.1        Client money and assets—all non-QFC schemes                            305


Chapter 12                Transitional                                               306
12.1.1        Existing applications for registration                                 306


contents 18              Collective Investment Schemes Rules 2010                     V2

                                      Effective: 1/7/11
                                                                             Contents
                                                                                    Page
12.1.2      Existing registered QFC qualified investor funds                        306


Schedule 1             Arrangements not collective investment
                       schemes                                                      308
S1.1        Individual investment management arrangements                           308
S1.2        Pure deposit-based arrangements                                         309
S1.3        Arrangements not operated by way of business                            309
S1.4        Debt issues                                                             309
S1.5        Common accounts                                                         312
S1.6        Arrangements entered into for commercial purposes related to existing
            businesses                                                              313
S1.7        Group arrangements                                                      314
S1.8        Franchise arrangements                                                  314
S1.9        Timeshare arrangements                                                  314
S1.10       Other arrangements relating to use or enjoyment of property             314
S1.11       Arrangements involving issue of certificates representing investments   315
S1.12       Clearing services                                                       315
S1.13       Contracts of insurance                                                  315
S1.14       Corporations                                                            315
S1.15       Partnerships                                                            317
S1.16       Profit sharing investment accounts                                      319


Schedule 2             Constitutional document content—QFC
                       schemes                                                      321
Part S2.1              Constitution requirements—all QFC schemes                    321
S2.1        Name of scheme                                                          321
S2.2        Scheme is established in QFC etc                                        321
S2.3        Legal form of scheme etc                                                321
S2.4        Islamic funds                                                           321
S2.5        Investment objectives and policy etc                                    322
S2.6        Duration of limited schemes                                             322
S2.7        Unitholder’s liability to pay                                           322


V2                        Collective Investment Schemes Rules 2010         contents 19

                                      Effective: 1/7/11
Contents
                                                                                   Page
S2.8          Fees, charges and other expenses of scheme                           323
S2.9          Classes of units                                                     323
S2.10         Income and capital distribution                                      324
S2.11         Investment and borrowing restrictions                                324
S2.12         Management of borrowing risks                                        324
S2.13         Valuation and pricing                                                324
S2.14         Base currency                                                        325
S2.15         Functions of operator and independent entity                         325
S2.16         Responsibility statement                                             325
S2.17         Meetings                                                             325
S2.18         Other statements and provisions for CIC                              326
S2.19         CIP partnership agreement binding etc                                326
S2.20         CIT trust deed binding etc                                           327
S2.21         CIT declaration of trust                                             327
S2.22         Assets other than cash for issue or redemption                       328
S2.23         Suspension and winding-up                                            328
S2.24         Amendment of constitutional document                                 328
S2.25         Redemption of units held in breach of QFC law                        328
S2.26         Documents evidencing title to units                                  329
S2.27         Other relevant matters                                               329
Part S2.2                 Extra constitution requirements —qualified investor
                          schemes                                                  329
S2.28         Qualified investor scheme statement—QFC qualified investor
              schemes                                                              329
S2.29         Only qualified investors can be unitholders in qualified investor
              schemes—QFC qualified investor schemes                               329
S2.30         Limits on unit issue and redemption—QFC qualified investor schemes   330
Part S2.3           Extra constitution requirement—UCITS type schemes              330
S2.31     UCITS type scheme statement—QFC UCITS type schemes                       330
Part S2.4                Extra constitution requirements —money-market funds 330
S2.32         Money-market fund statement—QFC money-market funds                   330
S2.33         Primary investment objective etc—QFC money-market funds              331




contents 20             Collective Investment Schemes Rules 2010                    V2

                                    Effective: 1/7/11
                                                                    Contents
                                                                         Page
Schedule 3         Prospectus content—QFC qualified investor
                   schemes                                   332
S3.1    Document status                                                  332
S3.2    Description of scheme etc                                        332
S3.3    Islamic funds                                                    333
S3.4    Investment objectives and policy etc                             334
S3.5    Distributions, accounting dates etc                              336
S3.6    Characteristics of units in the scheme                           336
S3.7    Operator                                                         337
S3.8    Independent entity                                               338
S3.9    Investment adviser and standing independent valuer               340
S3.10   Auditor                                                          340
S3.11   Register of unitholders                                          340
S3.12   Payments out of scheme property                                  341
S3.13   Dealing                                                          343
S3.14   Valuation and pricing                                            344
S3.15   Issue and redemption charges                                     344
S3.16   General information                                              345
S3.17   Mandatory statement about prospectus                             345
S3.18   Additional information for feeder funds                          346
S3.19   Additional information for fund of funds                         346
S3.20   Additional statements and information for property funds         347
S3.21   Information on umbrella schemes                                  348
S3.22   Application of prospectus contents to umbrella scheme            349


Schedule 4         Prospectus content—QFC retail schemes                350
S4.1    Document status                                                  350
S4.2    Description of scheme etc                                        350
S4.3    Islamic funds                                                    351
S4.4    Investment objectives and policy etc                             352
S4.5    Distributions, accounting and reporting dates etc                354
S4.6    Characteristics of units in the scheme                           355
S4.7    Operator                                                         356


V2                    Collective Investment Schemes Rules 2010     contents 21

                                  Effective: 1/7/11
Contents
                                                                      Page
S4.8          Independent entity                                      356
S4.9          Investment adviser                                      358
S4.10         Auditor                                                 359
S4.11         Relationships with other parties                        359
S4.12         Register of unitholders                                 360
S4.13         Payments out of scheme property                         360
S4.14         Allocation of payments                                  361
S4.15         Valuation and pricing                                   362
S4.16         Dealing                                                 362
S4.17         Dilution                                                364
S4.18         Issue charges                                           365
S4.19         Redemption charges                                      365
S4.20         Meeting of unitholders                                  365
S4.21         General information                                     366
S4.22         Mandatory statement about prospectus                    366
S4.23         Additional information for feeder funds                 367
S4.24         Additional information for fund of funds                368
S4.25         Information on umbrella schemes                         368
S4.26         Application of prospectus contents to umbrella scheme   369
S4.27         Additional information                                  369


Glossary                                                              371

Endnotes                                                              405




contents 22             Collective Investment Schemes Rules 2010       V2

                                    Effective: 1/7/11
                                                        General provisions        Chapter 1
                                                              Introductory         Part 1.1

                                                                                  Rule 1.1.1



Chapter 1                 General provisions

Part 1.1                  Introductory

1.1.1   Name of rules
        These rules are the Collective Investment Schemes Rules 2010 (or
        COLL).

1.1.2   Commencement
        These rules commence on 1 January 2011.

1.1.3   Application of COLL
        These rules do not apply to a collective investment scheme that is
        registered under the Private Placement Schemes Rules 2010 (PRIV).
        Note     A collective investment scheme that is established in the QFC may be
                 registered under PRIV as a private placement scheme.

1.1.4   Glossary
        The glossary at the end of these rules is part of these rules.
        Note 1   There are also relevant definitions in the INAP glossary. To assist the
                 reader, the application of a definition in that glossary would usually be
                 indicated by the word(s) being in italics (other than bold italics).
        Note 2   By contrast, the application of a definition in the glossary in these rules
                 is not indicated by the word(s) being in italics.
        Note 3   For the application of definitions, see INAP, r 2.1.8 (Application of
                 definitions).
        Note 4   A note in or to these rules is explanatory and is not part of the rules (see
                 INAP, r 2.1.6 (1) and r 2.1.7).




V2                    Collective Investment Schemes Rules 2010                       page 1

                                    Effective: 1/7/11
Chapter 1       General provisions
Part 1.1        Introductory

Rule 1.1.4

             Note 5   However, examples and guidance are part of these rules (see INAP,
                      r 2.1.4 (1) (b) and (2)).
             Note 6   An example is not exhaustive, and may extend, but does not limit the
                      meaning of these rules or the particular provision of these rules to which
                      it relates (see INAP, r 2.1.5).
             Note 7   For the effect of guidance, see the Financial Services Regulations,
                      art 17 (4).




page 2                Collective Investment Schemes Rules 2010                               V2

                                     Effective: 1/7/11
                                                      General provisions         Chapter 1
                             Basic concepts and key terms—all schemes              Part 1.2
                                         Collective investment schemes       Division 1.2.A
                                                                                 Rule 1.2.1




Part 1.2                   Basic concepts and key terms—
                           all schemes
Division 1.2.A             Collective investment schemes
1.2.1   What is a collective investment scheme?
        A collective investment scheme (or scheme) is an arrangement that
        is a collective investment fund under the Financial Services
        Regulations (other than an arrangement that is not a scheme under
        schedule 1).
        Note on FSR definition of collective investment fund
        The Financial Services Regulations (FSR), schedule 3, part 3, paragraphs 6.2
        to 6.6 provide as follows:

        6.2 Subject to paragraphs 6.5 and 6.6, a collective investment fund is any
            arrangement:
            (1)       the purpose or effect of which is to enable persons taking part in the
                      arrangements (the participants) to participate in or receive profits or
                      income arising from the acquisition, holding, management or
                      disposal of property or sums paid out of such profits or income;
            (2)       that meets the property condition in paragraph 6.3 and the
                      investment condition in paragraph 6.4.
        6.3 An arrangement will meet the property condition referred to in paragraph (2)
            if:
            (1)       the arrangement is made with respect to property of any description,
                      including money, whether the participants become owners of the
                      property or any part of it or otherwise; and
            (2)       any of the participants do not have day-to-day control over the
                      management of the property, whether or not they have the right to be
                      consulted or give directions in respect of the property.




V2                     Collective Investment Schemes Rules 2010                      page 3

                                     Effective: 1/7/11
Chapter 1        General provisions
Part 1.2         Basic concepts and key terms—all schemes
Division 1.2.B   Participants, scheme property, units and unitholders
Rule 1.2.2

            6.4 An arrangement will meet the investment condition referred to in
                paragraph 6.2 if:
                (1)       the contributions of the participants and the profits or income out of
                          which payments to be made are pooled; or
                (2)       the property is managed as a whole by or on behalf of the operator of
                          the scheme.
            6.5 Arrangements for such pooling as is mentioned in paragraph 6.4 (1) in
                relation to separate parts of the property are not to be regarded as constituting
                a single collective investment fund unless the participants are entitled to
                exchange rights in one part for rights in another.
            6.6 The Regulatory Authority may make Rules specifying the circumstances in
                which particular arrangements do not constitute a collective investment fund
                for the purposes of paragraph 6.1.

Division 1.2.B                 Participants, scheme property, units
                               and unitholders
1.2.2        Who is a participant?
             A participant in a collective investment scheme (or scheme) is a
             person who takes part (or is to take part) in the scheme by making a
             contribution to the scheme property.

1.2.3        What is the scheme property?
            The scheme property of a collective investment scheme (or scheme)
            is the property held for or in the scheme.
             Note     Property is defined in the glossary.




page 4                 Collective Investment Schemes Rules 2010                               V2

                                    Effective: 1/7/11
                                                   General provisions          Chapter 1
                           Basic concepts and key terms—all schemes              Part 1.2
                                QFC schemes and non-QFC schemes            Division 1.2.C
                                                                               Rule 1.2.4

1.2.4   What is a unit?
        A unit in a collective investment scheme (or scheme) is a unit
        representing the rights or interests (however described) of a
        participant in the scheme.
        Note     The nature of the rights or interests will differ according to the form of
                 the scheme. If the scheme is a company, the units would be shares in the
                 company.

1.2.5   Who is the unitholder?
        The unitholder of a unit in a collective investment scheme (or
        scheme) is the person whose name is entered for the unit in the
        scheme’s records (however described).
        Note 1   For a QFC scheme, the name would be entered in the register of
                 unitholders (the unitholder register) kept under these rules for the
                 scheme (see r 4.1.6).
        Note 2   Unitholder has a special meaning in div 5.5.B (Unitholder meetings—
                 QFC retail schemes) (see r 5.5.2).

Division 1.2.C           QFC schemes and non-QFC schemes
1.2.6   What is a QFC scheme?
        A QFC scheme is a collective investment scheme (or scheme) that
        is established in the QFC and registered under these rules.
        Note     Collective investment scheme (or scheme) is defined in r 1.2.1.

1.2.7   What is a non-QFC scheme?
        A non-QFC scheme is a collective investment scheme (or scheme)
        that is not established in the QFC.




V2                   Collective Investment Schemes Rules 2010                      page 5

                                   Effective: 1/7/11
Chapter 1        General provisions
Part 1.2         Basic concepts and key terms—all schemes
Division 1.2.D   Operator and independent entity
Rule 1.2.8


Division 1.2.D                 Operator and independent entity
1.2.8        Who is the operator?
         (1) The operator of a collective investment scheme (or scheme) is the
             person (however described) responsible for managing the scheme,
             including all of the scheme property.
             Note 1   Scheme property is defined in r 1.2.3.
             Note 2   For a QFC scheme, this person is described in these rules as the
                      scheme’s ‘operator’ (see r 4.1.3 (Functions of operator generally—all
                      QFC schemes)). For a non-QFC scheme, this person may, for example,
                      be described as the scheme’s ‘manager’.
             Note 3   The operator of a QFC scheme may outsource the management of all or
                      a part of the scheme property (see pt 8.5).

         (2) The law of the jurisdiction where the scheme is established is
             applied in deciding who is the person responsible for managing the
             scheme.
             Note 1   Jurisdiction is defined in the glossary.
             Note 2   For a QFC scheme, see pt 8.4 (Operator and independent entity
                      appointment and removal—QFC schemes).

         (3) The operator may also have other functions under the law of the
             jurisdiction where the scheme is established.
             Note     For a QFC scheme, see eg r 4.1.3 (Functions of operator generally—all
                      QFC schemes).

1.2.9        Who is the independent entity?
         (1) The independent entity of a collective investment scheme (or
             scheme) is the person (however described) responsible for
             safeguarding the scheme property.
             Note 1   Scheme property is defined in r 1.2.3.




page 6                Collective Investment Schemes Rules 2010                          V2

                                    Effective: 1/7/11
                                                     General provisions          Chapter 1
                             Basic concepts and key terms—all schemes              Part 1.2
                                Open-ended and closed-ended schemes          Division 1.2.E
                                                                                Rule 1.2.10

         Note 2   For a QFC scheme, this person is described in these rules as the
                  scheme’s ‘independent entity’ (see r 4.2.6 (Property safeguarding
                  functions of independent entity—all QFC schemes)). For a non-QFC
                  scheme, this person may, for example, be described as the scheme’s
                  ‘depository’ or ‘trustee’.

     (2) The law of the jurisdiction where the scheme is established is
         applied in deciding who is the person responsible for safeguarding
         the scheme property.
         Note 1   Jurisdiction is defined in the glossary.
         Note 2   For a QFC scheme, see pt 8.4 (Operator and independent entity
                  appointment and removal—QFC schemes).

     (3) The independent entity may also have other functions under the law
         of the jurisdiction where the scheme is established.
         Note     For a QFC scheme, see eg r 4.2.3 (Oversight functions of independent
                  entity—all QFC schemes).

Division 1.2.E             Open-ended and closed-ended
                           schemes
1.2.10   What are open-ended and closed-ended schemes?
     (1) An open-ended scheme is a collective investment scheme (or
         scheme) that permits its units to be redeemed, whether continuously
         or periodically.
         Note     Unit is defined in r 1.2.4. Redemption is defined in the glossary.

     (2) A closed-ended scheme is a collective investment scheme (or
         scheme) that does not permit its units to be redeemed.
     (3) A scheme registered under these rules must be an open-ended
         scheme.




V2                     Collective Investment Schemes Rules 2010                        page 7

                                    Effective: 1/7/11
Chapter 1        General provisions
Part 1.2         Basic concepts and key terms—all schemes
Division 1.2.F   Umbrella schemes
Rule 1.2.11


Division 1.2.F                Umbrella schemes
1.2.11       What are umbrella schemes and subschemes?
         (1) An umbrella scheme is a collective investment scheme (or scheme)
             under which the contributions of the unitholders, and the profit or
             income out of which payments are to be made to them, are pooled
             separately in relation to separate parts of the scheme property.
             Note     Unitholder is defined in r 1.2.5 and scheme property is defined in
                      r 1.2.3.

         (2) A subscheme of an umbrella scheme is a part of the scheme
             property that is pooled separately.

Division 1.2.G                Qualified investors and retail
                              customers
1.2.12       Who is a qualified investor or retail customer?
         (1) For these rules, a person can be a qualified investor or retail
             customer for a QFC scheme or an authorised firm (or for both).
         (2) A qualified investor for a QFC scheme is—
              (a) a person who would be a business customer or market
                  counterparty of the scheme in relation to dealings in
                  investments that consist of (or include) units in the scheme if
                  the scheme were an authorised firm and the person were a
                  client of the scheme; or
              (b) a person who is a business customer or market counterparty of
                  any authorised firm in relation to dealings in investments that
                  consist of (or include) units in the scheme.
             Note 1   Client, business customer and market counterparty are defined in
                      COND, r 1.2.1, r 1.2.5 and r 1.2.7 respectively.
             Note 2   Authorised firm and dealing in investments are defined in the glossary.


page 8                Collective Investment Schemes Rules 2010                            V2

                                   Effective: 1/7/11
                                                    General provisions        Chapter 1
                           Basic concepts and key terms—all schemes              Part 1.2
                               Qualified investors and retail customers   Division 1.2.G
                                                                             Rule 1.2.12

     (3) A qualified investor for an authorised firm in relation to units in a
         scheme is a person who is a business customer or market
         counterparty of the firm in relation to dealings in investments that
         consist of (or include) units in the scheme.
     (4) A retail customer for a QFC scheme is—
          (a) a person who would be a retail customer of the scheme in
              relation to dealings in investments that consist of (or include)
              units in the scheme if the scheme were an authorised firm and
              the person were a client of the scheme; or
          (b) a person who is a retail customer of any authorised firm in
              relation to dealings in investments that consist of (or include)
              units in the scheme.
               Note    Retail customer is defined in COND, r 1.2.6 (2).

     (5) For these rules, a retail customer for an authorised firm in relation
         to units in a scheme is a person who is a retail customer of the firm
         in relation to dealings in investments that consist of (or include)
         units in the scheme.




V2                    Collective Investment Schemes Rules 2010                    page 9

                                  Effective: 1/7/11
Chapter 1        General provisions
Part 1.3         Basic concepts and key terms—QFC schemes
Division 1.3.A   Types of QFC schemes generally
Rule 1.3.1




Part 1.3                     Basic concepts and key terms—
                             QFC schemes
Division 1.3.A               Types of QFC schemes generally
1.3.1        QFC schemes are qualified investor or retail schemes
             A QFC scheme registered under these rules is either—
             (a) a qualified investor scheme; or
             (b) a retail scheme.

1.3.2        What is a QFC qualified investor scheme?
             A QFC scheme is a qualified investor scheme if it is registered
             under these rules as a qualified investor scheme.

1.3.3        What is a QFC retail scheme?
             A QFC scheme is a retail scheme if it is registered under these rules
             as a retail scheme.

1.3.4        Types of QFC retail schemes
             QFC retail schemes are limited to UCITS type schemes.

1.3.5        What is a QFC UCITS type scheme?
             A QFC retail scheme is a UCITS type scheme if—
             (a) the scheme’s constitutional document contains the statement
                 required by part S2.31 (Extra constitution requirement—
                 UCITS type schemes); or




page 10               Collective Investment Schemes Rules 2010                 V2

                                  Effective: 1/7/11
                                                     General provisions       Chapter 1
                          Basic concepts and key terms—QFC schemes              Part 1.3
                                          Legal forms for QFC schemes     Division 1.3.B
                                                                              Rule 1.3.6

        (b) the scheme is an umbrella scheme that is a UCITS type scheme
            and each subscheme would be a UCITS type scheme if it were
            a separate scheme.
               Note     Umbrella scheme and subscheme are defined in r 1.2.11.

Division 1.3.B             Legal forms for QFC schemes
1.3.6   Permitted legal forms for QFC schemes
        A QFC scheme must take 1 of the following legal forms:
        (a) a QFC collective investment company (or CIC);
        (b) a QFC collective investment partnership (or CIP);
        (c) a QFC collective investment trust (or CIT);
        (d) another permitted form of QFC scheme.
        Note      The permitted legal forms of QFC schemes are defined in r 1.3.7 to
                  r 1.3.10.

1.3.7   What is a QFC collective investment company (or CIC)?
        A QFC collective investment company (or CIC) is an open-ended
        company with variable share capital incorporated under the
        Companies Regulations 2005 if its articles of association provide
        that the company is established for the sole purpose of constituting a
        collective investment scheme.
        Note      Articles of association is defined in the glossary.

1.3.8   What is a QFC collective investment partnership (or CIP)?
        A QFC collective investment partnership (or CIP) is a limited
        partnership registered under the Partnership Regulations 2007 if its
        partnership agreement provides that the partnership is established
        for the sole purpose of constituting a collective investment scheme.
        Note      Partnership agreement is defined in the glossary.


V2                     Collective Investment Schemes Rules 2010                  page 11

                                    Effective: 1/7/11
Chapter 1        General provisions
Part 1.3         Basic concepts and key terms—QFC schemes
Division 1.3.C   Particular types of QFC schemes
Rule 1.3.9


1.3.9        What is a QFC collective investment trust (or CIT)?
            A QFC collective investment trust (or CIT) is an express trust
            created under the Trust Regulations 2007 if its trust instrument
            provides that the trust is established for the sole purpose of
            constituting a collective investment scheme.
             Note       Trust instrument is defined in the glossary.

1.3.10       What is another permitted form of QFC scheme?
             Another permitted form of QFC scheme is an entity (other than a
             CIC, CIP or CIT) if—
             (a) the legal form of the entity—
                      (i) is permitted under regulations made under the QFC Law
                          or rules made by the Regulatory Authority or QFC
                          Authority; or
                    (ii) otherwise permitted under an approval, authority, or
                         licence, (however described) given by the QFC Authority
                         under the QFC Law; and
             (b) an instrument creating the legal form of the entity provides that
                 the entity is established for the sole purpose of constituting a
                 collective investment scheme.
             Note       Entity, QFC Law and instrument are defined in the glossary.

Division 1.3.C                  Particular types of QFC schemes
1.3.11       Islamic funds
            A QFC scheme, or a subscheme of a QFC umbrella scheme, is an
            Islamic fund if the constitutional document of the scheme states that
            the scheme or subscheme is an Islamic fund.
             Note 1     Umbrella scheme and subscheme are defined              in     r   1.2.11.
                        Constitutional document is defined in r 3.1.1.


page 12                 Collective Investment Schemes Rules 2010                              V2

                                      Effective: 1/7/11
                                                     General provisions       Chapter 1
                          Basic concepts and key terms—QFC schemes              Part 1.3
                                      Particular types of QFC schemes     Division 1.3.C
                                                                             Rule 1.3.12

         Note 2   The following provisions must be complied with in relation to Islamic
                  funds:
                     r 5.6.1 (2) and (3) (Accounting standards—all QFC schemes)
                     pt 8.10 (Shari’a Supervisory Board—all Islamic funds)
                     sch 2 (Constitutional document content—QFC schemes), r S2.4
                       (Islamic funds)
                     sch 3 (Prospectus content—QFC qualified investor schemes),
                       r S3.2 (e) (Description of scheme etc) and r S3.3 (Islamic funds)
                     sch 4 (Prospectus content—QFC retail schemes), r S4.2 (f)
                       (Description of scheme etc) and r S4.3 (Islamic funds).

1.3.12   Money-market funds
         A QFC scheme, or a subscheme of a QFC umbrella scheme, is a
         money-market fund if the constitutional document of the scheme
         states that the scheme or subscheme is a money-market fund.
         Note 1   Umbrella scheme and subscheme are defined               in   r    1.2.11.
                  Constitutional document is defined in r 3.1.1.
         Note 2   The following provisions must be complied with in relation to money-
                  market funds:
                     r 6.1.5 (Investments by money-market funds—QFC qualified
                       investor schemes)
                     r 7.2.4 (Investments by money-market funds—QFC retail schemes)
                     r 8.2.19 (Maintaining value—all money-market funds)
                     pt S2.4 (Extra constitution requirements—money-market funds)
                     sch 3 (Prospectus content—QFC qualified investor schemes),
                       r S3.2 (f) (Description of scheme etc)
                     sch 4 (Prospectus content—QFC retail schemes), r S4.2 (g)
                       (Description of scheme etc) (see also r S4.4 (r) (Investment
                       objectives and policy etc)).




V2                     Collective Investment Schemes Rules 2010                    page 13

                                   Effective: 1/7/11
Chapter 1        General provisions
Part 1.3         Basic concepts and key terms—QFC schemes
Division 1.3.C   Particular types of QFC schemes
Rule 1.3.13


1.3.13       Other types of QFC schemes
            This division does not limit by implication the types of QFC
            schemes permitted under these rules.
             Note 1   See, for example, the definitions of feeder fund, fund of fund and
                      property fund in the glossary.
            Note 2    For guaranteed funds and similar funds, see r 8.9.1 (5) to (11) (Name of
                      scheme etc—all QFC schemes).




page 14               Collective Investment Schemes Rules 2010                             V2

                                   Effective: 1/7/11
                                               General provisions   Chapter 1
                  Basic concepts and key terms—non-QFC schemes       Part 1.4

                                                                    Rule 1.4.1




Part 1.4               Basic concepts and key terms—
                       non-QFC schemes

1.4.1   What is a non-QFC retail customer scheme?
        A non-QFC scheme is a retail customer scheme if it is a non-QFC
        scheme declared to be a retail customer scheme under rule 10.1.1
        (Declaration of non-QFC retail customer schemes).
        Note   Non-QFC scheme is defined in rule 1.2.7.

1.4.2   What is a non-QFC qualified client scheme?
        A non-QFC scheme is a qualified client scheme if is not a retail
        customer scheme.
        Note   Non-QFC scheme is defined in rule 1.2.7.




V2                 Collective Investment Schemes Rules 2010           page 15

                                Effective: 1/7/11
Chapter 2       Registration of schemes in QFC


Rule 2.1.1




Chapter 2                      Registration                  of      schemes                 in
                               QFC

2.1.1        Schemes established in QFC must be registered
        (1) A person must not operate a scheme that is established in the QFC
            unless it is registered under these rules or PRIV.
             Note     PRIV relates to private placement schemes.

        (2) In this rule:
             operate a scheme includes being responsible for managing the
             scheme or any of the scheme property.
             Note     Scheme is defined in r 1.2.1. Scheme property is defined in r 1.2.3.

2.1.2        Application for registration of scheme established in QFC
        (1) The person who is to become the initial operator of a scheme
            established in the QFC may apply to the Regulatory Authority for
            registration of the scheme under these rules as either—
             (a) a qualified investor scheme; or
             (b) a retail scheme.
             Note 1   Operator is defined in r 1.2.8.
             Note 2   See the following provisions:
                          r 3.1.4 (Constitutional document and checklist to be filed with
                            registration application—all QFC schemes)
                          r 5.2.5 (Prospectus, checklist and any translations to be filed with
                            registration application—all QFC schemes).




page 16               Collective Investment Schemes Rules 2010                               V2

                                    Effective: 1/7/11
                                              Registration of schemes in QFC   Chapter 2


                                                                               Rule 2.1.3

        (2) The Regulatory Authority may, in writing, require the applicant to
            give the authority additional information or documents that the
            authority reasonably needs to decide the application.
        (3) If the applicant does not comply with the requirement, the
            Regulatory Authority may refuse to consider the application.
        (4) The applicant may withdraw the application by notice given to the
            Regulatory Authority at any time before the application is decided.
        (5) If, at any time between the making of the application and the
            application being withdrawn or decided, the applicant becomes
            aware of a material change that is reasonably likely to be relevant to
            the Regulatory Authority’s consideration of the application, the
            applicant must tell the authority about the change immediately, but
            by no later than the next business day.
             Note      Business day is defined in the glossary.

2.1.3        Decision on application for registration of scheme
             established in QFC
        (1) On an application under rule 2.1.2 for registration of a scheme, the
            Regulatory Authority must—
             (a) register the scheme under these rules as either—
                    (i) a qualified investor scheme; or
                    (ii) a retail scheme; or
             (b) refuse to register the scheme under these rules.
        (2) The Regulatory Authority must register the scheme unless it
            considers that—
             (a) the constitutional document does not comply with rule 3.1.2
                 (Matters to be included in constitutional document—all QFC
                 schemes) or contains a provision that conflicts with any
                 provision of these rules; or

V2                         Collective Investment Schemes Rules 2010              page 17

                                         Effective: 1/7/11
Chapter 2       Registration of schemes in QFC


Rule 2.1.3


             (b) the name of the scheme, any subscheme of the scheme, or a
                 class of units—
                  (i) is substantially similar to the name of—
                         (A) a scheme registered under PRIV or these rules; or
                         (B) a subscheme of an umbrella scheme registered under
                             PRIV or these rules; or
                         (C) a class of units for a scheme registered under PRIV
                             or these rules; or
                  (ii) is otherwise undesirable or misleading; or
                  Note      Umbrella scheme and subscheme are defined in r 1.2.11. Class is
                            defined in the glossary.
                  Guidance on names of CIC
                  A CIC must not include in its name the following words, abbreviations of
                  the following words or similar words or abbreviations:
                  (a) limited;
                  (b) unlimited;
                  (c) public limited company.

             (c) the person named in the application as the person who is to
                 become the initial operator of the scheme is not eligible, on the
                 scheme’s registration, to be the operator of the scheme under
                 rule 4.1.1 (Requirements for operator—all QFC schemes); or
                  Note      Operator is defined in r 1.2.8.

             (d) the person appointed by the operator, and named in the
                 application, as the person who is to become the initial
                 independent entity of the scheme is not—
                  (i) an authorised firm that is eligible, on the scheme’s
                      registration, to be the independent entity of the scheme
                      under rule 4.2.1 (Requirements for independent entity—
                      all QFC schemes); or


page 18               Collective Investment Schemes Rules 2010                          V2

                                   Effective: 1/7/11
                                          Registration of schemes in QFC         Chapter 2


                                                                                 Rule 2.1.3

                (ii) otherwise an appropriate person to be the independent
                     entity of the scheme; or
                Note 1    Constitutional document is defined in r 3.1.1. Independent entity
                          is defined in r 1.2.9.
                Note 2    For para (d) (ii), see r 4.2.9 (Non-QFC independent entities—
                          criteria for Regulatory Authority action).

          (e) the person named in the application as the person who is to
              become the initial auditor of the scheme is not eligible to be the
              auditor of the scheme under GENE, section 9.7 (Auditors) as
              applied by rule 5.6.2 (7) (Appointment and removal of auditors
              etc—all QFC schemes); or
          (f) the prospectus drawn up for the scheme does not comply with
              these rules; or
                Note      Prospectus is defined in the glossary.

         (g) the scheme does not otherwise comply with these rules; or
         (h) it is otherwise inappropriate for the scheme to be registered
             under these rules.
         Note      The Regulatory Authority has power under the Financial Services
                   Regulations, art 105 to give certain directions in relation to collective
                   investment funds, including a direction to cease the issue or redemption
                   of units in the fund and to wind up the fund.

     (3) The Regulatory Authority may register the scheme either—
          (a) without conditions, restrictions or requirements; or
         (b) with the conditions, restrictions or requirements it considers
             appropriate.
     (4) The Regulatory Authority must give the applicant written notice of
         its decision on the application.




V2                       Collective Investment Schemes Rules 2010                  page 19

                                      Effective: 1/7/11
Chapter 2       Registration of schemes in QFC


Rule 2.1.3


       (5) If the Regulatory Authority refuses to register the scheme or
           registers the scheme with conditions, restrictions or requirements
           not agreed to by the applicant, the notice must—
             (a) give reasons for the decision; and
             (b) tell the applicant that the applicant may appeal to the
                 Regulatory Tribunal against the decision.




page 20               Collective Investment Schemes Rules 2010            V2

                                  Effective: 1/7/11
                             Constitutional requirements—QFC schemes           Chapter 3
                               Constitutional document—QFC schemes              Part 3.1

                                                                               Rule 3.1.1




Chapter 3                  Constitutional requirements—
                           QFC schemes

Part 3.1                   Constitutional document—QFC
                           schemes

3.1.1       What is the constitutional document for a QFC scheme?
            The constitutional document, for a QFC scheme, is—
            (a) for a CIC—the articles of association of the company; and
            (b) for a CIP—the partnership agreement of the partnership; and
            (c) for a CIT—the trust instrument of the trust; and
            (d) for another permitted form of QFC scheme—any instrument
                creating the legal form of the entity.
            Note   CIC, CIP, CIT and another permitted form of QFC scheme are defined
                   in div 1.3.B (Legal forms for QFC schemes). Articles of association,
                   partnership agreement and trust instrument are defined in the glossary.

3.1.2       Matters to be included in constitutional document—all
            QFC schemes
            The constitutional document of a QFC scheme must include the
            statements and provisions required by schedule 2 (Constitutional
            document content—QFC schemes) for the scheme.

3.1.3       Relationship between constitutional document and these
            rules—all QFC schemes
        (1) The constitutional document of a QFC scheme must not contain a
            provision—


V2                     Collective Investment Schemes Rules 2010                   page 21

                                    Effective: 1/7/11
Chapter 3       Constitutional requirements—QFC schemes
Part 3.1        Constitutional document—QFC schemes

Rule 3.1.4


             (a) that conflicts with any provision of these rules; or
             (b) that is unfairly prejudicial to the interest of unitholders
                 generally or to the unitholders of any class of units.
                  Note    Class is defined in the glossary.

        (2) A provision of the constitutional document of a QFC scheme has no
            effect to the extent—
             (a) that it conflicts with any provision of these rules; or
             (b) that it is unfairly prejudicial to the interest of unitholders
                 generally or to the unitholders of any class of units.
        (3) However, a provision of the constitutional document of a QFC
            scheme must not be taken to conflict with a provision of these rules
            to the extent it can operate concurrently with the provision of these
            rules.
        (4) Any power given by these rules to a QFC scheme, or to the operator
            or independent entity of a QFC scheme, is subject to any applicable
            condition, restriction or requirement in the scheme’s constitutional
            document.

3.1.4        Constitutional document and checklist to be filed with
             registration application—all QFC schemes
             The person who is to become the operator of a scheme under these
             rules must file with the application for registration of the scheme—
             (a) a copy of the scheme’s constitutional document; and
             (b) a checklist prepared by the person listing all the statements and
                 provisions required by these rules and indicating where they
                 are in the constitutional document.




page 22              Collective Investment Schemes Rules 2010                  V2

                                 Effective: 1/7/11
                               Constitutional requirements—QFC schemes     Chapter 3
                                 Constitutional document—QFC schemes        Part 3.1

                                                                           Rule 3.1.5

3.1.5       Amendments           of    constitutional           document—all    QFC
            schemes
        (1) This rule applies if the constitutional document of a QFC scheme is
            amended.
        (2) Not later than 21 days after the day the amendment is made, the
            operator must file with the Regulatory Authority—
             (a) a copy of the amendment and the constitutional document as
                 amended; and
             (b) a written certificate by the operator stating that—
                   (i) the amendment was made in accordance with these rules
                       and the scheme’s constitutional document; and
                   (ii) the constitutional document as amended does not contain
                        a provision that conflicts with any provision of these
                        rules.
            Note     See pt 5.4 (Unitholder approvals and notice—QFC schemes) for the
                     unitholder approval or notice required for amendments of the
                     constitutional document.

3.1.6       Prohibited amendments of constitutional document—
            QFC UCITS type schemes
            The constitutional document of a QFC UCITS type scheme may not
            be amended in such a way that it ceases to be a UCITS type scheme.
            Note     UCITS type scheme is defined in r 1.3.5.




V2                       Collective Investment Schemes Rules 2010              page 23

                                      Effective: 1/7/11
Chapter 3        Constitutional requirements—QFC schemes
Part 3.2         Units—QFC schemes
Division 3.2.A   Units—all QFC schemes
Rule 3.2.1




Part 3.2                      Units—QFC schemes
Division 3.2.A                Units—all QFC schemes
3.2.1        Fractions of units—all QFC schemes
            The constitutional document of a QFC scheme may authorise the
            scheme to issue fractions of units.
             Note     Constitutional document is defined in r 3.1.1.

3.2.2        Smaller and larger denomination shares etc—CICs
        (1) The constitutional document of a CIC may provide that the rights
            attached to shares of any class are to be expressed in
            2 denominations; one of which (the smaller denomination) is to be
            such proportion of the other (the larger denomination) as is fixed
            by the constitutional document.
             Note     CIC is defined in r 1.3.7. Constitutional document is defined in r 3.1.1.

        (2) For any class of shares of a CIC to which subrule (1) applies, any
            share with rights expressed in the smaller denomination is a smaller
            denomination share, and any share with rights expressed in the
            larger denomination is a larger denomination share.
        (3) For any class of shares of a CIC that is not expressed in
            2 denominations, the rights that attach to a share of the class are
            equal to the rights that attach to every other share of that class.
        (4) For any class of shares of a CIC that is expressed in
            2 denominations—
             (a) the rights that attach to a share of the class are equal to the
                 rights that attach to every other share of that class of the same
                 denomination; and


page 24               Collective Investment Schemes Rules 2010                               V2

                                    Effective: 1/7/11
                                 Constitutional requirements—QFC schemes         Chapter 3
                                                        Units—QFC schemes          Part 3.2
                                     Units—QFC qualified investor schemes    Division 3.2.B
                                                                                 Rule 3.2.3

             (b) the rights that attach to a smaller denomination share of the
                 class are the relevant proportion of the rights that attach to a
                 larger denomination share of that class.
        (5) For subrule (4) (b):
              relevant proportion means the proportion fixed                      by    the
             constitutional document (as mentioned in subrule (1)).

3.2.3        Bearer certificates may not be issued—all QFC schemes
        (1) Bearer certificates may not be issued for units in a QFC scheme.
        (2) In this rule:
             bearer certificate means a certificate or other document evidencing
             title that indicates that the bearer is entitled to the units in the QFC
             scheme stated in it.
             Note    Document evidencing title is defined in the glossary.

Division 3.2.B                 Units—QFC qualified investor
                               schemes
3.2.4        Classes of units—QFC qualified investor schemes
        (1) The operator of a QFC qualified investor scheme may issue the
            classes of units that are set out in the constitutional document.
             Note    Class is defined in the glossary. Constitutional document is defined in
                     r 3.1.1.

        (2) However, the operator may issue a class of units only if the rights of
            unitholders of any class are not unfairly prejudiced as against the
            interests of the unitholders of any other class of units.




V2                          Collective Investment Schemes Rules 2010                page 25

                                        Effective: 1/7/11
Chapter 3        Constitutional requirements—QFC schemes
Part 3.2         Units—QFC schemes
Division 3.2.C   Units—QFC retail schemes
Rule 3.2.5


3.2.5        Limited issue—QFC qualified investor schemes
        (1) This rule applies to units in a QFC qualified investor scheme if,
            under the constitutional document, the issue of the units may be
            limited.
        (2) The operator may only issue the units if the issue—
             (a) is permitted by the constitutional document; and
             (b) is in accordance with the conditions, restrictions and
                 requirements (if any) stated in the latest filed prospectus; and
             (c) will not materially prejudice any existing unitholders.
             Note     Latest filed prospectus is defined in the glossary.

Division 3.2.C                 Units—QFC retail schemes
3.2.6        Classes of units—QFC retail schemes
        (1) The constitutional document of a QFC retail scheme may—
             (a) provide for different classes of units to be issued; and
             (b) if the scheme is an umbrella scheme—provide for different
                 classes of units to be issued for a subscheme.
             Note     Constitutional document is defined in r 3.1.1. Umbrella scheme and
                      subscheme are defined in r 1.2.11.

        (2) However, a new unit class must not be issued, or an existing unit
            class amended, if that would result in prejudice to unitholders of any
            other unit class.
        (3) Also, the nature, operation and effect of a unit class must be
            reasonably capable of being explained clearly to prospective
            unitholders.




page 26               Collective Investment Schemes Rules 2010                       V2

                                    Effective: 1/7/11
                                 Constitutional requirements—QFC schemes            Chapter 3
                                                        Units—QFC schemes             Part 3.2
                                                  Units—QFC retail schemes      Division 3.2.C
                                                                                    Rule 3.2.7

3.2.7        Currency class units—QFC retail schemes
        (1) This rule applies to a currency class unit in a QFC retail scheme.
             Note 1   A currency class unit differs from other units mainly in that its price,
                      having been calculated initially in the base currency will be quoted (and
                      normally paid for) in the currency of the designation of the class.
                      Income distributions will also be paid for in the currency of designation
                      of the class.
             Note 2   Currency class unit, base currency and class are defined in the
                      glossary.

        (2) The currency of the class must not be the base currency.
        (3) However, if the units in a subscheme are, in accordance with a
            statement in the latest filed prospectus, to be valued in a currency
            other than the base currency, the currency of the class may be in the
            base currency, but must not be in that other currency.
             Note     Subscheme is defined in r 1.2.11.

        (4) The price must be expressed in the currency of the class.
             Note     Price is defined in the glossary.

        (5) Any distribution must be paid in the currency of the class.
        (6) Statements of amounts of money or values included in statements
            must be given in the currency of the class (whether or not also given
            in the base currency).

3.2.8        Rights of unit classes—QFC retail schemes
        (1) If any class of units in a QFC retail scheme has different rights from
            another class of units in the scheme, the constitutional document
            must provide a method for calculating the proportion of the value of
            the scheme property, and the proportion of income available for
            allocation, attributable to each such class.
             Note     Class is defined in the glossary.



V2                         Collective Investment Schemes Rules 2010                   page 27

                                        Effective: 1/7/11
Chapter 3        Constitutional requirements—QFC schemes
Part 3.2         Units—QFC schemes
Division 3.2.C   Units—QFC retail schemes
Rule 3.2.8


       (2) For a QFC retail scheme that is not an umbrella scheme, the
           constitutional document must not provide for any class of units in
           relation to which—
             (a) the extent of the rights to participate in the capital property,
                 income property or distribution account would be decided
                 differently from the extent of the corresponding rights for any
                 other class of units; or
             (b) payments or accumulation of income or capital would differ in
                 source or form from those of any other class of units.
             Note      Capital property, income property and distribution account are defined
                       in the glossary.

       (3) For a QFC retail scheme that is an umbrella scheme, subrule (2) (a)
           applies to classes of units in relation to each subscheme as if each
           subscheme were a separate QFC retail scheme.
       (4) Subrules (2) and (3) do not prohibit a difference between the rights
           attached to classes of units that relates solely to any of the
           following:
             (a) the accumulation of income by way of periodical credit to
                 capital rather than distribution;
             (b) charges and expenses that may be taken out of the scheme
                 property or payable by the unitholders;
             (c) the currency in which prices or values are expressed or
                 payments made.
                    Note     Price is defined in the glossary.




page 28                Collective Investment Schemes Rules 2010                           V2

                                    Effective: 1/7/11
                              Constitutional requirements—QFC schemes         Chapter 3
                                                     Units—QFC schemes          Part 3.2
                                               Units—QFC retail schemes   Division 3.2.C
                                                                              Rule 3.2.9

3.2.9       Smaller and larger denomination shares—QFC retail
            schemes
        (1) This rule applies if the constitutional document of a CIC that is a
            QFC retail scheme provides, in relation to any class of shares, for
            smaller denomination shares and larger denomination shares.
            Note     CIC is defined in r 1.3.7. Smaller denomination share and larger
                     denomination share are defined in r 3.2.2 (2).

        (2) If a registered holding of shares includes a number of smaller
            denomination shares that can be consolidated into a larger
            denomination share of the same class, the operator must consolidate
            the relevant number of the smaller denomination shares into a larger
            denomination share.
        (3) To effect a transaction in shares, the operator may substitute the
            relevant number of smaller denomination shares for a larger
            denomination share.
        (4) If the operator acts under subrule (3), subrule (2) does not apply to
            the resulting smaller denomination share holding until the
            transaction is completed.

3.2.10      Subdivision and consolidation of units—QFC retail
            schemes
        (1) Unless expressly forbidden by the constitutional document, the
            operator of a QFC retail scheme may decide—
             (a) that each unit in any class is to be subdivided into 2 or more
                 units; or
             (b) that units in any class are to be consolidated.
        (2) The operator must immediately give notice to each unitholder (or
            the first named of joint unitholders) of any subdivision or
            consolidation under subrule (1).



V2                       Collective Investment Schemes Rules 2010               page 29

                                     Effective: 1/7/11
Chapter 3        Constitutional requirements—QFC schemes
Part 3.2         Units—QFC schemes
Division 3.2.C   Units—QFC retail schemes
Rule 3.2.11


       (3) Subrule (2) does not apply if the operator had given the notice
           before the subdivision or consolidation became effective.

3.2.11       Guarantees and capital protection—QFC retail schemes
       (1) This rule applies if there is—
             (a) any arrangement intended to result in a particular capital or
                 income return from a holding of units in a QFC retail scheme;
                 or
             (b) any investment objective of giving protection to the capital
                 value of, or income return from, a holding of units in a QFC
                 retail scheme.
       (2) The arrangement or protection must not create the possibility of a
           conflict of interest as between—
             (a) unitholders and the operator or independent entity; or
             (b) unitholders intended and not intended to benefit from the
                 arrangement.
       (3) If, in accordance with any information mentioned in schedule 4
           (Prospectus content—QFC retail schemes), rule S4.27 (a) (iv)
           (Additional information), action is required by the unitholders to
           obtain the benefit of any guarantee, the operator must provide
           reasonable written notice to unitholders before the action is
           required.
             Note     The Regulatory Authority may direct the operator of a QFC scheme to
                      change the name of the scheme if the name implies a degree of security
                      in relation to the capital or income that is not justified (see r 8.9.1
                      (3) (h) and (5) to (11).

3.2.12       Switching rights—QFC retail umbrella schemes
            In accordance with the Financial Services Regulations, schedule 3,
            part 3, paragraph 6.5, the participants in a QFC retail scheme that is


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                                             Units—QFC schemes             Part 3.2
                                       Units—QFC retail schemes      Division 3.2.C
                                                                        Rule 3.2.12

     an umbrella scheme are entitled to exchange rights in a subscheme
     for rights in another subscheme of the umbrella scheme.
     Note   Umbrella scheme and subscheme are defined in r 1.2.11.




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Chapter 4       The operator and independent entity—QFC schemes
Part 4.1        The operator—all QFC schemes

Rule 4.1.1




Chapter 4                    The operator and independent
                             entity—QFC schemes

Part 4.1                     The operator—all QFC schemes

4.1.1        Requirements for operator—all QFC schemes
        (1) The operator of a QFC scheme must be an authorised firm that—
             (a) is a corporation; and
                 Note     Corporation is defined in the glossary.

             (b) has an authorisation for each of the following regulated
                 activities:
                  (i) operating collective investment schemes;
                  (ii) dealing in investments;
                 (iii) managing investments; and
                 Note     Authorisation, regulated activity and the regulated activities
                          mentioned in this paragraph are defined in the glossary.

             (c) is permitted under the scope of its authorisation to be the
                 operator of the scheme, QFC schemes of that kind or any
                 scheme registered in the QFC; and
             (d) is a different person from the independent entity; and
             (e) for a CIC or CIP—is a different person from the scheme; and
                 Note     CIC and CIP are defined in r 1.3.7 and r 1.3.8 respectively.

             (f) is independent of—
                  (i) the independent entity; and

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                                                                                   Rule 4.1.2

                   (ii) if the scheme is a CIC or CIP—the scheme; and
                   (iii) a member (however described) of the governing body of
                         the independent entity or, for a CIC or CIP, the scheme.
                   Note      Governing body is defined in the glossary.

        (2) Without limiting subrule (1) (f), the operator is not independent of
            another person if—
             (a) the operator has at any time during the last 2 years been
                 involved in material business dealings with the person
                 (otherwise than in the exercise of their respective functions as
                 the holders of positions in relation to any scheme); or
             (b) the person has a material interest in the operator or the operator
                 has a material interest in the person.
            Note      Function is defined in the glossary.

4.1.2       Operator must comply with                        legal        and   regulatory
            requirements—all QFC schemes
        (1) The operator of a QFC scheme must comply with every legal and
            regulatory requirement applying to the operator—
             (a) in relation to the scheme; or
             (b) as the operator of a QFC scheme; or
             (c) as an authorised firm.
        (2) Without limiting subrule (1), the operator must act in accordance
            with the following:
             (a) these rules;
             (b) any regulations under which the QFC scheme is established,
                 including any law applied by, or that supplements, those
                 regulations;



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Part 4.1        The operator—all QFC schemes

Rule 4.1.3


             (c) the other provisions of the law applying in the QFC in relation
                 to—
                    (i) the scheme; or
                    (ii) the operator as the operator of a QFC scheme or as an
                         authorised firm;
             (d) the scope of the operator’s authorisation, including any
                 conditions, restrictions or requirements;
                    Note     Authorisation is defined in the glossary.

             (e) the scope of the scheme’s registration, including any
                 conditions, restrictions or requirements;
             (f) the constitutional document;
                    Note     Constitutional document is defined in r 3.1.1.

             (g) the latest filed prospectus.
                    Note     Latest filed prospectus is defined the glossary.

4.1.3        Functions of operator generally—all QFC schemes
        (1) The operator of a QFC scheme is responsible for managing the
            scheme, including all the scheme property.
             Note      Scheme property is defined in r 1.2.3.

        (2) Without limiting subrule (1), the operator of a QFC scheme must—
             (a) ensure that decisions about investments and borrowings by the
                 scheme are made in accordance with the scheme’s investment
                 objectives, strategies and policy as stated in the constitutional
                 document and latest filed prospectus; and
                    Note     Borrowing and latest filed prospectus are defined in the glossary.
                             Constitutional document is defined in r 3.1.1

             (b) value the scheme property in accordance with these rules; and


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                                                                                   Rule 4.1.4

             (c) calculate the scheme’s net asset value, net asset value per unit,
                 and the price of units for issue and redemption, in accordance
                 with these rules; and
                   Note      Net asset value and net asset value per unit are defined in the
                             glossary.

            (d) ensure the scheme property is—
                   (i) clearly identified as scheme property; and
                   (ii) held separately from the operator’s own property, and the
                        property of any other scheme; and
             (e) give the independent entity instructions about the exercise of
                 rights in relation to the scheme property; and
             (f) for a qualified investor scheme—not acquire or dispose of any
                 immovable property without the independent entity’s prior
                 consent.
            Note      The operator also has functions in relation to the scheme under a
                      number of other provisions of these rules eg see pt 8.2 (Valuation and
                      pricing—QFC schemes).

4.1.4       Duty of operator to report certain breaches of law—all
            QFC schemes
        (1) This rule applies if—
             (a) the operator of a QFC scheme becomes aware that the
                 operator, the independent entity or any other person has
                 breached, or suspects on reasonable grounds that the operator,
                 the independent entity or any other person may have breached
                 or may be about to breach, in relation to the scheme any
                 provision of these rules, any other Rules, any other law of the
                 QFC or the law of any other jurisdiction; and
                   Note      Rules is defined INAP. Breach and jurisdiction are defined in the
                             glossary.



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Part 4.1         The operator—all QFC schemes

Rule 4.1.5


             (b) the breach has had, or is likely to have, a material adverse
                 effect on the scheme or the interests of unitholders.
        (2) The operator must tell the Regulatory Authority about the breach
            immediately, but within 1 business day.
             Examples—meaning of ‘within 1 business day’
             1      If, on a business day, the operator becomes aware of the breach, the operator
                    must tell the authority about it immediately, but on that day.
             2      If, on a day that is not a business day, the operator becomes aware of the
                    breach, the operator must tell the authority about it immediately, but by no
                    later than the next business day.
             Note       Business day is defined in the glossary.

        (3) The operator must give the Regulatory Authority any information
            about the breach that the authority reasonably requires.
             Note       Under GENE, s 4.1.3 an authorised firm must also advise the authority
                        of certain significant events.

4.1.5        Particular duties of operator—all QFC schemes
             The operator of a QFC scheme must—
             (a) act honestly; and
             (b) exercise the degree of care and diligence that a reasonable
                 person would exercise in the operator’s position; and
             (c) act in the best interests of the unitholders and, if there is a
                 conflict between the unitholders’ interests and its own
                 interests, give priority to the unitholders’ interests; and
             (d) treat unitholders who hold units in the same class equally and
                 unitholders who hold units in different classes fairly; and
                     Note      Class is defined in the glossary.

             (e) not make improper use of information acquired as a result of
                 being the operator—


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                                                                                 Rule 4.1.6

                      (i) to gain, directly or indirectly, a personal advantage or an
                          advantage for another person; or
                  (ii) to cause detriment to the unitholders; and
             (f) not make improper use of the position of operator—
                      (i) to gain, directly or indirectly, a personal advantage or an
                          advantage for another person; or
                  (ii) to cause detriment to the unitholders.

4.1.6        Register of unitholders—all QFC schemes
        (1) The operator of a QFC scheme must ensure that a register of
            unitholders is kept as part of the operator’s records under rule 4.1.7.
        (2) The operator must exercise all due diligence and take reasonable
            care to ensure that—
             (a) the register is accurate, complete and up to date; and
             (b) for a qualified investor scheme—only a person who is a
                 qualified investor for the scheme is recorded in the register.
             Note 1     Qualified investor scheme, and qualified investor for a QFC scheme,
                        are defined in r 1.3.2 and r 1.2.12 (2) respectively.
             Note 2     Rule 8.3.1 specifies the information that must be included in the
                        register.

4.1.7        Records of operator—all QFC schemes
        (1) The operator of a QFC scheme must make the records necessary—
             (a) to enable the operator to comply with—
                      (i) these rules; and
                  (ii) the other provisions of the law applying in the QFC in
                       relation to—
                          (A) the scheme; or

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Part 4.1        The operator—all QFC schemes

Rule 4.1.7


                       (B) the operator as the operator of a QFC scheme or as
                           an authorised firm; and
             (b) to demonstrate at all times whether it has complied with these
                 rules.
       (2) If the scheme is a QFC qualified investor scheme and the latest filed
           prospectus states that the operator’s policy is to require a dilution
           adjustment or dilution levy, the operator must make a record of—
             (a) how it calculates and estimates dilution; and
             (b) its policy and method for deciding the rate or amount of any
                 dilution adjustment or dilution levy.
             Note    Latest filed prospectus, dilution adjustment, dilution levy and dilution
                     are defined in the glossary.

       (3) If the scheme is a QFC retail scheme, the operator must make a
           record of—
             (a) how it calculates and estimates dilution; and
             (b) its policy and method for deciding the rate or amount of any
                 dilution adjustment or dilution levy.
       (4) Subrules (2) and (3) do not limit subrule (1).
       (5) The operator must keep records made for this rule for at least
           6 years after the day they are made.
       (6) The operator must, at the request of the Regulatory Authority, the
           independent entity or the auditor—
             (a) make records kept under this rule available for inspection
                 within a reasonable period of not longer than 3 days; and
             (b) provide a copy of any of the records, in the requested form (if
                 any), within a reasonable period of not longer than 3 days.



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                                                                                    Rule 4.1.8

        (7) The operator must not charge for making records available, or
            providing a copy of any records, under subrule (6).
            Note      GENE, ch 6 also contains provisions about record-keeping.

4.1.8       Operator must give information etc to independent entity
            and auditor—all QFC schemes
            The operator of a QFC scheme must, on request, immediately give
            the independent entity or auditor of the scheme the information and
            explanations in relation to the scheme that the independent entity or
            auditor reasonably requires.

4.1.9       Maintenance of capital notification—CIC’s
            If the capital of a CIC changes so that it falls below the minimum, or
            exceeds the maximum, stated in the constitutional document, the
            operator must tell the Regulatory Authority about the change
            immediately, but within 1 business day after the day the change
            happens.
            Examples
            See examples to rule 4.1.4 (2) on the meaning of ‘within 1 business day’.
            Note      CIC is defined in r 1.3.7.




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Chapter 4        The operator and independent entity—QFC schemes
Part 4.2         The independent entity—QFC schemes
Division 4.2.A   Independent entity generally—QFC schemes
Rule 4.2.1




Part 4.2                       The independent entity—QFC
                               schemes
Division 4.2.A                 Independent entity generally—QFC
                               schemes
4.2.1        Requirements for independent entity—all QFC schemes
        (1) The independent entity of a QFC scheme must be—
             (a) appointed by the operator; and
             (b) either—
                   (i) an authorised firm that—
                        (A) has an authorisation for providing custody services
                            and operating collective investment schemes; and
                        (B) is permitted under the scope of its authorisation to be
                            the independent entity of the scheme, QFC schemes
                            of that kind or any QFC scheme; and
                        (C) is a corporation; or
                        Note     Authorised firm, authorisation, corporation and the
                                 regulated activities mentioned in para (i) (A) are defined in
                                 the glossary.

                   (ii) a corporation that is not an authorised firm or another
                        QFC licensed firm if the operator has certified in writing
                        that, after performing due diligence, it is satisfied that—
                        (A) the corporation is an appropriate person to be the
                            independent entity of the scheme; and
                        (B) the corporation can effectively exercise the
                            independent entity’s functions under these rules; and

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                             Independent entity generally—QFC schemes         Division 4.2.A
                                                                                  Rule 4.2.1

                      (C) the appointment of the corporation as independent
                          entity of the scheme is in the interest of participants
                          and potential participants in the scheme; and
                        Note     QFC licensed firm, exercise and function are defined in
                                 the glossary. Participant is defined in r 1.2.2.

          (c) a different person from the operator and, if the scheme is a CIC
              or CIP, the scheme; and
               Note       CIC and CIP are defined in r 1.3.7 and r 1.3.8 respectively.

          (d) independent of—
                (i) the operator; and
               (ii) if the scheme is a CIC or CIP—the scheme; and
              (iii) a member (however described) of the governing body of
                    the operator or, for a CIC or CIP, the scheme; and
               Note 1     Governing body is defined in the glossary.
               Note 2     See r (4) on the meaning of ‘independent’.

          (e) for a CIT—the trustee of the trust.
               Note       CIT is defined in r 1.3.9.

     (2) In deciding whether to give a certificate under subrule (1) (b) (ii) in
         relation to a corporation, the operator must consider each of the
         following matters:
          (a) anything the Regulatory Authority could consider in assessing
              the corporation’s fitness and propriety if the corporation were
              an applicant for an authorisation, including the following:
                (i) the corporation’s expertise and market reputation;
               (ii) the corporation’s credit rating, capital and financial
                    resources;
              (iii) the corporation’s regulatory status and history;


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Chapter 4        The operator and independent entity—QFC schemes
Part 4.2         The independent entity—QFC schemes
Division 4.2.A   Independent entity generally—QFC schemes
Rule 4.2.1


                  (iv) the other members of the corporation’s group and their
                       activities;
                  Note     Group is defined in the glossary.

             (b) the need to ensure that the corporation provides protection for
                 unitholders at least equivalent to the protection that would be
                 provided by an independent entity that is an authorised firm;
             (c) the regulatory regimes and legal systems (including insolvency
                 laws) to which the corporation is subject;
             (d) the regulatory authorisations (however described) held by the
                 corporation;
             (e) whether the corporation has entered into an agreement with the
                 operator and, if so, the terms of the agreement;
             (f) the corporation’s arrangements for safeguarding the scheme
                 property and its use of agents and service providers;
             (g) the obligations applying to the corporation, and the recourse
                 available against the corporation by the operator, the
                 Regulatory Authority and participants, under those regulatory
                 regimes and legal systems in relation to anything done or not
                 done by the corporation in relation to the scheme;
             (h) whether the corporation has submitted to the jurisdiction of the
                 Regulatory Authority, the QFC Court or both.
       (3) Subrule (2) does not limit the matters the operator may consider.
       (4) Without limiting subrule (1) (d), the independent entity is not
           independent of another person if—
             (a) the independent entity has at any time during the last 2 years
                 been involved in material business dealings with the person
                 (otherwise than in the exercise of their respective functions as
                 holders of positions in relation to a scheme); or


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                                  The independent entity—QFC schemes         Part 4.2
                            Independent entity generally—QFC schemes   Division 4.2.A
                                                                           Rule 4.2.2

            (b) the person has a material interest in the independent entity or
                the independent entity has a material interest in the person.

4.2.2       Independent entity must comply with legal and regulatory
            requirements—all QFC schemes
        (1) The independent entity of a QFC scheme must comply with every
            legal and regulatory requirement applying to the independent
            entity—
            (a) in relation to the scheme; or
            (b) as the independent entity of a QFC scheme; or
            (c) if the independent entity is an authorised firm—as an
                authorised firm.
        (2) Without limiting subrule (1), the independent entity must act in
            accordance with the following:
            (a) these rules;
            (b) any regulations under which the QFC scheme is established,
                including any law applied by, or that supplements, those
                regulations;
            (c) the other provisions of the law applying in the QFC in relation
                to—
                  (i) the scheme; or
                 (ii) the independent entity as the independent entity of a QFC
                      scheme; or
                (iii) if the independent entity is an authorised firm—the
                      independent entity as an authorised firm;




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Part 4.2         The independent entity—QFC schemes
Division 4.2.A   Independent entity generally—QFC schemes
Rule 4.2.3


             (d) if the independent entity is an authorised firm—the scope of
                 the independent entity’s authorisation, including any
                 conditions, restrictions or requirements;
                  Note     Authorisation is defined in the glossary.

             (e) the scope of the scheme’s registration, including any
                 conditions, restrictions or requirements;
             (f) the constitutional document;
             (g) the latest filed prospectus.
                  Note     Latest filed prospectus is defined in the glossary.

4.2.3        Oversight functions of independent entity—all QFC
             schemes
        (1) The independent entity of a QFC scheme must take reasonable care
            to ensure that the scheme is managed by the operator in accordance
            with—
             (a) the following provisions of these rules (as far as they apply to
                 the scheme):
                  part 5.1 (Transactions with affected persons—QFC
                      schemes)
                  rule 5.6.6 (Operator’s reports—QFC qualified investor
                      schemes)
                  rule 5.6.13 (Operator’s reports—QFC retail schemes)
                  chapter 6 (Investment and borrowing—QFC qualified
                      investor schemes)
                  chapter 7 (Investment and borrowing—QFC retail
                      schemes)
                  part 8.1 (Dealing—QFC schemes)




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                                   The independent entity—QFC schemes            Part 4.2
                             Independent entity generally—QFC schemes      Division 4.2.A
                                                                               Rule 4.2.3

                    part 8.2 (Valuation and pricing—QFC schemes)
                    part 8.7 (Accounting periods—QFC schemes)
                    part 8.8 (Income allocation and distribution—QFC
                      schemes); and
         (b) the provisions of the constitutional document, and the latest
             filed prospectus, that relate to any of the following matters:
                 (i) transactions with affected persons;
                (ii) reports of the operator about the scheme;
                (iii) investment and borrowing by the scheme;
                (iv) dealing in units;
                (v) valuation of the scheme property and pricing of units;
                (vi) income and capital of the scheme, including their
                     distribution.
     (2) Without limiting subrule (1), the independent entity must take
         reasonable care to ensure on a continuing basis that—
         (a) the operator is adopting appropriate procedures to ensure that
             the scheme’s net asset value, and the price per unit in each
             class, are calculated for each valuation point in accordance
             with these rules; and
         (b) the operator has made and kept sufficient records to show that
             the scheme’s net asset value, and the price per unit in each
             class, have been calculated for each valuation point in
             accordance with these rules.
         Note        Net asset value, class, price and valuation point are defined in the
                     glossary.




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Part 4.2         The independent entity—QFC schemes
Division 4.2.A   Independent entity generally—QFC schemes
Rule 4.2.4


4.2.4        Duty of independent entity to report certain breaches of
             law etc—all QFC schemes
        (1) This rule applies if the independent entity of a QFC scheme
            becomes aware that the operator or any other person has breached,
            or suspects on reasonable grounds that the operator or any other
            person may have breached or may be about to breach, in relation to
            the scheme any provision of these rules, any other law of the QFC or
            the law of any other jurisdiction.
             Note      Breach and jurisdiction are defined in the glossary.

        (2) The independent entity must immediately tell the operator in writing
            about the breach.
        (3) Subrule (4) applies if—
             (a) the independent entity is of the opinion that the operator has
                 not taken, or does not propose to take, appropriate action in
                 relation to the breach; and
             (b) the breach—
                    (i) is of a provision mentioned in rule 4.2.3 (1) (Oversight
                        functions of independent entity—all QFC schemes); or
                    (ii) has had, or is likely to have, a material adverse effect on
                         the scheme or the interests of unitholders.
        (4) If this subrule applies, the independent entity must tell the
            Regulatory Authority about the breach immediately, but within
            1 business day.
             Examples
             See examples to rule 4.1.4 (2) on the meaning of ‘within 1 business day’.

        (5) The independent entity must give the Regulatory Authority any
            information about the breach that the authority reasonably requires.




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                                 Independent entity generally—QFC schemes   Division 4.2.A
                                                                                Rule 4.2.5

4.2.5       Particular duties of independent entity—all QFC schemes
            The independent entity of a QFC scheme must—
            (a) act honestly; and
            (b) exercise the degree of care and diligence that a reasonable
                person would exercise in the independent entity’s position; and
            (c) be independent of the operator; and
            (d) act as independent entity solely in the interests of the
                unitholders; and
            (e) treat unitholders who hold units in the same class equally and
                unitholders who hold units in different classes fairly; and
                   Note      Class is defined in the glossary.

            (f) not make improper use of information acquired as a result of
                being the independent entity—
                   (i) to gain, directly or indirectly, a personal advantage or an
                       advantage for another person; or
                   (ii) to cause detriment to the unitholders; and
            (g) not make improper use of the position of independent entity—
                   (i) to gain, directly or indirectly, a personal advantage or an
                       advantage for another person; or
                   (ii) to cause detriment to the unitholders.

4.2.6       Property safeguarding functions of independent entity—
            all QFC schemes
        (1) The independent entity of a QFC scheme is responsible for
            safeguarding all the scheme property.
            Note      Scheme property is defined r 1.2.3.




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Part 4.2         The independent entity—QFC schemes
Division 4.2.A   Independent entity generally—QFC schemes
Rule 4.2.6


       (2) Without limiting subrule (1), the independent entity must—
             (a) ensure that all the scheme property is properly accounted for;
                 and
             (b) ensure that all the scheme property is—
                   (i) clearly identified as scheme property; and
                   (ii) held separately from the independent entity’s own
                        property, the operator’s own property and the property of
                        any other person; and
             (c) take all steps and complete all documents needed to ensure
                 completion of transactions properly entered into for the
                 scheme; and
             (d) ensure that instructions properly given by the operator about
                 the exercise of rights in relation to the scheme property are
                 carried out; and
             (e) ensure that any scheme property in registrable form is
                 registered as soon as practicable in its own name or in the
                 name of its nominee or delegate, as appropriate; and
             (f) take into its custody or control all documents evidencing title
                 to the scheme property, other than in relation to derivatives and
                 forward positions; and
                  Note     Document evidencing title and derivative are defined in the
                           glossary.

             (g) ensure that any resulting benefit of a derivative or forward
                 transaction is received by it for the scheme property; and
             (h) collect, hold and deal with income in relation to the scheme
                 property.
       (3) If the scheme property includes units in any other scheme operated
           by the operator or an associate of the operator, the independent


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                              Independent entity generally—QFC schemes   Division 4.2.A
                                                                             Rule 4.2.7

            entity must exercise any voting rights given by the units in
            accordance with what the independent entity reasonably believes to
            be in the interest of the unitholders of the QFC scheme.
             Note     Associate is defined in the glossary.

        (4) If the independent entity is of the opinion that a deal in property in
            relation to the scheme breaches these rules or the constitutional
            document, the independent entity may require the operator—
             (a) to cancel the transaction or make a disposal or acquisition to
                 restore the previous situation; and
             (b) to meet any resulting loss or expense.
             Note     Deal and breach is defined in the glossary.

        (5) If the independent entity is of the opinion that—
             (a) an acquisition of property necessarily involves documents
                 evidencing title being kept in the custody of a person other
                 than the independent entity; and
             (b) the independent entity cannot reasonably be expected to accept
                 the responsibility that would otherwise be placed on it if it
                 were to permit custody by the other person;
             the operator must either cancel the transaction or make a
             corresponding disposal if the independent entity asks it to take
             action under this subrule.

4.2.7        Records of independent entity—all QFC schemes
        (1) The independent entity of a QFC scheme must make the records
            necessary—
             (a) to enable the independent entity to comply with—
                    (i) these rules; and



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Part 4.2         The independent entity—QFC schemes
Division 4.2.A   Independent entity generally—QFC schemes
Rule 4.2.8


                    (ii) the other provisions of the law applying in the QFC in
                         relation to—
                        (A) the scheme; or
                        (B) the independent entity as the independent entity of a
                            QFC scheme or, if the independent entity is an
                            authorised firm, as an authorised firm; and
             (b) to demonstrate at all times whether it has complied with these
                 rules.
        (2) The independent entity must keep records made for this rule for at
            least 6 years after the day they are made.
        (3) The independent entity must, at the request of the Regulatory
            Authority, operator or auditor—
             (a) make records kept under this rule available for inspection
                 within a reasonable period of not longer than 3 days; and
             (b) provide a copy of any of the records, in the requested form (if
                 any), within a reasonable period of not longer than 3 days.
        (4) The independent entity must not charge for making records
            available, or providing a copy of any records, under subrule (3).
             Note     GENE, ch 6 also contains provisions about record-keeping by
                      independent entities that are authorised firms.

4.2.8        Independent entity must give information etc to operator
             and auditor—all QFC schemes
             The independent entity of a QFC scheme must, on request,
             immediately give the operator or auditor of the scheme the
             information and explanations in relation to the scheme that the
             operator or auditor reasonably requires.




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                                       The independent entity—QFC schemes           Part 4.2
                               Non-QFC independent entities—QFC schemes       Division 4.2.B
                                                                                  Rule 4.2.9

Division 4.2.B                  Non-QFC independent entities—QFC
                                schemes
4.2.9       Non-QFC independent entities—criteria for Regulatory
            Authority action
        (1) This rule applies in relation to the making of a decision by the
            Regulatory Authority under these rules about whether a corporation
            that is not an authorised firm or another QFC licensed firm is an
            appropriate person to be the independent entity of a QFC scheme (or
            a scheme established in the QFC that is proposed to become a QFC
            scheme).
            Note    This rule applies to decisions under the following provisions:
                          r 2.1.3 (2) (d) (ii) (Decision on application for registration of
                            scheme established in QFC)
                          r 4.2.13 (2) (a) (Non-QFC independent entities—removal by
                            Regulatory Authority).

        (2) The Regulatory Authority may consider all or any of the matters
            mentioned in rule 4.2.1 (2) (a) to (h) (Requirements for independent
            entity—all QFC schemes).
        (3) Subrule (2) does not limit the matters the Regulatory Authority may
            consider.

4.2.10      Non-QFC independent                    entities—annual           compliance
            certificate
        (1) This rule applies to the independent entity of a QFC scheme if the
            independent entity is not an authorised firm.




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Part 4.2         The independent entity—QFC schemes
Division 4.2.B   Non-QFC independent entities—QFC schemes
Rule 4.2.11


       (2) Not later than 1 February in each year, the independent entity must
           give the operator a written certificate about its compliance with the
           following provisions in relation to the QFC scheme during the
           previous year (the reporting year):
            rule 4.2.3 (Oversight functions of independent entity—all QFC
                schemes)
            rule 4.2.6 (Property safeguarding functions of independent
                entity—all QFC schemes).
       (3) The certificate must—
             (a) name the QFC scheme; and
             (b) state whether the independent entity complied fully with all
                 relevant provisions in relation to its functions under rule 4.2.3
                 and rule 4.2.6 and, if it did not fully comply with all relevant
                 provisions, the details of any material non-compliance.
                    Note     Function is defined in the glossary.

       (4) In this rule:
             relevant provisions means the provisions of—
             (a) these rules; and
             (b) any other law of the QFC applying in relation to the scheme;
                 and
             (c) the law of any other jurisdiction (if any) applying in relation to
                 the scheme.
             Note      Jurisdiction is defined in the glossary.

4.2.11       Non-QFC independent entities—oversight of property
             safeguarding functions by operators
       (1) This rule applies in relation to the independent entity of a QFC
           scheme if the independent entity is not an authorised firm.


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                                The independent entity—QFC schemes         Part 4.2
                        Non-QFC independent entities—QFC schemes     Division 4.2.B
                                                                        Rule 4.2.12

     (2) The operator must take reasonable care to ensure that the
         independent entity exercises its functions under rule 4.2.6 (Property
         safeguarding functions of independent entity—all QFC schemes) in
         accordance with the provisions of—
          (a) these rules; and
          (b) any other law of the QFC applying in relation to the scheme;
              and
          (c) the law of any other jurisdiction (if any) applying in relation to
              the scheme.

4.2.12   Non-QFC independent entities—removal by operators
     (1) This rule applies in relation to the independent entity of a QFC
         scheme if—
          (a) the independent entity is not an authorised firm; and
          (b) the operator considers that the independent entity is not, or is
              no longer, an appropriate person to be the independent entity of
              the scheme.
     (2) In making a decision for subrule (1) (b), the operator must consider
         the matters mentioned in rule 4.2.1 (2) (a) to (h) (Requirements for
         independent entity—all QFC schemes).
     (3) Subrule (2) does not limit the matters the operator may consider.
     (4) If this rule applies, the operator must—
          (a) by written notice given to the independent entity, remove the
              independent entity; and
          (b) appoint another person as the independent entity of the scheme.
     (5) The person appointed must be eligible to be the independent entity
         of the scheme under rule 4.2.1.



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Chapter 4        The operator and independent entity—QFC schemes
Part 4.2         The independent entity—QFC schemes
Division 4.2.B   Non-QFC independent entities—QFC schemes
Rule 4.2.13


       (6) If the independent entity is removed under this rule, the operator
           must tell the Regulatory Authority about the removal immediately,
           but within 1 business day after the day the independent entity is
           removed.
       (7) If another person is appointed as the independent entity under this
           rule, the operator must tell the Regulatory Authority about the
           appointment immediately, but within 1 business day after the day
           the appointment is made.
             Examples for r (6) and r (7)
             See examples to rule 4.1.4 (2) on the meaning of ‘within 1 business day’.

       (8) This rule is additional to, and does not limit, part 8.4 (Operator and
           independent entity appointment and removal—QFC schemes).

4.2.13       Non-QFC independent entities—removal by Regulatory
             Authority
       (1) The rule applies in relation to the independent entity of a QFC
           scheme if the independent entity is not an authorised firm.
       (2) The Regulatory Authority may, by written notice given to the
           operator, require the operator to remove the independent entity and
           appoint another person as the independent entity if satisfied that—
             (a) the independent entity is not, or is no longer, an appropriate
                 person to be the independent entity of the scheme; or
                   Note      See r 4.2.9 (Non-QFC independent entities—criteria for
                             Regulatory Authority action)).

             (b) it is desirable to remove the independent entity to protect
                 participants or potential participants in the scheme or the
                 financial system operating in or from the QFC; or
             (c) the independent entity is in breach of, or has been in breach of,
                 these rules, any other law of the QFC or the law of any other
                 jurisdiction; or


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                        Non-QFC independent entities—QFC schemes     Division 4.2.B
                                                                        Rule 4.2.13

          (d) a request has been received under the Financial Services
              Regulations, article 20 (International relations and co-
              operation) in relation to the independent entity.
     (3) The Regulatory Authority may give a notice under subrule (2) only
         if it has—
          (a) given the independent entity and the operator prior notice of its
              intention to give the notice; and
          (b) given the independent entity and the operator a reasonable
              opportunity to make representations; and
          (c) considered any representations made.
     (4) However, subrule (3) does not apply if—
          (a) the Regulatory Authority considers that any delay likely to
              arise because of the application of the subrule would be
              prejudicial to participants or potential participants in the QFC
              scheme or the financial system operating in or from the QFC;
              or
          (b) the power is to be exercised following a decision by the
              Regulatory Authority under the Financial Services
              Regulations, part 9 (Disciplinary and enforcement powers), or
              by the Regulatory Tribunal or the QFC Court, in relation to the
              independent entity.
     (5) If subrule (4) (a) applies, the Regulatory Authority must—
          (a) give the independent entity and the operator an opportunity to
              make representations promptly after the notice under
              subrule (2) has been given; and
          (b) consider any representations made.
     (6) If the Regulatory Authority gives a notice under subrule (2), it must
         give the independent entity a written notice—


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Part 4.2         The independent entity—QFC schemes
Division 4.2.B   Non-QFC independent entities—QFC schemes
Rule 4.2.13


             (a) stating that it has given the notice under subrule (2); and
             (b) giving reasons for the notice; and
             (c) tell the independent entity that the independent entity may
                 appeal to the Regulatory Tribunal against the decision.
       (7) The operator must give effect to a notice under subrule (2).
       (8) The person appointed by the operator as the replacement
           independent entity must be eligible to be the independent entity of
           the scheme under rule 4.2.1 (Requirements for independent entity—
           all QFC schemes).
       (9) This rule is additional to, and does not limit, any other powers of the
           Regulatory Authority to remove the independent entity of a QFC
           scheme.




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            Operator and independent entity other provisions—QFC schemes    Part 4.3

                                                                           Rule 4.3.1




Part 4.3                       Operator and independent entity
                               other provisions—QFC schemes

4.3.1        Duties of officers etc of operator and independent
             entity—all QFC schemes
        (1) This rule applies to a person who is an officer, employee or agent of
            the operator or independent entity of a QFC scheme.
        (2) The person must not—
             (a) make improper use of information acquired as a result of being
                 a person to whom this rule applies—
                    (i) to gain, directly or indirectly, a personal advantage or an
                        advantage for another person; or
                    (ii) to cause detriment to unitholders; or
             (b) make improper use of the person’s position as a person to
                 whom this rule applies—
                    (i) to gain, directly or indirectly, a personal advantage or an
                        advantage for another person; or
                    (ii) to cause detriment to unitholders.

4.3.2        Provisions of ch 4 do not limit other functions
        (1) This rule applies to a provision of this chapter that gives a function
            (however expressed) to the Regulatory Authority, the operator or
            independent entity of a QFC scheme or another person.
             Note      Function is defined in this glossary.

        (2) To remove any doubt, the provision is additional to, and does not
            limit, any function given to the Regulatory Authority, operator,
            independent entity or other person under—

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Part 4.3        Operator and independent entity other provisions—QFC schemes

Rule 4.3.2


             (a) any other provision of these rules; or
             (b) any other law of the QFC; or
             (c) for the operator—the constitutional document.




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                                      Investor relations—QFC schemes       Chapter 5
                     Transactions with affected persons—QFC schemes         Part 5.1

                                                                           Rule 5.1.1




Chapter 5                 Investor relations—QFC
                          schemes

Part 5.1                  Transactions with affected
                          persons—QFC schemes

5.1.1   Who is an affected person for a QFC scheme?
        An affected person for a QFC scheme is any of the following:
        (a) the operator;
        (b) the independent entity;
        (c) a member (however described) of the governing body of the
            operator, the independent entity or, for a CIC or CIP, the
            scheme;
        (d) for a qualified investor scheme—any standing independent
            valuer of the scheme;
        (e) any investment adviser for the scheme;
           (f) a person to whom functions of the operator or independent
               entity in relation to the scheme are outsourced;
        (g) the auditor of the scheme;
        (h) any associated person for any person mentioned in
            paragraphs (a) to (g);
           (i) a unitholder with 5% or more in value of all the units then in
               issue.
        Note      Governing body, standing independent valuer, investment adviser,
                  function and associated person are defined in the glossary. CIC and
                  CIP are defined in r 1.3.7 and r 1.3.8 respectively.


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Chapter 5        Investor relations—QFC schemes
Part 5.1         Transactions with affected persons—QFC schemes

Rule 5.1.2


5.1.2        Transactions with affected persons—general rule for all
             QFC schemes
        (1) This rule applies to a transaction by the operator of a QFC scheme
            in relation to the scheme property if the transaction is with an
            affected person.
        (2) The operator must ensure that the transaction—
             (a) is on terms at least as favourable to the scheme as any
                 comparable transaction on normal commercial terms
                 negotiated at arm’s length with an independent third party; and
             (b) does not breach any other provision of this part; and
             (c) is not prohibited by the constitutional document or the latest
                 filed prospectus.
                   Note      Constitutional document is defined in r 3.1.1. Breach and latest
                             filed prospectus are defined in the glossary.

5.1.3        Transactions with affected persons—prior notice to
             unitholders of QFC schemes
        (1) This rule applies to a proposed transaction by the operator of a QFC
            scheme in relation to the scheme property if the transaction is with
            an affected person.
        (2) The operator must not enter into the transaction unless the operator
            has given the unitholders prior written notice of the transaction (or
            transactions that include the transaction), including an explanation
            of how rule 5.1.2 has been complied with in relation to the
            transaction (or the transactions).
             Example of written notice
             notice given in the scheme’s latest filed prospectus




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                         Transactions with affected persons—QFC schemes     Part 5.1

                                                                           Rule 5.1.4

5.1.4       Transactions    with   affected persons—transactions
            involving 5% or more of QFC scheme’s net asset value
        (1) This rule applies to a proposed transaction by the operator of a QFC
            scheme in relation to the scheme property if—
             (a) the transaction is with an affected person; and
             (b) the total consideration for, or value of, the transaction (or the
                 transaction and all earlier such transactions within the last
                 12 months) is 5% or more of the latest net asset value of the
                 scheme, as disclosed in the scheme’s latest audited accounts.
                  Note     Net asset value is defined in the glossary.

        (2) The operator must not enter into the transaction unless the
            unitholders have given prior approval to the transaction at a general
            meeting in accordance with the constitutional document.

5.1.5       Transactions with affected persons—details required for
            QFC scheme’s annual reports
        (1) If the operator of a QFC scheme enters into any transaction with an
            affected person in relation to the scheme property during an annual
            accounting period, the scheme’s annual report, or the scheme’s
            annual long and short reports, for the period must include—
             (a) a summary of the total value of transactions with affected
                 persons in relation to the scheme property during the period;
                 and
             (b) a summary of the nature of the transactions; and
             (c) a summary of the identities of the affected persons; and
             (d) if the unitholders voted at a general meeting held during the
                 period to approve a transaction with an affected person—
                 details of the approval and the results of the voting in relation
                 to the approval.


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Chapter 5       Investor relations—QFC schemes
Part 5.1        Transactions with affected persons—QFC schemes

Rule 5.1.6


        (2) If the operator of a QFC scheme does not enter into a transaction
            with an affected person in relation to the scheme property during an
            annual accounting period, the scheme’s annual report, or the
            scheme’s annual long and short reports, for the period must include
            a statement to that effect.

5.1.6        Transactions      with     affected              persons—additional
             restrictions for QFC retail schemes
        (1) The operator of a QFC retail scheme must take reasonable care to
            ensure that the following transactions, arrangements or agreements
            are not entered into:
             (a) the putting of cash on deposit by the scheme with an affected
                 person, unless that person is an authorised firm or regulated
                 financial institution and the transaction complies with the
                 arm’s length requirement in subrule (2);
                 Note     Deposit, authorised firm and regulated financial institution are
                          defined in the glossary.

             (b) the lending of money by an affected person to or for the
                 scheme, unless the affected person is an authorised firm or
                 regulated financial institution and the transaction complies
                 with the arm’s length requirement in subrule (2);
             (c) the dealing in property by an affected person with or in relation
                 to the scheme (or the independent entity acting for the
                 scheme), unless subrule (3) applies;
                 Note     Deal is defined in the glossary.

             (d) the vesting of property (other than cash) by an affected person
                 in the scheme (or with the independent entity acting for the
                 scheme) against the issue of units in the scheme, unless—
                  (i) subrule (3) applies; or



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                                                                           Rule 5.1.6

              (ii) the purpose of the vesting is for—
                     (A) all or part of the property of a corporation or another
                         collective investment scheme to become the first
                         property of the QFC retail scheme; and
                     (B) holders of shares or units in the corporation or other
                         collective investment scheme to become the first
                         unitholders in the QFC retail scheme;
              Note      Corporation is defined in the glossary.

         (e) the acquisition of scheme property by an affected person from
             the scheme (or the independent entity acting for the scheme),
             unless subrule (3) applies or the acquisition is otherwise
             permitted by the constitutional document or under these rules;
              Note      See r 8.1.20 (Issue or redemption otherwise than for cash—QFC
                        retail schemes).

          (f) a stock lending arrangement or repo agreement with or in
              relation to the scheme, unless the transaction complies with the
              arm’s length requirement in subrule (2).
              Note      Stock lending arrangement and repo agreement are defined in
                        the glossary.

     (2) A transaction mentioned in subrule (1) (a), (b) or (f) must be as
         favourable to the scheme as any comparable arrangement on normal
         commercial terms negotiated at arm’s length between the affected
         person and an independent third party.
     (3) A transaction does not breach subrule (1) (c), (d) or (e) if the
         transaction complies with—
         (a) subrule (4) (the best execution on-exchange requirement); or
         (b) subrule (5) (the independent valuation requirement); or
         (c) subrule (6) (the arm’s length transaction requirement).



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Chapter 5       Investor relations—QFC schemes
Part 5.1        Transactions with affected persons—QFC schemes

Rule 5.1.6


       (4) For subrule (3), the transaction complies with this subrule (the best
           execution on-exchange requirement) if—
             (a) the property is an approved derivative or approved security;
                 and
                  Note    Approved derivative is defined in r 7.1.8. Approved security is
                          defined in r 7.1.9.

             (b) the transaction is effected under the rules of the relevant
                 market with or through a person who is bound by those rules;
                 and
             (c) there is written evidence of the effecting of the transaction and
                 its terms; and
             (d) the operator has taken all reasonable steps to ensure that the
                 transaction is effected on the terms that are the best available
                 for the scheme.
       (5) For subrule (3), the transaction complies with this subrule (the
           independent valuation requirement) if—
             (a) the value of the property is certified in writing for the purpose
                 of the transaction by a person approved by the independent
                 entity as—
                  (i) independent of any affected person; and
                  (ii) qualified to value property of the relevant kind; and
             (b) the independent entity is of the opinion that the terms of the
                 transaction are not likely to result in any material prejudice to
                 unitholders.
       (6) For subrule (3), the transaction complies with this subrule (the arm’s
           length transaction requirement) if—
             (a) the property is not an approved derivative or approved
                 security; and


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                                                                 Rule 5.1.6

     (b) it is not reasonably practicable to comply with subrule (5) (the
         independent valuation requirement); and
     (c) the independent entity has reliable evidence that the transaction
         is or will be on terms that comply with the arm’s length
         requirement in subrule (2).




V2               Collective Investment Schemes Rules 2010          page 65

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Chapter 5       Investor relations—QFC schemes
Part 5.2        Prospectus requirements—QFC schemes

Rule 5.2.1




Part 5.2                     Prospectus requirements—QFC
                             schemes

5.2.1        Prospectus to be drawn up—all QFC schemes
             The operator of a QFC scheme must ensure that a prospectus is
             drawn up for the scheme in accordance with these rules.
             Note    Prospectus is defined in the glossary.

5.2.2        Prospectus etc to be made available—all QFC schemes
        (1) The operator of a QFC scheme must make available free of charge
            the latest filed prospectus, and the latest filed translation of the
            prospectus in each language for which there is a translation prepared
            by or for the operator, to any person eligible to invest in the scheme
            before the person buys units (or additional units) in the scheme.
             Note    Latest filed prospectus and latest filed translation are defined in the
                     glossary.

        (2) The operator of a UCITS type scheme must, on the request of a
            unitholder of the scheme, give the unitholder the following
            information supplementary to the information provided by the latest
            filed prospectus:
             (a) the quantitative limits applying to the risk management of the
                 scheme;
             (b) the methods used in relation to risk management;
             (c) any recent developments in relation to the risk and yield of the
                 main categories of investment.
             Note    UCITS type scheme is defined in r 1.3.5.




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                                Prospectus requirements—QFC schemes          Part 5.2

                                                                            Rule 5.2.3

5.2.3        General information requirements for prospectus—all
             QFC schemes
        (1) The operator of a QFC scheme must ensure that the scheme’s
            prospectus at all times contains all the information that investors and
            their professional advisers would reasonably require, and reasonably
            expect to have drawn to their attention, in the prospectus for the
            purpose of making an informed judgment about—
             (a) the merits and risks of participating in the scheme; and
             (b) the extent and characteristics of the risks accepted by
                 participating in the scheme.
        (2) The operator must ensure that at all times the prospectus contains a
            clear and easily understandable explanation of any risks that
            investment in the scheme may reasonably be regarded as presenting
            to investors in the scheme.
        (3) Without limiting subrules (1) and (2), the operator must ensure that
            at all times the prospectus includes the information, statements and
            provisions required for the QFC scheme by—
             (a) if the scheme is a qualified investor scheme—schedule 3
                 (Prospectus content—QFC qualified investor schemes); and
             (b) if the scheme is a retail scheme—schedule 4 (Prospectus
                 content—QFC retail schemes).

5.2.4        Other general requirements for prospectus—all QFC
             schemes
        (1) The operator of a QFC scheme must ensure that any prospectus for
            the scheme—
             (a) is in English; and
             (b) presents information about the scheme clearly and fairly; and
             (c) does not contain any untrue or misleading statement; and

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Part 5.2        Prospectus requirements—QFC schemes

Rule 5.2.5


             (d) otherwise complies with these rules.
        (2) Subrule (1) (a) does not prevent the operator preparing, or arranging
            for the preparation of, a translation of the prospectus in any other
            language.
        (3) However, the operator must ensure that any translation of a
            prospectus prepared by or for the operator—
             (a) presents information about the scheme clearly and fairly; and
             (b) does not contain any untrue or misleading statement; and
             (c) is otherwise a correct translation; and
             (d) prominently displays the date of the translation; and
             (e) states that it is a translation authorised by the operator; and
             (f) otherwise complies with these rules.

5.2.5        Prospectus, checklist and any translations to be filed
             with registration application—all QFC schemes
        (1) The person who is to become the operator of a collective investment
            scheme established in the QFC must file with the application for
            registration of the scheme under these rules—
             (a) the original prospectus for the scheme; and
             (b) a checklist prepared by the person listing all the statements and
                 information required by these rules and indicating where they
                 are in the original prospectus; and
             (c) each translation of the original prospectus that has been
                 prepared by or for the person; and
             (d) for each translation mentioned in paragraph (c)—a certificate
                 by the person who made the translation stating that the
                 translation is a correct translation of the original prospectus.


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        (2) If the person mentioned in subrule (1) (either before or after
            becoming the initial operator of the scheme), or a person who is a
            later operator of the scheme, prepares another translation of the
            original prospectus or has another translation prepared, the person
            must immediately, but within 1 business day after the day the
            translation is prepared, file with the Regulatory Authority—
             (a) the translation; and
             (b) a certificate by the person who made the translation stating that
                 the translation is a correct translation of the original
                 prospectus.
             Examples
             See examples to rule 4.1.4 (2) on the meaning of ‘within 1 business day’.

        (3) The certificate of a person under subrule (1) (d) or (2) (b) must state,
            in English, the person’s—
             (a) full name and address; and
             (b) qualifications for making the translation.

5.2.6        Revisions of prospectus etc—all QFC schemes
        (1) The operator of a QFC scheme must keep the latest filed prospectus
            under review.
        (2) If the operator becomes aware of the happening of any materially
            significant change affecting a statement or information required to
            be included in the prospectus, the operator must—
             (a) immediately revise the prospectus and immediately file a
                 revised or supplementary prospectus with the Regulatory
                 Authority; and
             (b) if a translation of the latest filed prospectus has been filed with
                 the authority in a particular language—the operator must
                 immediately prepare, or arrange for the preparation of, a
                 translation of the revised or supplementary prospectus in that

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Rule 5.2.6


                   language and immediately file the translation with the
                   authority.
             Example of materially significant change
             a change in the scheme’s investment objectives, strategies or policy

       (3) Without limiting subrules (1) and (2), the operator must, at least
           once every year—
             (a) review the latest filed prospectus, make any revisions
                 necessary and, whether or not revisions are necessary,
                 immediately file a prospectus or revised prospectus with the
                 Regulatory Authority; and
             (b) if a translation of the latest filed prospectus has been filed with
                 the authority in a particular language—file with any revised or
                 supplementary prospectus filed under paragraph (a) a
                 translation of that prospectus in the same language.
       (4) To remove any doubt, subrules (2) and (3) do not prevent the
           operator—
             (a) revising the latest filed prospectus at any other time; or
             (b) preparing, or arranging for the preparation of, a translation or
                 revised translation of the latest filed prospectus in any
                 language.
       (5) If the operator revises the latest filed prospectus otherwise than
           under subrule (2) or (3), the operator must immediately file a
           revised or supplementary prospectus with the Regulatory Authority.
       (6) If the operator prepares, or arranges for the preparation of, a
           translation or revised translation of the latest filed prospectus
           otherwise than under subrule (2) or (3), the operator must
           immediately file the translation with the Regulatory Authority.
       (7) A prospectus filed under this rule must be accompanied by a
           checklist prepared by the operator listing all the statements and


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           information required by these rules and indicating where they are in
           the prospectus.
      (8) A translation of a prospectus filed under this rule must be
          accompanied by a certificate signed by the person who made the
          translation stating that the translation is a correct translation of the
          prospectus.
      (9) The certificate of a person under subrule (8) must state, in English,
          the person’s—
           (a) full name and address; and
           (b) qualifications for making the translation.
     (10) If, under this rule, the operator is required to do something
          immediately, the operator must do the thing immediately, but within
          1 business day after the day the requirement to do the thing arises.
           Examples
           See examples to rule 4.1.4 (2) on the meaning of ‘within 1 business day’.




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Part 5.3        Prospectus responsibility—QFC schemes

Rule 5.3.1




Part 5.3                     Prospectus responsibility—QFC
                             schemes

5.3.1        Persons responsible for prospectus—all QFC schemes
        (1) Each of the following persons is responsible for a QFC scheme’s
            prospectus:
             (a) the operator;
             (b) each member (however described) of the governing body of
                 the operator;
                  Note     Governing body is defined in the glossary.

             (c) subject to subrules (2) and (3), each person who has accepted,
                 and is stated in the prospectus to have accepted, responsibility
                 for the prospectus or any part of it;
             (d) subject to subrules (2) and (3), each person who is taken under
                 rule 5.3.2 (Responsibility for expert statements in prospectus—
                 all QFC schemes) to have accepted responsibility for part of
                 the prospectus;
             (e) subject to subrules (2) and (3), each person not mentioned in
                 paragraphs (a) to (d) who has authorised, and is stated in the
                 prospectus to have authorised, the prospectus or any part of it.
        (2) If a person accepts (or is taken under rule 5.3.2 to have accepted)
            responsibility for, or authorises, only part of a prospectus, the person
            is responsible only for that part of the prospectus.
        (3) However, the person is responsible for that part of the prospectus
            only if it is included in, or substantially in, the form and context in
            which the person accepted responsibility for it, consented to its
            inclusion or authorised it.


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                                                                       Rule 5.3.2

        (4) This rule does not make a person responsible for a prospectus only
            because the person gave advice about its contents, in a professional
            capacity, to a person mentioned in subrule (1) (a) to (e).

5.3.2       Responsibility for expert statements in prospectus—all
            QFC schemes
        (1) For this rule, an expert is a person whose profession or reputation
            gives authority to statements made by the person.
        (2) For rule 5.3.1 (1) (d), an expert is taken to have accepted
            responsibility for a part of a QFC scheme’s prospectus if—
             (a) the part is a statement made by, or is based on a statement
                 made by, the expert; and
             (b) the expert gave the operator written consent for the statement
                 to be included in the prospectus; and
             (c) the prospectus states that the expert authorised the statement;
                 and
             (d) the expert does not withdraw the consent, by written notice
                 given to the operator, before the prospectus is filed with the
                 Regulatory Authority.
        (3) The operator must keep the following for at least 6 years after the
            day the prospectus is last made available to a person eligible to
            invest in the scheme:
             (a) the expert’s consent;
             (b) any written notice given to the operator withdrawing the
                 expert’s consent.

5.3.3       Liability for prospectus—all QFC schemes
        (1) A person responsible under rule 5.3.1 (Persons responsible for
            prospectus—all QFC schemes) for a prospectus is liable to pay


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Rule 5.3.4


             compensation to another person who acquires (or contracts to
             acquire) units in the scheme for any loss or damage arising from—
             (a) any untrue or misleading statement in the prospectus; or
             (b) the omission from the prospectus of any matter required by
                 these rules to have been included in it.
        (2) However, if rule 5.3.1 (1) (c), (d) or (e) applies to the person, the
            person is only liable to pay compensation in relation to a part of the
            prospectus for which the person is responsible under rule 5.3.1 (2)
            and (3).
        (3) Also, this rule is subject to rule 5.3.4.
        (4) To remove any doubt, this rule does not limit any liability that exists
            apart from this rule.
        (5) In this rule:
             prospectus includes a translation of the prospectus prepared by or
             for the operator.

5.3.4        Exceptions        from      liability     for    prospectus—all   QFC
             schemes
        (1) A person (other than the operator) is not liable under rule 5.3.3 to
            pay compensation, in relation to a statement in, or omission from, a
            QFC scheme’s prospectus, to another person who acquires units in
            the scheme if—
             (a) at the time the prospectus was filed with the Regulatory
                 Authority, the person believed on reasonable grounds, after
                 having made all inquiries that were reasonable—
                   (i) that the statement was true and not misleading; or
                  (ii) that the omitted matter was properly omitted; and
                  Note      See defs acquire and prospectus in r (6).


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                                                                     Rule 5.3.4

         (b) 1 or more of the following subparagraphs apply:
               (i) the person continued in that belief until the units were
                   acquired;
              (ii) the units were acquired before it was reasonably
                   practicable to bring a correction to the attention of
                   potential purchasers of the units;
              (iii) before the units were acquired, the person had already
                    taken all reasonable steps to ensure that a correction was
                    brought to the attention of potential purchasers of the
                    units;
              (iv) the person who acquired the units was not materially
                   influenced or affected by the statement or omission in
                   making the decision to invest.
     (2) A person (the first person) is not liable under rule 5.3.3 to pay
         compensation, in relation to a statement in a QFC scheme’s
         prospectus, to another person who acquired units in the scheme if—
          (a) the statement is a part of the prospectus for which a third
              person (the expert) is taken, under rule 5.3.2 (Responsibility
              for expert statements in prospectus—all QFC schemes), to
              have accepted responsibility; and
         (b) at the time the prospectus was filed with the Regulatory
             Authority, the first person believed on reasonable grounds,
             after having made all inquiries that were reasonable—
               (i) that the expert was competent to make the statement; and
              (ii) that the expert gave the operator written consent to
                   include the statement in the prospectus; and
              (iii) that the expert had not withdrawn the consent; and




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Rule 5.3.4


                 (iv) that the statement was included in, or substantially in, the
                      form and context in which the expert consented to its
                      inclusion; and
             (c) 1 or more of the following subparagraphs apply:
                  (i) the first person continued in that belief until the units
                      were acquired;
                  (ii) the units were acquired before it was reasonably
                       practicable to bring a correction to the attention of
                       potential purchasers of the units;
                 (iii) before the units were acquired, the first person had
                       already taken all reasonable steps to ensure that a
                       correction was brought to the attention of potential
                       purchasers of the units;
                 (iv) the person who acquired the units was not materially
                      influenced by the statement in making the decision to
                      invest.
       (3) For the application of subrule (1) (b) (iii) or (2) (c) (iii) in relation to
           a person, it is sufficient if, before the units were acquired—
             (a) the correction had been published in a way likely to bring it to
                 the attention of potential purchasers of the units; or
             (b) the person took all reasonable steps to ensure that such a
                 correction was published and believed on reasonable grounds
                 the correction had been published.
       (4) A person is not liable under rule 5.3.3 to pay compensation, in
           relation to a statement in or omission from a QFC scheme’s
           prospectus, to another person who acquired units in the scheme if
           the other person knew, at the time of acquisition, that the statement
           was untrue or misleading or of the omission.



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                                                                        Rule 5.3.4

     (5) For this rule—
          (a) a revised or supplementary prospectus is taken to be a different
              prospectus from the original prospectus; and
          (b) each revised or supplementary prospectus filed with the
              Regulatory Authority is taken to be a different prospectus from
              each other revised or supplementary prospectus filed with the
              authority.
     (6) In this rule:
          acquire units includes contract to acquire them.
          prospectus includes a translation of the prospectus prepared by or
          for the operator.




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Chapter 5        Investor relations—QFC schemes
Part 5.4         Unitholder approvals and notice—QFC schemes
Division 5.4.A   Unitholder approvals and notice—QFC qualified investor schemes
Rule 5.4.1




Part 5.4                      Unitholder approvals and
                              notice—QFC schemes
Division 5.4.A                Unitholder approvals and notice—
                              QFC qualified investor schemes
5.4.1        Changes requiring unitholder approval or notice—QFC
             qualified investor schemes
        (1) Any proposed change or event that would reasonably be considered
            a fundamental change in relation to a QFC qualified investor
            scheme requires the prior approval of an ordinary resolution of the
            unitholders.
        (2) Any proposed change or event that would not reasonably be
            considered a fundamental change in relation to a QFC qualified
            investor scheme, but that would reasonably be considered a
            significant change, requires the giving of reasonable notice to
            unitholders to become effective.
        (3) If a change mentioned in subrule (1) or (2) affects only a particular
            subscheme or class of units, it is sufficient to comply with the
            subrule only in relation to unitholders of the subscheme or class of
            units.
        (4) For subrule (3), the provisions of these rules apply in relation to the
            change as if—
             (a) a reference to unitholders of the scheme were a reference to the
                 unitholders of the subscheme or class of units; and
             (b) all other necessary changes were made.
        (5) The operator of a QFC qualified investor scheme must ensure this
            rule is complied with in relation to the scheme.


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                                                                                      Rule 5.4.2

        (6) If a fundamental change in relation to a QFC qualified investor
            scheme happens, the operator must give the Regulatory Authority
            written notice of the change not later than 21 days after the day the
            change happens.

Division 5.4.B                   Unitholder approvals and notice—
                                 QFC retail schemes
5.4.2       Fundamental changes requiring prior                               approval        by
            unitholder meeting—QFC retail schemes
        (1) The operator of a QFC retail scheme must, by way of a special
            resolution, obtain prior approval from the unitholders for any
            proposed change or event in relation to the scheme that is a
            fundamental change.
            Note        Special resolution is defined in the glossary.

        (2) For this rule, a fundamental change is a change or event—
             (a) that changes the purpose or nature of the scheme; or
             (b) that may materially prejudice a unitholder; or
             (c) that changes the risk profile of the scheme; or
             (d) that introduces any new type of payment out of scheme
                 property.
            Guidance on fundamental changes
            1      Any change or event may be fundamental depending on its degree of
                   materiality and effect on the scheme and its unitholders. Consequently, the
                   operator will need to decide in each case whether a particular change is
                   fundamental in nature.
            2      For rule 5.4.2 (2) (a) to (c), a fundamental change is likely to include any of
                   the following:
                   (a) any proposal for a scheme of arrangement;




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Division 5.4.B   Unitholder approvals and notice—QFC retail schemes
Rule 5.4.3

                 (b)      a change in the investment objectives, strategies or policy to achieve
                          capital growth from investment in one jurisdiction rather than another
                          jurisdiction;
                 (c)      a change in the investment objectives, strategies or policy to achieve
                          capital growth from investments in fixed interest rather than
                          investments in equity;
                 (d)      a change in the investment objectives, strategies or policy to allow the
                          scheme to invest in derivatives as an investment strategy that increases
                          its volatility;
                 (e)      a change to the characteristics of the scheme to distribute income
                          annually rather than monthly.

5.4.3        Significant changes requiring pre-event notification—
             QFC retail schemes
        (1) The operator of a QFC retail scheme must give prior written notice
            of not less than 60 days to unitholders of any proposed change or
            event in relation to the scheme that is a significant change.
        (2) For this rule, a significant change is a change or event that is not a
            fundamental change under rule 5.4.2, but—
             (a) affects a unitholder’s ability to exercise rights in relation to the
                 unitholder’s investment; or
             (b) would reasonably be expected to cause the unitholder to
                 reconsider participation in the scheme; or
             (c) results in any increased payments out of the scheme property to
                 the operator or an associated person for the operator; or
                   Note        Associated person is defined in the glossary.

             (d) materially increases other types of payments out of scheme
                 property.
             Guidance on significant changes
             1   Any change or event may be significant depending on its degree of
                 materiality and effect on the scheme and its unitholders. Consequently, the



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                                                                                   Rule 5.4.4

                operator will need to decide in each case whether a particular change is
                significant in nature.
            2   For rule 5.4.3, a significant change is likely to include any of the following:
                (a) a change in how the scheme property is valued;
                (b) a change in the method of price publication;
                (c) a change in the operator’s operational policy (for example, allocation
                       of payments policy).

5.4.4       Notifiable changes—QFC retail schemes
        (1) The operator of a QFC retail scheme must notify unitholders in an
            appropriate way, and within a reasonable time, of any change or
            event in relation to the scheme that is a notifiable change.
        (2) For this rule, a notifiable change is a change or event, other than a
            fundamental change under rule 5.4.2 or a significant change under
            rule 5.4.3, that is reasonably likely to affect, or has affected, the
            scheme or its operation unless the operator decides that the change
            or event is insignificant.
            Guidance on notifiable changes
            1   The circumstances causing a notifiable change may or may not be within the
                control of the operator.
            2   For rule 5.4.4, a notifiable change is likely to include any of the following:
                (a) a change of named investment manager if the scheme has been
                      marketed on the basis of the manager’s involvement;
                (b) a change of named investment adviser if the scheme has been
                      marketed on the basis of the adviser’s involvement;
                (c) a significant political event that affects the scheme or its operation;
                (d) a change on the time of the valuation point;
                (e) a change of independent entity;
                 (f) a change in the scheme’s name.
            3   The appropriate way and reasonable time for notification would depend on
                the nature of the change or event. Consequently, the operator will need to
                assess each change or event individually.
            4   An appropriate way for notification could include any or all the following:
                (a) sending a notice to unitholders;


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Division 5.4.B   Unitholder approvals and notice—QFC retail schemes
Rule 5.4.4

                 (b)   publishing the information on a website;
                 (c)   including the information in the next annual report of the scheme.




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                     Unitholder meetings—QFC qualified investor schemes   Division 5.5.A
                                                                              Rule 5.5.1




Part 5.5                    Unitholder meetings—QFC
                            schemes
Division 5.5.A              Unitholder meetings—QFC qualified
                            investor schemes
5.5.1       Unitholder meetings—QFC qualified investor schemes
        (1) The constitutional document of a QFC qualified investor scheme
            must set out details of the procedures for the calling and conducting
            of meetings, and for resolutions, of unitholders.
        (2) The procedures must be reasonable and fair as between the parties.
        (3) The operator must record minutes of all proceedings to which
            rule 5.4.1 (Changes requiring unitholder approval or notice—QFC
            qualified investor schemes) or this rule apply.
        (4) The operator must keep the minutes for at least for 6 years after the
            day they are made.

Division 5.5.B              Unitholder             meetings—QFC                 retail
                            schemes
5.5.2       Special meaning of unitholder in div 5.5.B—QFC retail
            schemes
        (1) A reference in this division to a unitholder of a QFC retail scheme
            in relation to a meeting is a reference to a unitholder of the scheme
            as at a cut-off date for the meeting selected by—
             (a) if the independent entity calls the meeting—the independent
                 entity; and
             (b) in any other case—the operator.


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Rule 5.5.3


        (2) The date selected by the independent entity or operator must be a
            reasonable time before notices of the meeting are sent out.

5.5.3        Application of div 5.5.B to class meetings—QFC retail
             schemes
        (1) This division applies to a class meeting for a class of units in a QFC
            retail scheme as if—
             (a) a reference to a general meeting of the scheme were a
                 reference to the class meeting; and
             (b) a reference to units were a reference to units in the class; and
             (c) a reference to unitholders were a reference to unitholders of
                 units in the class; and
             (d) a reference to prices of units were a reference to prices of units
                 in the class; and
             (e) all other necessary changes were made.
             Note     Class is defined in the glossary.

        (2) In this rule:
             class meeting, for a class of units in the scheme, means a separate
             meeting of unitholders of that class of units.

5.5.4        General meetings of unitholders—QFC retail schemes
        (1) The operator or independent entity of a QFC retail scheme may call
            a general meeting of unitholders at any time.
        (2) The unitholders may, at any time, request the calling of a general
            meeting of unitholders.
        (3) The request must—
             (a) state the object of the meeting; and


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                                                                                Rule 5.5.5

             (b) be dated; and
             (c) be signed by unitholders who, at that date, are registered as the
                 unitholders of units representing not less than the required
                 percentage in value of all the units then in issue; and
             (d) be given to the operator or independent entity.
        (4) If the operator or independent entity is given a request for a general
            meeting of unitholders that complies with subrule (3), the operator
            or independent entity must immediately call a general meeting.
        (5) The date fixed for the general meeting called under subrule (4) must
            not be later than 8 weeks after the day the request is given to the
            operator or independent entity.
        (6) In this rule:
             required percentage means—
             (a) 10%; or
             (b) if the constitutional document provides for a lower
                 percentage—that percentage.

5.5.5        Notice of general meetings of unitholders—QFC retail
             schemes
        (1) This rule applies if the operator or independent entity of a QFC
            retail scheme (the initiating entity) decides to call a general meeting
            to unitholders.
        (2) The initiating entity must give unitholders notice of the meeting.
        (3) The notice must—
             (a) be given to each unitholder at least 14 days before the date
                 fixed for the meeting; and
             (b) state the place, date and time of the meeting; and


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Rule 5.5.5


             (c) state the terms of the resolutions to be proposed.
             Note      Rule 5.5.10 (3) also requires a notice to contain a reasonably prominent
                       statement that a unitholder may appoint a proxy if the unitholder is
                       entitled to attend and vote.

       (4) If the meeting is adjourned, the initiating entity must give
           unitholders notice of the adjourned (or further adjourned) meeting.
       (5) Notice of an adjourned meeting (including a further adjourned
           meeting) must—
             (a) be given to each unitholder at least 14 days before the date of
                 the adjourned meeting; and
             (b) state the place, date and time of the adjourned meeting; and
             (c) state that, although 2 unitholders present in person or by proxy
                 are required for a quorum at the adjourned meeting, this may
                 be reduced to 1 if a quorum is not present after a reasonable
                 time from the time fixed for the start of the meeting.
                    Note     See r 5.5.6 (Quorum for unitholder meetings—QFC retail
                             schemes).

       (6) In working out the 14-day period for subrule (3) (a) or (5) (a), the
           day the notice is given and the day of the meeting are included.
       (7) If the operator is the initiating entity, the operator must give a copy
           of each notice under subrule (2) or (4) to the independent entity not
           later than the start of the 14-day period mentioned in subrule (3) (a)
           or (5) (a).
       (8) If the independent entity is the initiating entity, the independent
           entity must give a copy of each notice under subrule (2) or (4) to the
           operator not later than the start of the 14-day period mentioned in
           subrule (3) (a) or (5) (a).




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                                        Unitholder meetings—QFC schemes           Part 5.5
                                   Unitholder meetings—QFC retail schemes   Division 5.5.B
                                                                                Rule 5.5.6

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

5.5.6        Quorum for unitholder meetings—QFC retail schemes
        (1) The quorum required to conduct business at a meeting of
            unitholders of a QFC retail scheme is 2 unitholders, present in
            person or by proxy.
        (2) If a quorum is not present after a reasonable time from the time
            fixed for the start of the meeting, the meeting—
             (a) if called at the request of unitholders—must be dissolved; and
             (b) in any other case—must be adjourned to—
                    (i) a day and time that is at least 7 days after the day and
                        time of the meeting; and
                    (ii) a place to be appointed by the chair of the meeting.
        (3) If, at an adjourned meeting under subrule (2) (b), a quorum is not
            present after a reasonable time from the time fixed for the start of
            the meeting, a single person who is entitled to be counted in a
            quorum, and is present at the meeting, is taken to be a quorum.

5.5.7        Resolutions at unitholder meetings—QFC retail schemes
        (1) Unless a special resolution is required or permitted by these rules,
            any resolution of unitholders of a QFC retail scheme is passed by a
            simple majority of the votes validly cast at a general meeting of
            unitholders.
             Note      Special resolution is defined in the glossary.

        (2) But, if the votes are equal, the chair of the meeting is entitled to a
            casting vote.



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Chapter 5          Investor relations—QFC schemes
Part 5.5           Unitholder meetings—QFC schemes
Division 5.5.B     Unitholder meetings—QFC retail schemes
Rule 5.5.8


        (3) If a resolution (including a special resolution) is required to conduct
            business at a meeting of unitholders, and every unitholder is
            prohibited under rule 5.5.8 from voting—
             (a) it is not necessary to call a meeting of unitholders; and
             (b) a resolution may, with the prior written agreement of the
                 independent entity, instead be passed with the written consent
                 of the unitholders representing 50% or more (or, for a special
                 resolution, 75% or more) of the units in issue.

5.5.8        Voting rights at unitholder meetings—QFC retail schemes
        (1) On a show of hands at a general meeting of unitholders of a QFC
            retail scheme, every unitholder of the scheme who is present in
            person has 1 vote.
        (2) On a poll, the following provisions apply:
             (a) votes may be given in person, by proxy or in another way
                 permitted by the constitutional document;
             (b) the voting rights for each unit are calculated in accordance with
                 the following formula:
                                                B
                                           A
                                                C
          where:
                    A is the total number of the voting rights given by all the units
                    in issue at the cut-off date selected by the operator under rule
                    5.5.2 (Special meaning of unitholder in div 5.5.B—QFC retail
                    schemes).
                    B is the price of the unit.




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                                     Unitholder meetings—QFC schemes                   Part 5.5
                                Unitholder meetings—QFC retail schemes           Division 5.5.B
                                                                                     Rule 5.5.8

                 C is the total of the prices of all the units in issue at the cut-off
                 date selected by the operator under rule 5.5.2;
                 Note     See r (6) for the treatment of the operator’s units.

          (c) a unitholder need not use all the unitholder’s votes or cast all
              the unitholder’s votes in the same way.
          Note      Price and issue are defined in the glossary.

     (3) For joint unitholders, the vote of the most senior unitholder 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 is decided by the order in which the names are recorded in
         the unitholder register.
     (4) The operator cannot be counted in the quorum of any meeting of the
         scheme, and neither the operator nor any associate of the operator
         may vote at any meeting of the scheme.
          Note      Associate is defined in the glossary.

     (5) The prohibition in subrule (4) against voting at any meeting of the
         scheme does not apply in relation to units held on behalf of, or
         jointly, with a person if—
          (a) the person would be entitled to vote if the person were the
              registered unitholder; and
          (b) the operator or associate of the operator has received voting
              instructions from the person.
     (6) For this division, units held, or treated as held, by the operator must
         not be taken to be in issue unless subrule (5) applies to them.




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Chapter 5        Investor relations—QFC schemes
Part 5.5         Unitholder meetings—QFC schemes
Division 5.5.B   Unitholder meetings—QFC retail schemes
Rule 5.5.9


5.5.9        Right to demand poll at unitholder meetings—QFC retail
             schemes
        (1) A resolution put to the vote at a general meeting of unitholders of a
            QFC retail scheme must be decided on a show of hands unless a poll
            is demanded by—
             (a) the chair of the meeting; or
             (b) at least 2 unitholders; or
             (c) the independent entity.
        (2) The poll may be demanded only before or on the declaration of the
            result of the show of hands.
        (3) Unless a poll is demanded in accordance with this rule, a declaration
            by the chair of the meeting about the result of a resolution is
            conclusive evidence of the result.

5.5.10       Proxies at unitholder meetings—QFC retail schemes
        (1) A unitholder of a QFC retail scheme may appoint another person to
            attend a general meeting of unitholders of the scheme and vote in
            the unitholder’s place.
        (2) Unless the constitutional document provides otherwise, a unitholder
            of a QFC retail scheme may appoint more than 1 proxy to attend on
            the same occasion but a proxy may vote only on a poll.
        (3) Every notice calling a meeting of unitholders of a QFC retail
            scheme must contain a reasonably prominent statement that a
            unitholder may appoint a proxy if the unitholder is entitled to attend
            and vote.
        (4) Any document relating to the appointment of a proxy must not be
            required to be received more than 48 hours before the time fixed for
            the start of the meeting or adjourned meeting.



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                                  Unitholder meetings—QFC schemes           Part 5.5
                             Unitholder meetings—QFC retail schemes   Division 5.5.B
                                                                         Rule 5.5.11

5.5.11    Chair, adjournment and minutes of unitholder meetings—
          QFC retail schemes
     (1) A meeting of unitholders of a QFC retail scheme must have a chair
         for the meeting who is nominated by the independent entity.
     (2) If the chair is not present after a reasonable time from the time fixed
         for the start of the meeting, the unitholders present must choose a
         unitholder present to be the chair of the meeting.
     (3) The chair of the meeting may adjourn the meeting from time to
         time, and from place to place, if a quorum is present at the meeting
         and the meeting agrees.
     (4) The chair of the meeting must adjourn the meeting from time to
         time, and from place to place, if directed to do so by the meeting.
     (5) Business must not be transacted at any adjourned meeting unless it
         could have been lawfully transacted at the original meeting.
     (6) The operator must ensure that—
          (a) minutes of all resolutions and proceedings at every meeting of
              unitholders are made and kept for at least 6 years after the day
              of the meeting; and
          (b) any minute under paragraph (a) is signed by the chair of the
              meeting.
     (7) Any minute mentioned in subrule (6) (b) is conclusive evidence of
         the matters stated in it.




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Chapter 5        Investor relations—QFC schemes
Part 5.6         Reports, accounts and auditors—QFC schemes
Division 5.6.A   Accounting standards and auditors—all QFC schemes
Rule 5.6.1




Part 5.6                      Reports, accounts and
                              auditors—QFC schemes
Division 5.6.A                Accounting standards and auditors—
                              all QFC schemes
5.6.1        Accounting standards—all QFC schemes
        (1) Unless subrule (2) or (3) applies, the operator of a QFC scheme
            must prepare and keep all financial accounts and statements in
            accordance with—
             (a) US GAAP; or
             (b) UK GAAP or IFRS, as supplemented, if appropriate, by the
                 Statement of Recommended Practice issued from time to time
                 by the United Kingdom Investment Management Association.
             Note     US GAAP, UK GAAP and IFRS are defined in r (4).

        (2) If the scheme is an Islamic fund, the operator must prepare and keep
            all financial accounts and statements in accordance with the
            accounting standards of AAOIFI FAS 14.
             Note     Islamic fund is defined in r 1.3.11. AAOIFI is defined in the glossary.

        (3) If the operator of an umbrella scheme operates 1 or more
            subschemes that are Islamic funds, it must prepare and keep all
            financial accounts and statements in accordance with IFRS, as
            supplemented by AAOIFI FAS 14.
             Note 1   Umbrella scheme and subscheme are defined in r 1.2.11.
             Note 2   AAOIFI FAS 14 sets out the accounting rules for conventional
                      institutions that offer Islamic financial services.




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                           Reports, accounts and auditors—QFC schemes           Part 5.6
                      Accounting standards and auditors—all QFC schemes   Division 5.6.A
                                                                              Rule 5.6.2

        (4) In this rule:
             IFRS means International Financial Reporting Standards.
             UK GAAP means generally accepted accounting principles in the
             United Kingdom of Great Britain and Northern Ireland.
             US GAAP means generally accepted accounting principles in the
             United States of America.

5.6.2        Appointment and removal of auditors etc—all QFC
             schemes
        (1) The operator of a QFC scheme must ensure that there is an auditor
            of the scheme at all times, and that the auditor is a QFC approved
            auditor.
        (2) The operator of a QFC scheme may, from time to time, appoint a
            QFC approved auditor as auditor of the scheme.
        (3) The audit fees of the auditor are as decided by the operator.
        (4) The operator may remove the auditor at any time.
        (5) The operator may exercise a power under subrule (2), (3) or (4) only
            with the independent entity’s approval.
        (6) The power under subrule (4) has effect despite anything in any
            agreement between the auditor and all or any of the following:
             (a) the operator;
             (b) the independent entity;
             (c) the scheme.
        (7) GENE, section 9.7 (Auditors) applies to the appointment and
            removal of the auditor of the QFC scheme as if the scheme were an
            authorised firm.
             Note    Authorised firm is defined in the glossary.



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Chapter 5        Investor relations—QFC schemes
Part 5.6         Reports, accounts and auditors—QFC schemes
Division 5.6.B   Reports and accounts—QFC qualified investor schemes
Rule 5.6.3


        (8) In this rule:
             QFC approved auditor means a person—
             (a) who is approved by the QFC Authority to act as an auditor; and
             (b) whose name is entered in the register of auditors maintained by
                 the QFC Companies Registration Office.

Division 5.6.B                Reports and accounts—QFC qualified
                              investor schemes
5.6.3        Reports and accounts generally—QFC qualified investor
             schemes
        (1) The operator of a QFC qualified investor scheme must prepare a
            report for each annual accounting period and half-yearly accounting
            period in accordance with this division.
             Note     Annual accounting period and half-yearly accounting period are
                      defined in the glossary.

        (2) However if the first annual accounting period is less than
            12 months, a half-yearly report need not be prepared for that period.
        (3) A report for an annual accounting period must be prepared within
            4 months after the day the period ends, and a report for a half-yearly
            accounting period must be prepared within 3 months after the day
            the period ends.
        (4) The operator must give a copy of an annual or half-yearly report
            free of charge to any unitholder on request.
        (5) If a person eligible to invest in the scheme asks for a copy of the
            latest annual or half-yearly report, the operator must give a copy
            free of charge to the person before any sale (or further sale) of units
            to the person is concluded.



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                            Reports, accounts and auditors—QFC schemes           Part 5.6
                    Reports and accounts—QFC qualified investor schemes    Division 5.6.B
                                                                               Rule 5.6.4

        (6) The operator must give a copy of each annual and half-yearly report
            to the Regulatory Authority within 21 days after the day the report is
            prepared.
        (7) If the scheme is an umbrella scheme, any annual report given to a
            unitholder or other person under subrule (4) or (5) may be a report
            prepared under rule 5.6.4 (3) for the relevant subscheme.
        (8) However, the operator must also give the unitholder or other person
            a copy of the annual report prepared under rule 5.6.4 (2) for the
            scheme as a whole if the unitholder or other person asks for it.

5.6.4        Contents of annual reports—QFC qualified investor
             schemes
        (1) An annual report for a QFC qualified investor scheme other than a
            QFC umbrella scheme must contain the following:
             (a) the full audited accounts for the annual accounting period;
             (b) the operator’s report for the period in accordance with
                 rule 5.6.6 (Operator’s reports—QFC qualified investor
                 schemes);
             (c) the independent entity’s report for the period in accordance
                 with rule 5.6.7 (Independent entity’s reports—QFC qualified
                 investor schemes);
             (d) the auditor’s report for the period in accordance with rule 5.6.8
                 (Auditor’s reports—QFC qualified investor schemes).
            Note     See also r 5.1.5 (Transactions with affected persons—details required
                     for QFC scheme’s annual reports).

        (2) An annual report for a QFC qualified investor scheme that is an
            umbrella scheme must be prepared for the scheme as a whole and
            must contain the following:
             (a) for each subscheme—the full audited accounts for the
                 subscheme for the annual accounting period and the operator’s

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Part 5.6         Reports, accounts and auditors—QFC schemes
Division 5.6.B   Reports and accounts—QFC qualified investor schemes
Rule 5.6.4


                  report for the subscheme for the period in accordance with
                  rule 5.6.6;
             (b) an aggregation of all the accounts required by paragraph (a);
             (c) the independent entity’s report for the scheme for the period in
                 accordance with rule 5.6.7;
             (d) the auditor’s report for the scheme for the period in accordance
                 with rule 5.6.8.
       (3) If the scheme is an umbrella scheme, the operator may, in addition
           to complying with subrule (2), prepare a further annual report for
           any 1 or more individual subschemes.
       (4) A report under subrule (3) for a subscheme must contain the
           following:
             (a) the full audited accounts for the subscheme for the annual
                 accounting period;
             (b) the operator’s report for the subscheme for the period in
                 accordance with rule 5.6.6;
             (c) the independent entity’s report for the scheme for the period in
                 accordance with rule 5.6.7;
             (d) the auditor’s report for the scheme for the period in accordance
                 with rule 5.6.8.
       (5) The operator of a QFC qualified investor scheme must ensure that
           the accounts mentioned in subrule (1) (a), (2) (a) and (4) (a) give a
           true and fair view of—
             (a) the net income and the net gains and losses on the scheme
                 property of the scheme (or subscheme) for the annual
                 accounting period; and
             (b) the financial position of the scheme (or subscheme) as at the
                 end of the period.

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                    Reports and accounts—QFC qualified investor schemes   Division 5.6.B
                                                                              Rule 5.6.5

5.6.5       Contents of half-yearly reports—QFC qualified investor
            schemes
        (1) A half-yearly report for a QFC qualified investor scheme, or a
            subscheme of a QFC umbrella scheme, must contain—
             (a) the full accounts for the half-yearly accounting period; and
             (b) the operator’s report for the period in accordance with
                 rule 5.6.6.
        (2) If the scheme is an umbrella scheme, the operator may choose
            whether the half-yearly report is prepared for the scheme as a whole,
            each individual subscheme, or both.

5.6.6       Operator’s reports—QFC qualified investor schemes
            A report of the operator of a QFC qualified investor scheme for a
            period must include the following:
             (a) a review of the investment activities of the scheme (or
                 subscheme) during the period against the prospectus applying
                 to the period;
             (b) particulars of any fundamental or significant change in relation
                 to the scheme (or subscheme) since the date of the operator’s
                 last report;
             (c) any other information that would enable unitholders to make
                 an informed judgment on the development of the activities of
                 the scheme (or subscheme) during the period and the results of
                 those activities as at the end of the period.

5.6.7       Independent entity’s reports—QFC qualified investor
            schemes
        (1) The independent entity of a QFC qualified investor scheme must
            make an annual report to the unitholders.



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Chapter 5        Investor relations—QFC schemes
Part 5.6         Reports, accounts and auditors—QFC schemes
Division 5.6.B   Reports and accounts—QFC qualified investor schemes
Rule 5.6.8


        (2) The report for an annual accounting period must include the
            following:
             (a) a description, which may be in summary form, of the functions
                 of the independent entity under these rules;
             (b) a statement whether, in any material respect, the provisions
                 mentioned in rule 4.2.3 (1) (Oversight functions of independent
                 entity—all QFC schemes) have not been complied with during
                 the period;
             (c) a statement whether, in any material respect, the investment
                 and borrowing powers and restrictions applying to the scheme
                 have been exceeded during the period.
        (3) The independent entity must give the report to the operator for
            inclusion in the annual report prepared under rule 5.6.3 (Reports and
            accounts generally—QFC qualified investor schemes) for the annual
            accounting period.

5.6.8        Auditor’s reports—QFC qualified investor schemes
             The operator of a QFC qualified investor scheme must ensure that
             the report of the auditor to the unitholders for an annual accounting
             period includes the following statements:
             (a) whether, in the auditor’s opinion, the accounts have been
                 properly prepared in accordance with these rules and the
                 constitutional document;
             (b) whether, in the auditor’s opinion, the accounts give a true and
                 fair view of—
                   (i) the net income and the net gains or losses of the scheme
                       property for the period; and
                   (ii) the financial position of the scheme as at the end of the
                        period;


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                             Reports and accounts—QFC retail schemes    Division 5.6.C
                                                                            Rule 5.6.9

             (c) whether the auditor is of the opinion that proper accounting
                 records for the scheme have been kept and whether the
                 accounts are in agreement with the accounting records;
             (d) whether the auditor has been given all the information and
                 explanations that, to the best of the auditor’s knowledge and
                 belief, are necessary for the purposes of the audit;
             (e) whether the auditor is of the opinion that the information given
                 in the operator’s report for the period is consistent with the
                 accounts.

Division 5.6.C              Reports and accounts—QFC retail
                            schemes
5.6.9       Preparation of long and short reports—QFC retail
            schemes
        (1) The operator of a QFC retail scheme must prepare a short report and
            a long report for each annual accounting period and half-yearly
            accounting period in accordance with this division.
            Note    Annual accounting period and half-yearly accounting period are
                    defined in the glossary.

        (2) However, if the first annual accounting period is less than 12
            months, a half-yearly report need not be prepared for that period.
        (3) For a QFC retail scheme that is an umbrella scheme, the operator
            must prepare a short report for each subscheme but need not prepare
            a short report for the QFC retail scheme as a whole.




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Chapter 5        Investor relations—QFC schemes
Part 5.6         Reports, accounts and auditors—QFC schemes
Division 5.6.C   Reports and accounts—QFC retail schemes
Rule 5.6.10


5.6.10       Contents of short reports—QFC retail schemes
       (1) The short report for a QFC retail scheme (or, for a QFC retail
           scheme that is an umbrella scheme, a subscheme) for a period must
           contain the following for the period:
             (a) the name of the scheme (or subscheme), its investment
                 objectives, strategies and policy, a brief assessment of its risk
                 profile, and the name and address of the operator;
             (b) a review of the scheme’s (or subscheme’s) investment
                 activities and investment performance during the period;
             (c) a performance record consistent with rule 5.6.14 (Comparative
                 tables—QFC retail schemes) that enables a unitholder to put
                 into context the results of the investment activities of the
                 scheme (or subscheme) during the period;
             (d) sufficient information to enable unitholders to form a view of
                 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 that would reasonably enable
                 unitholders to make an informed judgment on the activities of
                 the scheme (or subscheme) during the period and the results of
                 those activities at the end of the period;
             (f) a statement that the latest long report is available on request.
            Note      See also r 5.1.5 (Transactions with affected persons—details required
                      for QFC scheme’s annual reports).

       (2) Without limiting subrule (1) (d) and (e), the short report must
           include the following for the relevant period:
             (a) particulars of any change or event in relation to the scheme
                 during the period that is a fundamental change under rule 5.4.2
                 (Fundamental changes requiring prior approval by unitholder
                 meeting—QFC retail schemes);


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                           Reports and accounts—QFC retail schemes    Division 5.6.C
                                                                         Rule 5.6.10

          (b) particulars of any change or event in relation to the scheme
              during the period that is a significant change under rule 5.4.3
              (Significant changes requiring pre-event notification—QFC
              retail schemes), if the change or event affects the unitholders’
              ability to make an informed judgment on the activities of the
              scheme (or subscheme);
          (c) particulars of any other developments in relation to the
              investment objectives, strategies and policy of the scheme (or
              subscheme) or the instruments used by it during the period;
          (d) the total expense ratio;
          (e) particulars of any qualification of the reports of the auditor and
              independent entity;
          (f) particulars of any income or distribution relating to the period.
     (3) The operator 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.
     (4) The short report must be in the form of a separate stand-alone
         document and must not include any extraneous material.
         Note     Document is defined in the glossary.

     (5) The inclusion in a single document of the short reports of 2 or more
         QFC retail schemes with the same operator (or 2 or more
         subschemes of a QFC retail scheme that is an umbrella scheme)
         does not breach subrule (4) if each of the reports is discrete and
         easily identifiable.
     (6) The operator must ensure that the information given in the short
         report is consistent with the long report for the relevant accounting
         period prepared under rule 5.6.11 (Contents of annual long
         reports—QFC retail schemes) or rule 5.6.12 (Contents of half-yearly
         long report—QFC retail schemes).


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Chapter 5        Investor relations—QFC schemes
Part 5.6         Reports, accounts and auditors—QFC schemes
Division 5.6.C   Reports and accounts—QFC retail schemes
Rule 5.6.11


5.6.11       Contents of annual long reports—QFC retail schemes
       (1) An annual long report for a QFC retail scheme other than an
           umbrella scheme must contain the following:
             (a) the full audited accounts for the annual accounting period;
             (b) the operator’s report for the period in accordance with rule
                 5.6.13 (Operator’s reports—QFC retail schemes);
             (c) the comparative table for the period in accordance with rule
                 5.6.14 (Comparative tables—QFC retail schemes);
             (d) the independent entity’s report for the period in accordance
                 with rule 5.6.15 (Independent entity’s reports—QFC retail
                 schemes);
             (e) the auditor’s report for the period in accordance with rule
                 5.6.16 (Auditor’s reports—QFC retail schemes).
            Note      See also r 5.1.5 (Transactions with affected persons—details required
                      for QFC scheme’s annual reports).

       (2) An annual long report for a QFC retail scheme that is an umbrella
           scheme must be prepared for the scheme as a whole and must
           contain the following:
             (a) for each subscheme—the following:
                    (i) the full audited accounts for the subscheme for the annual
                        accounting period;
                   (ii) the operator’s report for the subscheme for the period in
                        accordance with rule 5.6.13;
                   (iii) the comparative table for the subscheme for the period in
                         accordance with rule 5.6.14;
             (b) the aggregation          of    all    the   accounts      required     by
                 paragraph (a) (i);


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                          Reports and accounts—QFC retail schemes    Division 5.6.C
                                                                        Rule 5.6.11

          (c) the independent entity’s report for the scheme for the period in
              accordance with rule 5.6.15;
          (d) the auditor’s report for the scheme for the period in accordance
              with rule 5.6.16.
     (3) If the scheme is an umbrella scheme, the operator may, in addition
         to complying with subrule (2), prepare a further annual long report
         for any 1 or more individual subschemes of the scheme.
     (4) A report under subrule (3) for a subscheme must contain the
         following:
          (a) the full accounts for the subscheme for the annual accounting
              period;
          (b) the operator’s report for the subscheme for the period in
              accordance with rule 5.6.13;
          (c) the comparative table for the subscheme for the period in
              accordance with rule 5.6.14;
          (d) the independent entity’s report for the scheme for the period in
              accordance with rule 5.6.15;
          (e) the auditor’s report for the scheme for the period in accordance
              with rule 5.6.16.
     (5) The operator of a QFC retail scheme must ensure that the accounts
         mentioned in subrule (1) (a), (2) (a) (i) and (4) (a) give a true and
         fair view of—
          (a) the net income and the net gains and losses on the scheme
              property of the scheme (or subscheme) for the annual
              accounting period; and
          (b) the financial position of the scheme (or subscheme) as at the
              end of the period.



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Part 5.6         Reports, accounts and auditors—QFC schemes
Division 5.6.C   Reports and accounts—QFC retail schemes
Rule 5.6.12


5.6.12       Contents of half-yearly long reports—QFC retail schemes
       (1) A half-yearly long report for a QFC retail scheme that is not an
           umbrella scheme must contain—
             (a) the full accounts for the half-yearly accounting period; and
             (b) the operator’s report for the period in accordance with rule
                 5.6.13 (Operator’s reports—QFC retail schemes).
       (2) A half-yearly long report for a QFC retail scheme that is an
           umbrella scheme must be prepared for the scheme as a whole and
           must contain the following:
             (a) for each subscheme—the following:
                   (i) the full accounts for the subscheme for the half-yearly
                       accounting period;
                  (ii) the operator’s report for the subscheme for the period in
                       accordance with rule 5.6.13;
             (b) the aggregation         of    all    the   accounts   required   by
                 paragraph (a) (i).
       (3) The operator of a QFC retail scheme that is an umbrella scheme
           may, in addition to complying with subrule (2), prepare a further
           half-yearly long report for any 1 or more individual subschemes.
       (4) A report under subrule (3) for a subscheme must contain the full
           accounts, and the operator’s report, that would be required by
           subrule (1) if the subscheme were a separate QFC retail scheme.




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                          Reports and accounts—QFC retail schemes    Division 5.6.C
                                                                        Rule 5.6.13

5.6.13   Operator’s reports—QFC retail schemes
         A report of the operator of a QFC retail scheme must include the
         following:
         (a) the names and addresses of the following:
              (i) the operator;
              (ii) the independent entity;
             (iii) any investment adviser;
             (iv) the auditor;
         (b) for a CIC—the names of the directors of the CIC;
         (c) for a CIP—the name of the general partner of the CIP;
         (d) a statement that the scheme is registered under these rules;
         (e) a statement that the unitholders are not liable for—
              (i) the debts or other liabilities of the scheme; or
              (ii) acts or omissions of the operator or independent entity;
         (f) the scheme’s investment objectives, strategies and policy;
         (g) a review of the investment activities during the period to which
             the report relates;
         (h) particulars of any change or event in relation to the scheme
             during the period that is a fundamental change under rule 5.4.2
             (Fundamental changes requiring prior approval by unitholder
             meeting—QFC retail schemes);
         (i) particulars of any change or event in relation to the scheme
             during the period that is a significant change under rule 5.4.3
             (Significant changes requiring pre-event notification—QFC
             retail schemes), if the change or event affects the unitholders’



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Part 5.6         Reports, accounts and auditors—QFC schemes
Division 5.6.C   Reports and accounts—QFC retail schemes
Rule 5.6.13


                  ability to make an informed judgment on the activities of the
                  scheme (or subscheme);
             (j) for a scheme that invests a substantial part of the scheme
                 property in other schemes—a statement of the maximum
                 proportion of management fees charged to the scheme itself
                 and to other schemes in which it invests;
             (k) any other information that would enable unitholders to make
                 an informed judgment on the development of the scheme’s
                 activities during the period and the results of the schemes
                 activities as at the end of that period;
             (l) for a report on an umbrella scheme prepared in accordance
                 with rule 5.6.11 (2) (Contents of annual long reports—QFC
                 retail schemes) or rule 5.6.12 (2) (Contents of half-yearly long
                 reports—QFC retail schemes)—
                   (i) for a CIC—a statement to the effect that, as a subscheme
                       is not a legal entity, if the assets attributable to any
                       subscheme were insufficient to meet the liabilities
                       attributable to it, the shortfall might have to be met out of
                       the assets attributable to 1 or more other subschemes of
                       the CIC; and
                  (ii) for each subscheme—the information mentioned in
                       paragraphs (a) to (j) if it would differ from the
                       information given for the umbrella scheme as a whole;
            (m) for a report on an individual subscheme of an umbrella scheme
                prepared in accordance with rule 5.6.11 (3) or rule 5.6.12 (3)—
                   (i) for a CIC—a statement corresponding to that required by
                       paragraph (l) (i) making it clear that, if the liability relates
                       to another subscheme of the umbrella scheme, the
                       shortfall (or any part of it) might have to be met out of the
                       assets of the subscheme to which the report relates; and


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                           Reports and accounts—QFC retail schemes        Division 5.6.C
                                                                             Rule 5.6.14

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

5.6.14   Comparative tables—QFC retail schemes
     (1) The comparative table required by rule 5.6.11 (1) (c) or (4) (c)
         (Contents of annual long reports—QFC retail schemes) must set out
         the following:
          (a) a performance record over the last 5 years (or, if the scheme
              has not been in existence for 5 years, the years in which it has
              been in existence) showing—
               (i) the highest and the lowest price of a unit in each class in
                   issue during each of those years;
               (ii) the net income distributed (or, for accumulation units,
                    allocated) for a unit in each class in issue during each of
                    those years, taking into account any subdivision or
                    consolidation of units that happened during those years;
               Note    Year and accumulation unit are defined in the glossary.

          (b) as at the end of the last 3 annual accounting periods (or, if the
              scheme has had less than 3 annual accounting periods, all of
              the scheme’s annual accounting periods), the following:
               (i) the net asset value;
               (ii) the net asset value per unit;
              (iii) the number of units in issue of each class;
              (iv) the price per unit in each class.
               Note    Net asset value, net asset value per unit and price are defined in
                       the glossary.

     (2) If, in the period covered by the table—




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Part 5.6         Reports, accounts and auditors—QFC schemes
Division 5.6.C   Reports and accounts—QFC retail schemes
Rule 5.6.15


             (a) the scheme has been the subject of a change or event (for
                 example, a scheme of arrangement) having a material effect on
                 the size of the scheme, but excluding any issue or redemption
                 of units for cash; or
                  Note     Scheme of arrangement is defined in the glossary.

             (b) there have been changes in the scheme’s investment objectives,
                 strategies or policy;
             the table must include an indication, related in the body of the table
             to the relevant year in the table, of the date of the change or event
             and a brief description of its nature.

5.6.15       Independent entity’s reports—QFC retail schemes
       (1) The independent entity of a QFC retail scheme must make an annual
           report to the unitholders.
       (2) The report for an annual accounting period must include the
           following:
             (a) a description, which may be in summary form, of the functions
                 of the independent entity under these rules;
             (b) a statement whether, in any material respect, any of the
                 following matters have not been carried out during the period
                 in accordance with these rules or, if applicable, the
                 constitutional document:
                   (i) the sale, issue and redemption of units;
                  (ii) the calculation of the price of units;
                  (iii) the application of the scheme’s income;
             (c) a statement whether, in any material respect, the investment
                 and borrowing powers and restrictions applying to the scheme
                 have been exceeded during the period.


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                       Reports, accounts and auditors—QFC schemes          Part 5.6
                          Reports and accounts—QFC retail schemes    Division 5.6.C
                                                                        Rule 5.6.16

5.6.16   Auditor’s reports—QFC retail schemes
         The operator of a QFC retail scheme must ensure that the report of
         the auditor to the unitholders for an annual accounting period
         includes the following statements:
          (a) whether, in the auditor’s opinion, the accounts have been
              properly prepared in accordance with these rules and the
              constitutional document;
          (b) whether, in the auditor’s opinion, the accounts give a true and
              fair view of—
               (i) the net revenue, and the net capital gains or losses on the
                   scheme property, for the period; and
               (ii) the financial position of the scheme as at the end of the
                    period;
          (c) whether the auditor is of the opinion that proper accounting
              records for the scheme have been kept and whether the
              accounts are in agreement with those records;
          (d) whether the auditor has been given all the information and
              explanations that, to the best of the auditor’s knowledge and
              belief, are necessary for the purpose of the audit;
          (e) whether the auditor is of the opinion that the information given
              in the operator’s report for the period is consistent with the
              accounts.

5.6.17   Provision of short reports—QFC retail schemes
     (1) Within 4 months after the end of each annual accounting period and
         within 3 months after the end of each half-yearly accounting period,
         the operator of a QFC retail scheme must send a copy of the short
         report for the period prepared in accordance with rule 5.6.10
         (Contents of short reports—QFC retail schemes) to—


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Part 5.6         Reports, accounts and auditors—QFC schemes
Division 5.6.C   Reports and accounts—QFC retail schemes
Rule 5.6.18


             (a) each unitholder (or to the first named of joint unitholders)
                 entered in or entitled to be entered in the unitholder register at
                 the close of business on the last day of the accounting period;
                 and
             (b) any other person on request.
             Note     Annual accounting period, half-yearly accounting period and month
                      are defined in the glossary.

       (2) Unitholders of a QFC retail scheme that is an umbrella scheme must
           be sent a short report for the relevant period for the particular
           subscheme in which they hold units.
       (3) However, a unitholder of a subscheme must also be provided with
           the long report for the period for the umbrella scheme on request.
       (4) A report provided under this rule must be provided free of charge.

5.6.18       Publication and availability of annual and half-yearly long
             reports—QFC retail schemes
       (1) Within 4 months after the end of each annual accounting period and
           3 months after the end of each half-yearly accounting period, the
           operator of a QFC retail scheme must publish and make available
           the long report for the period prepared in accordance with rule
           5.6.11 (Contents of annual long reports—QFC retail schemes) or
           rule 5.6.12 (Contents of half-yearly long reports—QFC retail
           schemes).
             Note     Annual accounting period, half-yearly accounting period and month
                      are defined in the glossary.

       (2) The long report must—
             (a) be given free of charge to any person on request; and




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                     Reports and accounts—QFC retail schemes    Division 5.6.C
                                                                   Rule 5.6.18

     (b) be available in English, and any other language in which they
         have been published, for inspection by the public free of
         charge during ordinary office hours at a place in the QFC; and
     (c) be given to the Regulatory Authority as soon as it is available,
         but within the relevant period mentioned in subrule (1).




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Chapter 6       Investment and borrowing—QFC qualified investor schemes
Part 6.1        Investment and borrowing generally—QFC qualified investor schemes

Rule 6.1.1




Chapter 6                    Investment and borrowing—
                             QFC qualified investor
                             schemes

Part 6.1                     Investment and borrowing
                             generally—QFC qualified
                             investor schemes

6.1.1        General duties of operator in relation to investment and
             borrowing—QFC qualified investor schemes
        (1) The operator of a QFC qualified investor scheme must ensure that
            the scheme property is not invested or used in breach of this chapter.
             Note    Breach is defined in the glossary.

        (2) If the operator becomes aware of a breach of this chapter, the
            operator must take action to rectify the breach at its own expense.
        (3) The operator must take action under subrule (2) immediately unless
            subrule (4) applies.
        (4) If the operator believes on reasonable grounds that taking action
            under subrule (2) immediately would not be in the best interests of
            the unitholders, the operator must take the action as soon as it is in
            the interests of unitholders to do so.




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        Investment and borrowing generally—QFC qualified investor schemes      Part 6.1

                                                                              Rule 6.1.2

6.1.2        Investment powers generally—QFC qualified investor
             schemes
        (1) The operator of a QFC qualified investor scheme must ensure that
            investments included in the scheme property are investments to
            which the scheme is dedicated.
             Note    Investment and dedicated are defined in the glossary.

        (2) Subrule (1) is subject to the other provisions of this chapter.
        (3) The constitutional document and the latest filed prospectus may
            further restrict—
             (a) the kinds of property in which the scheme property may be
                 invested; and
             (b) the kinds of transactions permitted by the scheme and any
                 relevant limits.
        (4) Subrule (3) does not limit the further restrictions that the
            constitutional document and latest filed prospectus may impose on
            investment by the scheme or on the use of the scheme property.
        (5) The operator must ensure that any further restrictions are complied
            with.

6.1.3        Permissible investments                 generally—QFC           qualified
             investor schemes
        (1) The scheme property of a QFC qualified investor scheme must be
            invested only in 1 or more of the following:
             (a) specified products;
             (b) immovables;
             (c) gold, silver, platinum and palladium;




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Part 6.1        Investment and borrowing generally—QFC qualified investor schemes

Rule 6.1.4


             (d) commodity contracts traded on an eligible exchange.
             Note    Specified product and commodity are defined in the glossary. Eligible
                     exchange is defined in INAP.

        (2) This rule is subject to the other provisions of this chapter.

6.1.4        Spread of risk—QFC qualified investor schemes
             The operator of a QFC qualified investor scheme must take
             reasonable steps to ensure that the scheme property provides a
             spread of risk, taking into account the scheme’s investment
             objectives, strategies and policy as stated in the constitutional
             document and the latest filed prospectus, and, in particular, any
             investment objective about return to the unitholders (whether from
             capital appreciation, income or both).
             Note    Constitutional document is defined in r 3.1.1 and latest filed
                     prospectus is defined in the glossary.

6.1.5        Investments by money-market funds—QFC qualified
             investor schemes
        (1) A QFC qualified investor scheme that is a money-market fund must
            comply with its primary investment objective, and the investment
            restrictions, mentioned in schedule 2 (Constitutional document
            content—QFC schemes), rule S2.33 (Primary investment objective
            etc—QFC money-market funds).
             Note    Money-market fund is defined in r 1.3.12.

        (2) For the investment restrictions, an approved money-market
            instrument is a high-quality approved money-market instrument
            if—
             (a) it has been rated by at least 1 rating agency; and




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        Investment and borrowing generally—QFC qualified investor schemes      Part 6.1

                                                                              Rule 6.1.6

             (b) it has been awarded the highest available credit rating by each
                 rating agency that has rated it.
            Note     Approved money-market instrument is defined in r 7.1.5. Rating
                     agency is defined in INAP.

        (3) If an approved money-market instrument forms part of the scheme
            property of a QFC qualified investor scheme that is a money-market
            fund, the operator must monitor the instrument to ensure that it
            continues to be of high quality, taking into account both its credit
            risk and its final maturity.
        (4) A QFC qualified investor scheme that is a money-market fund must
            provide liquidity through same day or next day settlement.
        (5) The weighted average maturity of its investments must not exceed
            60 days.

6.1.6       Application of ch 6 to umbrella schemes—QFC qualified
            investor schemes
        (1) This chapter applies to each subscheme of a QFC qualified investor
            scheme that is an umbrella scheme as if it were a separate QFC
            qualified investor scheme.
            Note     Subscheme and umbrella scheme are defined in r 1.2.11.

        (2) However, a subscheme of an umbrella scheme must not invest in
            another subscheme of the same umbrella scheme.




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Part 6.2         Particular kinds of investments and transactions—QFC qualified investor
Division 6.2.A   Collective investments schemes—QFC qualified investor schemes
Rule 6.2.1




Part 6.2                       Particular kinds of investments
                               and transactions—QFC qualified
                               investor schemes
Division 6.2.A                 Collective investments schemes—
                               QFC qualified investor schemes
6.2.1        Investments          in    schemes—QFC               qualified       investor
             schemes
        (1) The operator of a QFC qualified investor scheme must ensure that
            the scheme invests in units in a collective investment scheme (the
            second scheme) only if—
             (a) the second scheme is a QFC scheme; or
             (b) the second scheme is a non-QFC scheme, but the operator has
                 taken reasonable care to decide that the second scheme meets
                 all the following requirements:
                    (i) it is subject to an independent annual audit conducted in
                        accordance with international accounting standards;
                   (ii) it has its value verified by a person independent of the
                        scheme’s operator in relation to each day on which
                        dealing in the scheme’s units may take place;
                  (iii) there are mechanisms in place to enable unitholders of the
                        scheme to redeem their units within a reasonable time;
                  (iv) it is prohibited from having more than 15% of its value in
                       units in schemes;
                   (v) it operates in accordance with the principle of risk
                       spreading.


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      Particular kinds of investments and transactions—QFC qualified investor          Part 6.2
     Derivatives, forward transactions and commodity contracts—QFC qualified     Division 6.2.B
                                                            investor schemes
                                                                                     Rule 6.2.2

        (2) If the second scheme is an umbrella scheme, subrule (1) applies to
            each subscheme as if it were a separate scheme.

Division 6.2.B                  Derivatives, forward transactions and
                                commodity contracts—QFC qualified
                                investor schemes
6.2.2         Delivery of property under transactions in derivatives
              etc—QFC qualified investor schemes
        (1) The operator of a QFC qualified investor scheme must take
            reasonable care to decide the following when entering into any
            transaction in derivatives, or any commodity contract, that may
            result in any asset becoming part of the scheme property:
              (a) if it is an asset in which the scheme property could be
                  invested—that the transaction—
                     (i) can be readily closed out; or
                     (ii) would, at the expected time of delivery, relate to an asset
                          that could be included in the scheme property under this
                          chapter;
              (b) in any other case—that the transaction can be readily closed
                  out.
              Note      Derivative, commodity and close out are defined in the glossary.

        (2) If the operator makes a decision under subrule (1) in relation to an
            asset that proves to be incorrect, the operator may nevertheless
            acquire the asset for the scheme if the operator decides on
            reasonable grounds that the acquisition is in the interest of the
            unitholders.
        (3) An asset acquired under subrule (2) may form part of the scheme
            property until the position can be rectified.


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Part 6.2         Particular kinds of investments and transactions—QFC qualified investor
Division 6.2.B   Derivatives, forward transactions and commodity contracts—QFC qualified
Rule 6.2.3


        (4) Subrule (3) applies despite any other provision of this chapter.

6.2.3        Valuation of OTC derivatives—QFC qualified investor
             schemes
        (1) The operator of a QFC qualified investor scheme must ensure that a
            transaction by the scheme in an OTC derivative can be valued.
             Note     OTC derivative is defined in the glossary.

        (2) For subrule (1), the transaction can be valued only if the operator
            having taken reasonable care decides that, if the transaction were to
            be entered into, the operator could value the investment throughout
            the life of the OTC derivative with reasonable accuracy—
             (a) on the basis of an up-to-date market value that the operator and
                 independent entity have agreed is reliable; or
             (b) if such a value is not available—on the basis of a pricing model
                 that the operator and independent entity have agreed uses an
                 adequate recognised methodology.

6.2.4        Cover for transactions in derivatives and forward
             transactions—QFC qualified investor schemes
        (1) A transaction in derivatives or a forward transaction may be entered
            into by the operator of a QFC qualified investor scheme only if the
            maximum exposure, in terms of the principal or notional principal
            created by the transaction to which the scheme is or may be
            committed by another person, is covered globally under subrule (2).
             Note     Derivative, principal and notional principal are defined in the glossary.

        (2) Exposure is covered globally if adequate cover from within the
            scheme property is available to meet the scheme’s total exposure
            taking into account any reasonably foreseeable market movement.




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     Particular kinds of investments and transactions—QFC qualified investor         Part 6.2
                                Immovables—QFC qualified investor schemes      Division 6.2.C

                                                                                   Rule 6.2.5

        (3) The total exposure relating to derivatives held in the scheme
            property must not at any time exceed the scheme’s net asset value.
            Note      Net asset value is defined in the glossary.

        (4) No element of cover may be used more than once.

6.2.5       Continuing nature of limits and requirements for
            derivatives and forward positions—QFC qualified
            investor schemes
        (1) The operator of a QFC qualified investor scheme must, as frequently
            as necessary to ensure compliance with rule 6.2.4 (Cover for
            transactions in derivatives and forward transactions—QFC qualified
            investor schemes), re-calculate the amount of cover required in
            relation to derivatives and forward positions.
        (2) Derivatives and forward positions may be kept in the scheme
            property only so long as they remain covered globally under
            rule 6.2.4 (2).
        (3) The operator must use a risk management process to monitor and
            measure as frequently as appropriate the risk of the scheme’s
            derivatives and forward positions and their contribution to the
            scheme’s overall risk profile.

Division 6.2.C                 Immovables—QFC qualified investor
                               schemes
6.2.6       Standing independent valuer—QFC qualified investor
            schemes
            A QFC qualified investor scheme that holds, or proposes to hold,
            immovables as part of the scheme property must at all times have a
            valuer of the scheme (the standing independent valuer).



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Chapter 6        Investment and borrowing—QFC qualified investor schemes
Part 6.2         Particular kinds of investments and transactions—QFC qualified investor
Division 6.2.C   Immovables—QFC qualified investor schemes
Rule 6.2.7


6.2.7        Requirements for making investments in immovables—
             QFC qualified investor schemes
        (1) The operator of a QFC qualified investor scheme must ensure that
            the scheme does not invest in an immovable to be held as part of the
            scheme property unless all the following requirements are met:
             (a) the immovable must be located in a jurisdiction identified in
                 the latest filed prospectus;
             (b) the operator must have taken reasonable care to decide that the
                 title to the interest to be acquired in the immovable is a good
                 marketable title;
             (c) the standing independent valuer has valued the interest and the
                 operator and independent entity have received a report on the
                 valuation that states either—
                    (i) that, in the valuer’s opinion, the interest in the immovable
                        could, if acquired by the scheme, be disposed of
                        reasonably quickly at the valuation stated in the report; or
                   (ii) that—
                          (A) the immovable is adjacent to or in the vicinity of
                              another immovable already included in the scheme
                              property; and
                          (B) in the valuer’s opinion, the total value of the
                              interests in the immovables would at least equal the
                              total of the price payable for the interest in the
                              immovable and the existing value of the interest in
                              the other immovable.
                   Note      See r 6.2.10 (Reports on valuation of immovables before
                             acquisition or disposal—QFC qualified investor schemes).




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     Particular kinds of investments and transactions—QFC qualified investor         Part 6.2
                                Immovables—QFC qualified investor schemes      Division 6.2.C

                                                                                   Rule 6.2.8

        (2) However, a report of the standing independent valuer may not be
            relied on to acquire the interest in the immovable if—
             (a) the interest is not acquired, or agreed by enforceable contract
                 to be acquired, within 3 months after the date of the report; or
            (b) it is (or should reasonably be) apparent to the operator that the
                standing independent valuer’s report cannot, or can no longer,
                reasonably be relied on; or
             (c) the price of the interest is, or becomes, more than 105% of the
                 valuation of the interest stated in the report.

6.2.8       Investments   in   non-Qatari  immovables   through
            intermediate holding vehicles—QFC qualified investor
            schemes
        (1) An immovable located outside Qatar may be held by a QFC
            qualified investor scheme through an intermediate holding vehicle,
            or a series of intermediate holding vehicles, if—
             (a) the purpose of the vehicle, or each of the vehicles, is to enable
                 the scheme to hold immovables located outside Qatar; and
            (b) the vehicle, or each of the vehicles, is wholly owned by the
                scheme, or by another intermediate holding vehicle or series of
                intermediate holding vehicles wholly owned by the scheme,
                unless and to the extent that the law of the jurisdiction where
                the immovable is located requires local ownership; and
             (c) the vehicle, or each of the vehicles, undertakes the purchase,
                 sale and management of immovables on behalf of the scheme
                 in accordance with the scheme’s investment objectives,
                 strategies and policy; and




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Division 6.2.C   Immovables—QFC qualified investor schemes
Rule 6.2.8


             (d) the interests of the unitholders are otherwise adequately
                 protected.
             Note     Intermediate holding vehicle is defined in the glossary.

       (2) Any investment in an intermediate holding vehicle for the purpose
           of holding an immovable located outside Qatar must be treated for
           this chapter as if it were a direct investment in the immovable.
       (3) The operator of a QFC qualified investor scheme may, by the use of
           inter-company debt, transfer capital and income between the scheme
           and an intermediate holding vehicle of the scheme if—
             (a) the purpose of the transfer is for investment in immovables
                 located outside Qatar or repatriation of income generated by
                 such an investment; and
             (b) a record of inter-company debt is kept to provide an accurate
                 audit trail; and
             (c) interest paid out on the debt instruments that gave rise to the
                 inter-company debt is equivalent to the net rental income
                 earned from the immovables less the intermediate holding
                 vehicle’s reasonable running costs (including tax).
       (4) If practicable, an intermediate holding vehicle of a QFC qualified
           investor scheme must have the same auditor and accounting
           reference date as the scheme.
       (5) The accounts of any intermediate holding vehicle of a QFC
           qualified investor scheme must be consolidated into the annual and
           half-yearly reports of the scheme.




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                                                                                   Rule 6.2.9

6.2.9       Additional requirements for immovables—QFC qualified
            investor schemes
        (1) The operator must ensure that the following requirements are
            complied with in relation to interests in immovables held as part of
            the scheme property of a QFC qualified investor scheme:
             (a) the amount secured by mortgages over any immovable must
                 not exceed 100% of the latest valuation of the scheme’s
                 interest in the immovable stated in a report by the scheme’s
                 standing independent valuer;
             (b) no option may be granted to a person to buy or obtain an
                 interest in any immovable if this might unduly prejudice the
                 ability to provide redemption;
             (c) the total of all premiums paid for options to purchase interests
                 in immovables must not exceed 10% of the value of the
                 scheme property in any 12-month period, calculated at the date
                 of the granting of the option;
             (d) an interest in an immovable must not be disposed of unless—
                   (i) the standing independent valuer has valued the interest;
                       and
                  (ii) the operator and independent entity have received a report
                       on the valuation;
                  Note      See r 6.2.10 (Reports on valuation of immovables before
                            acquisition or disposal—QFC qualified investor schemes).

             (e) each immovable must be adequately protected by appropriate
                 insurance that is sufficient to cover its reinstatement.
        (2) However, a report of the standing independent valuer may not be
            relied on under subrule (1) (d) to dispose of an interest in an
            immovable if the interest is not disposed of, or agreed by


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Rule 6.2.10


             enforceable contract to be disposed of, within 3 months after the
             date of the report.

6.2.10       Reports on valuation of immovables before acquisition or
             disposal—QFC qualified investor schemes
       (1) This rule applies to a report by the standing independent valuer of a
           QFC qualified investor scheme in relation to the proposed
           acquisition or disposal for the scheme of an interest in an
           immovable.
             Note      See the following provisions:
                          r 6.2.7 (2) (c) (Requirements for making investments in
                            immovables—QFC qualified investor schemes)
                          r 6.2.9 (1) (d) (Additional requirements for immovables—QFC
                            qualified investor schemes).

       (2) The report must—
             (a) include a brief description of the immovable, including—
                     (i) its location and existing use; and
                     (ii) the nature of the interest the scheme is proposed to
                          acquire, or dispose of, in the immovable; and
                    (iii) any encumbrances affecting the immovable; and
                    (iv) whether the immovable is leased and, if leased, the terms
                         of the lease and its expiry; and
                     (v) the capital value of the immovable at the date of
                         valuation; and
                    (vi) the net monthly income (if any) from the immovable; and
                    (vii) any other matters that may affect the immovable or the
                          value of the interest; and




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                                                                                  Rule 6.2.11

            (b) include all material details about the basis of valuation and the
                assumptions used; and
            (c) describe and explain the valuation methods used; and
            (d) if more than 1 valuation method is available—explain the
                reasons for choosing a particular method; and
            (e) outline the structure and condition of the relevant market,
                including an analysis of the supply and demand situation, the
                market trend, and investment activities; and
            (f) confirm the professional status of the standing independent
                valuer and that the report is prepared on a fair and unbiased
                basis; and
            (g) be dated as at the date the valuation is made.

6.2.11      Valuation of immovables part of scheme property—QFC
            qualified investor schemes
      (1) The following provisions apply in relation to the valuation of
          interests in immovables held as part of the scheme property of a
          QFC qualified investor scheme:
            (a) the operator must ensure that the standing independent
                valuer—
                   (i) values, at least once a year, all the interests in
                       immovables held as part of the scheme property, on the
                       basis of a full valuation with physical inspection
                       (including, if the immovable is or includes a building,
                       internal inspection of the building); and
                  (ii) gives the operator and independent entity a report on the
                       valuation;




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Rule 6.2.11


             (b) for paragraph (a), any inspection in relation to adjacent
                 properties of a similar nature and value may be limited to the
                 inspection of only a single representative property;
             (c) the operator must also ensure that the standing independent
                 valuer—
                    (i) values, at least once a month, all the interests in
                        immovables held as part of the scheme property, on the
                        basis of a review of the last full valuation (unless the
                        valuer decides that the valuation of an interest in an
                        immovable should be conducted on the basis mentioned
                        in paragraph (a)); and
                   (ii) gives the operator and independent entity a report on the
                        valuation;
                   Note     Month is defined in the glossary.

             (d) if the operator or independent entity becomes aware of any
                 matter that appears likely—
                    (i) to affect the valuation of an interest in an immovable; or
                   (ii) to cause the standing independent valuer to decide to
                        value on the basis mentioned in paragraph (a) instead of
                        on the basis mentioned in paragraph (c);
                   it must immediately tell the standing independent valuer about
                   the matter;
             (e) the operator must use its best endeavours to ensure that any
                 other affected person immediately tells the standing
                 independent valuer if the affected person becomes aware of a
                 matter mentioned in paragraph (d).
                   Note     Affected person is defined in r 5.1.1.




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                                                                                  Rule 6.2.12

      (2) The valuation of an interest in an immovable under this rule has
          effect for these rules until the next valuation of the interest under
          this rule.

6.2.12      Annual and other periodic valuation reports—QFC
            qualified investor schemes
      (1) This rule applies to a report by the standing independent valuer of a
          QFC qualified investor scheme under rule 6.2.11 (Valuation of
          immovables part of scheme property—QFC qualified investor
          schemes).
      (2) The report must—
            (a) include a brief description of each immovable in which the
                scheme holds an interest, including—
                   (i) its location and existing use; and
                  (ii) the nature of the interest the scheme holds in the
                       immovable; and
                 (iii) any encumbrances affecting the immovable; and
                 (iv) whether the immovable is leased and, if leased, the terms
                      of the lease and its expiry; and
                  (v) the capital value of the immovable at the date of
                      valuation; and
                 (vi) the net monthly income (if any) from the immovable; and
                 (vii) any other matters that may affect the immovable or the
                       value of the interest; and
            (b) include all material details about the basis of valuation and the
                assumptions used; and
            (c) describe and explain the valuation methods used; and


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Rule 6.2.13


             (d) if more than 1 valuation method is available—explain the
                 reasons for choosing a particular method; and
             (e) outline the structure and condition of the relevant market,
                 including an analysis of the supply and demand situation, the
                 market trend, and investment activities; and
             (f) confirm the professional status of the standing independent
                 valuer and that the report is prepared on a fair and unbiased
                 basis; and
             (g) be dated as at the date the valuation is made.

6.2.13       Basis of valuation by standing independent valuer—QFC
             qualified investor schemes
       (1) Any valuation of an interest in an immovable by the standing
           independent valuer of a QFC qualified investor scheme must be—
             (a) on the basis of ‘open market value’ (as defined in the
                 constitutional document and the latest filed prospectus); or
             (b) on another appropriate basis.
             Guidance
             1   The constitutional document and latest filed prospectus would be expected to
                 define ‘open market value’ using an authoritative text such as the latest
                 edition of the Royal Institute of Chartered Surveyors’ Appraisal and
                 Valuation Standards (the ‘Red Book’).
             2   In considering whether valuation of an interest in an immovable by the
                 standing independent valuer is made on another basis that is appropriate, the
                 operator must consider whether the valuation was made in accordance with
                 internationally accepted valuation principles, procedures and definitions as
                 set out in the International Valuations Standards published by the
                 International Valuation Standards Committee.

       (2) The basis on which the standing independent valuer makes a
           valuation is subject to the constitutional document and the latest
           filed prospectus.


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                                                                                  Rule 6.2.14

      (3) In making a valuation, the standing independent valuer—
            (a) may treat the contents of any building as part of the building;
                and
            (b) must disregard any arrangement to dispose of an interest in an
                immovable forming part of the scheme property unless the
                valuer is satisfied on reasonable grounds that the arrangement
                is legally enforceable.

6.2.14      Appointment of standing                   independent          valuer—QFC
            qualified investor schemes
      (1) The operator of a QFC qualified investor scheme that holds, or
          proposes to hold, immovables as part of the scheme property must,
          as required from time to time and with the independent entity’s
          approval, appoint a person as the standing independent valuer.
      (2) A person must not be appointed as the standing independent valuer
          unless—
            (a) the person conducts the business of valuing immovables; and
            (b) the operator and the independent entity are satisfied that the
                person has the skills, experience, qualifications and attributes
                to be the standing independent valuer of the scheme, having
                regard in particular to the scheme’s investment objectives,
                strategies and policy; and
            (c) the person is independent of—
                   (i) the operator and independent entity; and
                  (ii) if the scheme is a CIC or CIP—the scheme; and




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Rule 6.2.14


                  (iii) a member (however described) of the governing body of
                        the operator, the independent entity or, for a CIC or CIP,
                        the scheme.
                   Note     Governing body is defined in the glossary.
             Guidance for para (b)
             The operator and independent entity should be satisfied that the person meets all
             the following requirements:
             (a) the person is a fellow or associate (however described), or has key personnel
                  who are fellows or associates (however described), of a relevant recognised
                  professional body of surveyors or property valuers;
             (b) the person has, or has access to, expertise relevant to the scheme and, in
                  particular, knowledge and experience in the valuation of immovables of the
                  relevant kind in the relevant area;
             (c) the person has robust internal controls and checks and balances to ensure—
                   (i) the integrity of valuation reports; and
                  (ii) that valuation reports are properly and professionally prepared in
                        accordance with international best practice;
             (d) the person has adequate professional indemnity insurance;
             (e) the person does not have ownership or other commercial links with other
                  persons providing services to the scheme (for example, investment advisers)
                  that could impair the person’s ability to provide independent and objective
                  valuation services to the scheme.

       (3) Without limiting (2) (c), a person (A) is not independent of another
           person (B) if—
             (a) A has at any time during the last 2 years been involved in
                 material business dealings with B (otherwise than in the
                 exercise of their respective functions as the holders of positions
                 in relation to any scheme); or
             (b) B has a material interest in A or A has a material interest in B.




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                                                                                  Rule 6.2.15

6.2.15      Standing independent valuer not to deal in immovables
            etc—QFC qualified investor schemes
            The standing independent valuer of a QFC qualified investor
            scheme must not be personally engaged, and must not have an
            associated person who is engaged, in finding immovables for the
            scheme or finding the scheme for immovables.
            Note      Associated person is defined in the glossary.

6.2.16      Removal of standing independent valuer—QFC qualified
            investor schemes
      (1) The operator of a QFC qualified investor scheme may, with the
          independent entity’s approval, remove the standing independent
          valuer at any time.
      (2) The operator of a QFC qualified investor scheme must remove a
          person as the standing independent valuer if—
            (a) a special resolution of the unitholders is passed to remove the
                person as the standing independent valuer; or
                   Note     Special resolution is defined in the glossary.

            (b) the person breaches rule 6.2.15 (Standing independent valuer
                not to deal in immovables etc—QFC qualified investor
                schemes); or
            (c) the person ceases to be eligible to be appointed as the standing
                independent valuer.
                   Note     See r 6.2.14 (Appointment of standing independent valuer—QFC
                            qualified investor schemes).

      (3) The power to remove the standing independent valuer under this
          rule has effect despite anything in any agreement between the valuer
          and all or any of the following:
            (a) the operator;

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Rule 6.2.16


             (b) the independent entity;
             (c) the scheme.




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                                                                                Rule 6.3.1




Part 6.3                         Stock lending and repos—QFC
                                 qualified investor schemes

6.3.1        Permitted stock lending                    and      repos—QFC     qualified
             investor schemes
        (1) The independent entity of a QFC qualified investor scheme may, at
            the operator’s request, enter into a stock lending arrangement or
            repo agreement.
             Note       Stock lending arrangement and repo agreement are defined in the
                        glossary.

        (2) Subrule (1) is subject to the constitutional document and the latest
            filed prospectus.
        (3) The independent entity must ensure that the value of any collateral
            for a stock lending arrangement is at all times at least equal to the
            value of the securities transferred by the independent entity.
        (4) If the validity of any collateral expires, the independent entity’s duty
            under subrule (3) is satisfied if the independent entity or the
            operator, as appropriate, takes reasonable care to ensure that
            sufficient collateral will be transferred by close of business on the
            day of the expiry.
             Note       Collateral is defined in the glossary.




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Part 6.4        Borrowing—QFC qualified investor schemes

Rule 6.4.1



Part 6.4                     Borrowing—QFC qualified
                             investor schemes

6.4.1        Borrowing—QFC qualified investor schemes
        (1) The operator of a QFC qualified investor scheme must—
             (a) ensure that the scheme’s total borrowing does not, on any day,
                 exceed the permitted percentage of the scheme’s net asset
                 value; and
                 Note      Borrowing and net asset value are defined in the glossary.

             (b) ensure that any further borrowing restrictions in the
                 constitutional document and latest filed prospectus are
                 complied with; and
             (c) take reasonable care to ensure that arrangements are in place
                 that will enable borrowings to be closed out to ensure that
                 paragraphs (a) and (b) are complied with.
                 Note      Close out is defined in the glossary.

        (2) For subrule (1) (a), the permitted percentage is—
             (a) 100 %; or
             (b) if the Regulatory Authority, by written notice, sets a different
                 percentage (whether higher or lower) for the scheme (whether
                 at the time of registration or later) or for QFC qualified
                 investor schemes that include the scheme—the percentage set.
        (3) If the Regulatory Authority sets a different percentage by notice
            under subrule (2) (b), the authority must—
             (a) publish the notice on an approved website; and




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                                                                      Rule 6.4.1

     (b) give a copy of the notice to the operator of each scheme to
         which the notice applies.
     Note       Approved website is defined in INAP.




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Chapter 7       Investment and borrowing—QFC retail schemes
Part 7.1        Investment and borrowing introduction—QFC retail schemes

Rule 7.1.1




Chapter 7                    Investment and borrowing—
                             QFC retail schemes

Part 7.1                     Investment and borrowing
                             introduction—QFC retail
                             schemes

7.1.1        Objects of ch 7—QFC retail schemes
        (1) The objects of this chapter include helping to protect investors in
            QFC retail schemes by providing minimum standards for the
            investments that may be held by a QFC retail scheme.
        (2) In particular, this chapter—
             (a) restricts the proportion of the scheme property of a QFC retail
                 scheme that may be held in transferable securities that are not
                 approved securities and derivatives that are not approved
                 derivatives; and
                  Note     Approved security is defined in r 7.1.9 and approved derivative is
                           defined in r 7.1.8.

             (b) requires a QFC retail scheme to comply with a number of
                 investment rules that require the spreading of risk.
        (3) The intention of the restriction mentioned in subrule (2) (a) is, in
            part, to limit investment in transferable securities and derivatives
            that cannot be accurately valued and readily disposed of.




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                                                                               Rule 7.1.2

7.1.2       General duties of operator in relation to investment and
            borrowing—QFC retail schemes
        (1) The operator of a QFC retail scheme must ensure that, except to the
            extent permitted by subrule (3) (b), the scheme property is not
            invested or used in breach of this chapter.
            Note          Breach is defined in the glossary.

        (2) If the operator becomes aware of a breach of this chapter in relation
            to the QFC retail scheme, the operator must immediately take
            action, at its own expense, to rectify the breach, unless the breach
            happened because of circumstances to which subrule (3) applies.
        (3) The operator must ensure that this chapter is complied with as soon
            as practicable having regard to the interests of the unitholders and,
            in any event, within the maximum period mentioned in subrule (6)
            if—
             (a) the scheme property is—
                    (i)      invested or used in breach of this chapter; and
                   (ii)      the breach is beyond the control of both the operator and
                            the independent entity; or
             (b) all the following subparagraphs apply:
                    (i) there is a transaction (the subsequent transaction)
                        deriving from the exercise of a right (for example, the
                        right to convert stock or subscribe to a rights issue)
                        attributable to an investment of the scheme (the original
                        investment);
                   (ii) the subsequent transaction would, apart from this rule, be
                        a breach of this chapter;
                   (iii) at the time of the acquisition of the original investment, it
                         was reasonable for the operator to expect that a breach
                         would not be caused by the subsequent transaction.

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Rule 7.1.2


       (4) In subrule (3) (b) (i), the reference to the exercise of a right includes
           the taking effect of a right without any action by or on behalf of the
           independent entity or operator.
       (5) If the independent entity becomes aware of any breach of this
           chapter in relation to the QFC retail scheme, it must immediately
           ensure that the operator complies with subrule (2).
       (6) The maximum period to ensure that this chapter is complied with
           under subrule (3) starts on the day the operator finds out about the
           relevant circumstances and ends—
             (a) if the transaction was a transaction under rule 7.4.9 (Permitted
                 transactions in derivatives and forward transactions—QFC
                 retail schemes)—at the close of business 5 business days after
                 that day or, if that period is extended under subrule (7), the
                 period as extended; or
                  Note       Business day is defined in the glossary.

             (b) if the transaction relates to an immovable—2 years after that
                 day; or
             (c) in any other case—for 6 months after that day.
       (7) The period mentioned in subrule (6) (a) is extended—
             (a) if the transaction involved a delivery of a commodity—from 5
                 to 20 business days; or
                  Note       Commodity is defined in the glossary.

             (b) if the reason for the breach mentioned in subrule (3) (a) is the
                 inability of the operator to close out a transaction because of a
                 limit in the number or value of transactions imposed by a
                 derivatives market that is an eligible market—until 5 business
                 days after—
                  (i)     the inability resulting from the limit is removed; or


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                                                                               Rule 7.1.3

                    (ii) it becomes, to the operator’s knowledge, practicable and
                         prudent for the transaction to be closed out in another
                         way.
             Note     Close out is defined in the glossary. Eligible market is defined in
                      r 7.1.7.

7.1.3        Treatment of obligations under ch 7—QFC retail schemes
        (1) If a provision of this chapter allows a QFC retail scheme to enter
            into a transaction, or retain an investment, only if possible
            obligations arising out of the transaction or retention would not
            breach any limits under this chapter, it must be assumed that the
            maximum possible liability of the scheme under any other
            applicable provision of this chapter must also be provided for.
        (2) If a provision of this chapter allows a QFC retail scheme to enter
            into a transaction, or retain an investment, only if the transaction or
            retention is covered, or any other similar transactions or investments
            are covered—
             (a) it must be assumed that, in applying any of the provisions of
                 this chapter, the scheme must also, simultaneously, satisfy any
                 other applicable obligation relating to cover; and
             (b) no element of cover may be used more than once.

7.1.4        Valuation for ch 7—QFC retail schemes
        (1) For this chapter, the value at any time of the scheme property of a
            QFC retail scheme is its net asset value at that time calculated in
            accordance with division 8.2.B (Valuation and pricing—QFC retail
            schemes).
             Note     Net asset value is defined in the glossary.




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Rule 7.1.5


        (2) In valuing the scheme property for this chapter, the following
            provisions apply:
             (a) the time at which the valuation is conducted (the relevant time)
                 must be treated as if it were a valuation point, but the valuation
                 and the relevant time do not count as a valuation or a valuation
                 point for division 8.2.B;
             (b) initial outlay must be regarded as remaining part of the scheme
                 property;
                  Note     Initial outlay is defined in the glossary.

             (c) if the operator, having taken reasonable care, decides that the
                 scheme will become entitled to any unrealised profit that has
                 been made for a transaction in derivatives—the prospective
                 entitlement must be regarded as part of the scheme property.
                  Note     Derivative is defined in the glossary.

7.1.5        What is an approved money-market instrument?
        (1) For these rules, an approved money-market instrument is a money-
            market instrument that is normally dealt in on the money market, is
            liquid and has a value that can be accurately decided at any time.
        (2) For this rule, a money-market instrument is normally dealt in on the
            money market if any of the following apply to it:
             (a) it has a maturity at issue of no more than 397 days;
             (b) it has a residual maturity of no more than 397 days;
             (c) it undergoes regular yield adjustments in line with money
                 market conditions at intervals of no longer than 397 days;
             (d) it has a risk profile, including credit and interest rate risks,
                 corresponding to the risk profile of an instrument—
                  (i) that has a maturity mentioned in paragraph (a) or (b); or


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                    (ii) that is subject to yield adjustments mentioned in
                         paragraph (c).
        (3) For this rule, a money-market instrument is liquid if it can be sold at
            limited cost in an adequately short time, taking into account the
            obligation of the operator to redeem units on the instructions of any
            unitholder.
             Note     See r 8.1.17 (3) (Issue and redemption generally—QFC retail schemes).

        (4) For this rule, a money-market instrument has a value that can be
            accurately decided at any time if accurate and reliable valuation
            systems are available for it.
        (5) The valuation systems must meet both of the following
            requirements:
             (a) they must enable the operator to calculate a net value of a
                 money-market instrument in accordance with the value at
                 which the instrument could be exchanged between
                 knowledgeable, willing parties in an arm’s length transaction;
             (b) they must be based either on market data or on valuation
                 models, including systems based on amortised costs.
        (6) A money-market instrument that is normally dealt in on the money
            market and is admitted to or dealt in on an eligible market must be
            presumed to be liquid and to have a value that can be accurately
            decided at any time unless there is information available to the
            operator that would lead to a different decision.
             Note     Eligible market is defined in r 7.1.7.

7.1.6        What is a transferable security?
        (1) For these rules, a transferable security is an investment that is any
            of the following:
             (a) a share;


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Rule 7.1.6


             (b) a government or public security;
             (c) another debt instrument;
             (d) a warrant;
             (e) a securities receipt.
             Note 1   Investment and each of the types of investment mentioned in r (1) are
                      defined in the glossary.
             Note 2   For other kinds of investments that are taken to be transferable
                      securities, see the following provisions:
                         r 7.4.2 (Investments in closed-ended schemes as transferable
                           securities—QFC retail schemes)
                         r 7.4.3 (Investments linked etc to other assets as transferable
                           securities—QFC retail schemes).

       (2) However, an investment is not a transferable security if the title to
           the investment cannot be transferred, or can be transferred only with
           the consent of a third party.
       (3) In applying subrule (2) to a share or debt instrument issued by a
           corporation, the need for any consent on the part of the corporation
           or any of its members, or the debt instrument holders of it, may be
           disregarded.
             Note     Corporation is defined in the glossary.

       (4) Also, an investment is not a transferable security unless the liability
           of the holder of the investment to contribute to the debts of the
           issuer is limited to any amount for the time being unpaid by the
           holder in relation to the investment.




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                                                                                 Rule 7.1.7

7.1.7       What is an eligible market?
        (1) For these rules, a derivatives or securities market is an eligible
            market in relation to a QFC scheme if it meets all the following
            requirements:
             (a) the operator, after consultation with and notification to the
                 independent entity, decides that the market is appropriate for
                 investment of scheme property or dealing in investments for
                 the scheme property;
             (b) the market is included in a list in the latest filed prospectus;
                  Note     Latest filed prospectus is defined in the glossary.

             (c) the independent entity has taken reasonable care to decide
                 that—
                   (i) adequate custody arrangements can be provided for
                       dealing in investments on the market; and
                  (ii) all reasonable steps have been taken by the operator in
                       deciding whether the market meets the requirement of this
                       rule.
        (2) For subrule (1) (a), a market may be considered appropriate only if
            it meets all the following requirements:
             (a) it is regulated;
             (b) it operates regularly;
             (c) it is recognised as a market or exchange, or as a self-regulating
                 organisation, by an appropriate regulatory or governmental
                 entity;
             (d) it is open to the public;
             (e) it is adequately liquid;




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Rule 7.1.8


             (f) it has adequate arrangements for unimpeded transmission of
                 income and capital to or to the order of investors.

7.1.8        What is an approved derivative?
             An approved derivative is a derivative that is traded or dealt in on,
             or under the rules of, a derivatives market that is an eligible market.
             Note    Derivative and deal are defined in the glossary. Eligible market is
                     defined in r 7.1.7.

7.1.9        What is an approved security?
             An approved security is a transferable security that is traded on, or
             under the rules of, a securities market that is an eligible market
             (otherwise than by the specific permission of the market authority).
             Note    Transferable security is defined in r 7.1.6. Eligible market is defined in
                     r 7.1.7.

7.1.10       Application of ch 7 to umbrella schemes—QFC retail
             schemes
        (1) This chapter applies to each subscheme of a QFC retail scheme that
            is an umbrella scheme as it were a separate QFC retail scheme.
             Note    Subscheme and umbrella scheme are defined in r 1.2.11.

        (2) However, the following rules apply to the umbrella scheme itself
            and not separately to each subscheme:
             rule 7.2.3 (Significant influence through transferable
                securities—UCITS type schemes)
             rule 7.3.10 (Concentration—QFC retail schemes).
        (3) Also, a subscheme of an umbrella scheme must not invest in another
            subscheme of the same umbrella scheme.




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                                                                             Rule 7.2.1




Part 7.2                     Investments generally—QFC
                             retail schemes

7.2.1       Investment powers generally—QFC retail schemes
        (1) The scheme property of a QFC retail scheme must be invested only
            in investments mentioned in rule 7.2.2 (Permissible investments
            generally—QFC retail schemes) to which the scheme is dedicated.
            Note     Investment and dedicated are defined in the glossary.

        (2) The scheme property of a QFC retail scheme must be invested and
            used only in accordance with the relevant provisions of this chapter,
            including within any limit or other restriction (however described)
            of this chapter.
        (3) The constitutional document and the latest filed prospectus of a
            QFC retail scheme may further restrict—
             (a) the kinds of property in which the scheme property may be
                 invested; and
             (b) the proportion of the capital property of the scheme that may
                 be invested in investments of any kind; and
             (c) the kinds of transactions permitted by the scheme and any
                 relevant limits; and
             (d) the borrowing powers of the scheme.
            Note     Constitutional document is defined in r 3.1.1. Capital property is
                     defined in the glossary.

        (4) Subrule (3) does not limit the further restrictions that the
            constitutional document and latest filed prospectus may impose on



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Rule 7.2.2


             investment and borrowing by the scheme or on the use of the
             scheme property.
        (5) The operator must ensure that any further restrictions are complied
            with.

7.2.2        Permissible investments generally—QFC retail schemes
        (1) The scheme property of a QFC retail scheme must be invested only
            in any 1 or more of the following:
             (a) transferable securities;
             (b) money-market instruments;
             (c) units in schemes;
             (d) derivatives and forward transactions;
             (e) deposits.
             Note 1   Transferable security is defined in r 7.1.6.
             Note 2   For investments that are treated as transferable securities, see the
                      following provisions:
                         r 7.4.2 (Investments in closed-ended schemes as transferable
                           securities—QFC retail schemes)
                         r 7.4.3 (Investments linked etc to other assets as transferable
                           securities—QFC retail schemes).
             Note 3   A QFC retail scheme may not invest in immovables, precious metals or
                      commodity contracts.

        (2) This rule is subject to the other provisions of this chapter.

7.2.3        Significant influence through transferable securities—
             UCITS type schemes
        (1) The operator of a QFC retail scheme must ensure that the scheme
            does not acquire transferable securities (the relevant securities)
            issued by a corporation if—


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                                                                               Rule 7.2.4

             (a) the relevant securities give the right to vote (whether or not on
                 substantially all matters) at general meetings of the
                 corporation; and
             (b) either—
                    (i) the scheme already holds transferable securities issued by
                        the corporation that give the scheme power to influence
                        significantly the conduct of business by the corporation;
                        or
                    (ii) acquisition of the relevant securities would give the
                         scheme that power.
                    Note     Corporation is defined in the glossary.

        (2) For subrule (1), the QFC retail scheme is taken to have power to
            influence significantly the conduct of business by the corporation if
            the scheme, or the operator or independent entity (or both acting
            together), can exercise or control the exercise of at least 1/3 of the
            voting rights in the corporation because of the transferable securities
            issued by the corporation that are held by the scheme.
        (3) For subrule (2), any temporary suspension of voting rights must be
            disregarded.

7.2.4        Investments          by     money-market              funds—QFC     retail
             schemes
        (1) A QFC retail scheme that is a money-market fund must comply with
            its primary investment objective, and the investment restrictions,
            mentioned in schedule 2 (Constitutional document content—QFC
            schemes), rule S2.33 (Primary investment objective etc—QFC
            money-market funds).
             Note      Money-market fund is defined in r 1.3.12.




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Rule 7.2.4


       (2) For the investment restrictions, an approved money-market
           instrument is a high-quality approved money-market instrument
           if—
             (a) it has been rated by at least 1 rating agency; and
             (b) it has been awarded the highest available credit rating by each
                 rating agency that has rated it.
             Note    Approved money-market instrument is defined in r 7.1.5. Rating
                     agency is defined in INAP.

       (3) If an approved money-market instrument forms part of the scheme
           property of a QFC retail scheme that is a money-market fund, the
           operator must monitor the instrument to ensure that it continues to
           be of high quality, taking into account both its credit risk and its
           final maturity.
       (4) A QFC retail scheme that is a money-market fund must provide
           liquidity through same day or next day settlement.
       (5) The weighted average maturity of its investments must not exceed
           60 days.




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                                                                                      Rule 7.3.1




Part 7.3                        Investment diversification—QFC
                                retail schemes

7.3.1        Prudent spread of risk—QFC retail schemes
            The operator of a QFC retail scheme must ensure that the scheme
            property provides a prudent spread of risk, taking into account the
            scheme’s investment objectives, strategies and policy as stated in the
            constitutional document and latest filed prospectus.
             Note       Constitutional document is defined in r 3.1.1 and latest filed
                        prospectus is defined in the glossary.

7.3.2        Spread for certain transferable securities and money-
             market instruments—QFC retail schemes
        (1) This rule applies to a transferable security if—
             (a) the transferable security is not an approved security; and
             (b) either—
                      (i) the transferable security has been issued for 1 year or
                          longer; or
                    (ii) the transferable security has been issued for less that
                         1 year and the terms of issue did not include an
                         undertaking that application would be made for it to be
                         admitted to an eligible market.
             Note 1     Transferable security is defined in r 7.1.6. Approved security is defined
                        in r 7.1.9. Eligible market is defined in r 7.1.7.




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Rule 7.3.3

             Note 2   For investments that are treated as transferable securities, see the
                      following provisions:
                         r 7.4.2 (Investments in closed-ended schemes as transferable
                           securities—QFC retail schemes)
                         r 7.4.3 (Investments linked etc to other assets as transferable
                           securities—QFC retail schemes).

        (2) This rule applies to a money-market instrument if—
             (a) the instrument is not an approved money-market instrument; or
             (b) the instrument is an approved money-market instrument but the
                 scheme could not invest in it under rule 7.4.4 (Investments in
                 approved money-market instruments not admitted to eligible
                 markets etc—QFC retail schemes).
             Note     Approved money-market instrument is defined in r 7.1.5.

        (3) The operator of a QFC retail scheme must ensure that not more than
            10% in value of the scheme property consists of transferable
            securities and money-market instruments to which this rule applies.

7.3.3        Spread for transferable securities and money-market
             instruments issued by single issuer or group—QFC retail
             schemes
        (1) This rule does not apply to government or public securities.
             Note 1   Government or public security is defined in the glossary.
             Note 2   See r 7.3.5 (Spread for government or public securities issued by single
                      issuer—QFC retail schemes).

        (2) The operator of a QFC retail scheme must ensure that not more than
            5% in value of the scheme property consists of transferable
            securities or money-market instruments (or both) issued by a single
            person.
             Note 1   Transferable security is defined in r 7.1.6.




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                                                                             Rule 7.3.3

          Note 2   For investments that are treated as transferable securities, see the
                   following provisions:
                      r 7.4.2 (Investments in closed-ended schemes as transferable
                        securities—QFC retail schemes)
                      r 7.4.3 (Investments linked etc to other assets as transferable
                        securities—QFC retail schemes).

     (3) However, the 5% limit under subrule (2) is raised to 10% in relation
         to not more than 40% in value of the scheme property.
     (4) Covered bonds need not be taken into account for the purpose of
         applying the raised limit of 10% in relation to 40% in value of the
         scheme property.
          Note     Covered bond is defined in the glossary.

     (5) Also, the 5% limit under subrule (2) is raised to 25% in relation to
         covered bonds if the total value of the covered bonds held does not
         exceed 80% in value of the scheme property.
     (6) In addition, the 5% limit under subrule (2) may be increased to no
         more than 20% (or 35%) under rule 7.3.4 (Spread exception for
         schemes replicating indices—QFC retail schemes).
     (7) In applying subrules (2) to (6), securities receipts must be treated as
         equivalent to the underlying security.
          Note     Securities receipt is defined in the glossary.

     (8) The operator of a QFC retail scheme must also ensure that not more
         than 20% in value of the scheme property consists of transferable
         securities or money-market instruments (or both) issued by members
         of a single group.
          Note     Group is defined in the glossary.




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Rule 7.3.4


7.3.4        Spread exception for schemes replicating indices—QFC
             retail schemes
        (1) Despite rule 7.3.3 (2) (Spread for transferable securities and money-
            market instruments issued by single issuer or group—QFC retail
            schemes), a QFC retail scheme may invest up to 20% in value of the
            scheme property in shares and debt instruments that are issued by a
            single person if the aim of the scheme’s investment objectives,
            strategies and policy as stated in its constitutional document and
            latest filed prospectus is to replicate the performance or composition
            of an index that is a permitted index under subrule (3).
             Note     Share, debt instrument and entity are defined in the glossary.

        (2) However, the limit in subrule (1) may be increased to no more than
            35%, but only in relation to a single person and if—
             (a) justified by exceptional market conditions; and
             (b) the latest filed prospectus includes a prominent statement of
                 the increased limit.
        (3) For subrule (1), a permitted index is an index that meets all the
            following requirements:
             (a) the index is sufficiently diversified (see subrule (5));
             (b) the index is a representative benchmark for the market to
                 which it refers (see subrule (6));
             (c) the index is published in an appropriate way (see subrule (7)).
        (4) For subrule (1), replication of the composition of an index is
            replication of the composition of the underlying assets, including by
            way of efficient portfolio management.
             Guidance
             The scheme property of a scheme replicating an index under this rule need not
             consist of the exact composition and weighting of the underlying assets if the



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                                                                                   Rule 7.3.5

             scheme’s investment objectives, strategies and policy are to achieve a result
             consistent with the replication of the index rather than an exact replication.
             Note     Efficient portfolio management is defined in the glossary.

        (5) For subrule (3) (a), an index is sufficiently diversified if its
            components comply with this part.
        (6) For subrule (3) (b), an index is a representative benchmark for the
            market to which it refers if its provider uses a recognised
            methodology that generally does not result in the exclusion of a
            major issuer of the market to which it refers.
        (7) For subrule (3) (c), an index is published in an appropriate way
            if—
             (a) it is accessible to the public; and
             (b) the index provider is independent of the QFC retail scheme.
        (8) Subrule (7) (b) does not prevent the index provider and the scheme
            or its operator from being part of the same group, if effective
            arrangements to manage conflicts of interest are in place.
             Note     Group is defined in the glossary.

7.3.5        Spread for government or public securities issued by
             single issuer—QFC retail schemes
        (1) This rule applies to government or public securities.
             Note     Government or public security is defined in the glossary.

        (2) If no more than 35% in value of the scheme property of a QFC retail
            scheme is invested in government or public securities issued by a
            single issuer, there is no limit on the amount that may be invested in
            government or public securities or in any single issue.




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Rule 7.3.5


       (3) A QFC retail scheme may invest more than 35% in value of the
           scheme property in government or public securities issued by a
           single issuer only if all the following requirements are met:
             (a) the operator, after consultation with the independent entity
                 before making the investment, is satisfied that the investment is
                 in accordance with the investment objectives, strategies and
                 policy of the scheme as stated in the constitutional document
                 and latest filed prospectus;
             (b) no more than 30% in value of the scheme property consists of
                 government or public securities of a single issue;
             (c) the scheme property includes government or public securities
                 of at least 6 different issues, whether they are issued by that
                 issuer or another issuer;
             (d) the constitutional document expressly authorises the scheme to
                 invest more than 35% in value of the scheme property in
                 government or public securities issued by a single issuer;
             (e) the disclosure required by subrule (4) has been made.
       (4) For subrule (3) (e), the latest filed prospectus must prominently
           state—
             (a) that more than 35% of the scheme property is or may be
                 invested in government or public securities issued by a single
                 issuer; and
             (b) the names of the jurisdictions, or the public or local authorities,
                 issuing government or public securities in which the scheme
                 may invest more than 35% of the scheme property.
                  Note     Jurisdiction is defined in the glossary.

       (5) For this rule, an issue of government or public securities differs
           from another issue if there is a difference in relation to repayment
           date, rate of interest, guarantor or other material terms of the issue.


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                                                                                 Rule 7.3.6

        (6) In this rule:
             issue includes guarantee.

7.3.6        Spread for units in schemes etc—QFC retail schemes
        (1) The operator of a QFC retail scheme must ensure that not more than
            20% in value of the scheme property consists of units in any single
            collective investment scheme.
             Note    See r 7.4.2 (Investments in closed-ended schemes as transferable
                     securities—QFC retail schemes) for units in schemes that are treated as
                     transferable securities and not as units in a scheme.

        (2) However, subrule (1) does not apply to units in a feeder fund.
             Note    Feeder fund is defined in the glossary.

        (3) The operator of a QFC retail scheme must ensure that no more than
            30% in value of the scheme property is invested under rule 7.4.6
            (Investments in collective investment schemes generally—QFC
            retail schemes) in units in non-QFC retail customer schemes.
             Note    Non-QFC retail customer scheme is defined in r 1.4.1.

        (4) However, subrule (3) does not apply to units in a feeder fund or fund
            of funds.
             Note    Fund of funds is defined in the glossary.

7.3.7        Spread for OTC derivatives—QFC retail schemes
        (1) The operator of a QFC retail scheme must ensure that the exposure
            to a single counterparty in an OTC derivative transaction does not
            exceed 10% in value of the scheme property.
             Note    OTC derivative is defined in the glossary.




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Rule 7.3.7


       (2) In calculating a limit under this rule, the exposure in relation to an
           OTC derivative may be reduced to the extent that collateral is held
           in relation to it if the collateral meets all the following requirements:
             (a) it is marked-to-market on a daily basis and its value exceeds
                 the amount at risk;
             (b) it is exposed only to negligible risks (for example, risks for
                 government bonds of first credit rating or cash) and is liquid;
             (c) it is held by a third-party custodian not related to the provider
                 or is legally secured from the consequences of a failure of a
                 related party;
             (d) it can be fully enforced by the QFC retail scheme at any time.
             Note     Collateral is defined in the glossary.

       (3) In calculating a limit under this rule, OTC derivative positions with
           the same counterparty may be netted if the netting procedures—
             (a) correspond as closely as possible to—
                    (i) the off-balance sheet netting procedures required to be
                        used by an authorised firm under PIIB, rule 4.7.5; or
                    (ii) substantially equivalent provisions under the law of
                         another jurisdiction; and
             (b) are based on legally binding agreements.
             Guidance for para (a) (ii)
             Substantially equivalent provisions would include the conditions in the Banking
             Consolidation Directive (the Directive of the European Parliament and Council of
             14 June 2006 relating to the taking up and pursuit of the business of credit
             institutions (No 2006/48/EC)), annex III, part 7 (Contractual netting (Contracts
             for novation and other netting agreements)).




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                                                                                       Rule 7.3.8

        (4) In applying this rule, a derivative transaction is taken to be free of
            counterparty risk if—
             (a) it is performed on an exchange; and
             (b) it is cleared through a clearing house that meets both of the
                 following requirements:
                    (i) the clearing house is backed by an appropriate
                        performance guarantee;
                    (ii) the clearing house is characterised by a daily mark-to-
                         market valuation of the derivative position and at least
                         daily margining.
             Guidance on spread generally
             The operator of a QFC retail scheme should particularly note rule 7.3.7 (2) (d)
             under which collateral has to be legally enforceable at any time. The Regulatory
             Authority, therefore, expects the operator to undertake legal due diligence before
             entering into any financial collateral arrangement. This is particularly important if
             the collateral arrangement has a cross-border dimension. The Regulatory
             Authority also expects the independent entity to exercise reasonable care to
             review collateral arrangements in accordance with its functions.

7.3.8        Spread for deposits—QFC retail schemes
        (1) The operator of a QFC retail scheme must ensure that no more than
            20% in value of the scheme property consists of deposits placed
            with any single eligible bank.
             Note      Deposit and eligible bank are defined in the glossary.

        (2) For subrule (1), all uninvested cash that is capital property of the
            scheme is taken to be a deposit.
             Note      Capital property is defined in the glossary.




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Rule 7.3.9


7.3.9        Spread for certain investments with single person—QFC
             retail schemes
        (1) The operator of a QFC retail scheme must ensure that no more than
            20% in value of the scheme property consists of any combination of
            2 or more of the following issued by or made with a single person:
             (a) transferable securities (including covered bonds) or money-
                 market instruments;
             (b) deposits;
             (c) exposures to an OTC derivative transaction.
             Note     For investments that are treated as transferable securities, see the
                      following provisions:
                         r 7.4.2 (Investments in closed-ended schemes as transferable
                           securities—QFC retail schemes)
                         r 7.4.3 (Investments linked etc to other assets as transferable
                           securities—QFC retail schemes).

        (2) In calculating the limit under this rule, the provisions of rule 7.3.7
            (2) to (4) (Spread for OTC derivatives—QFC retail schemes) apply
            with any necessary changes.

7.3.10       Concentration—QFC retail schemes
        (1) The operator of a QFC retail scheme must ensure that the scheme
            does not acquire transferable securities (other than debt instruments)
            that—
             (a) do not give a right to vote on any matter at a general meeting
                 of the issuer of the transferable securities; and
             (b) represent more than 10% of the transferable securities issued
                 by the issuer.
             Note 1   Transferable security is defined in r 7.1.6. Debt instrument is defined
                      in the glossary.



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                                                                            Rule 7.3.11

          Note 2   For investments that are treated as transferable securities, see the
                   following provisions:
                      r 7.4.2 (Investments in closed-ended schemes as transferable
                        securities—QFC retail schemes)
                      r 7.4.3 (Investments linked etc to other assets as transferable
                        securities—QFC retail schemes).

     (2) The operator of a QFC retail scheme must ensure that the scheme
         does not acquire—
          (a) more than 10% of the debt instruments issued by a single
              issuer; or
          (b) more than 25% of the units in a collective investment scheme;
              or
          (c) more than 10% of the money-market instruments issued by a
              single issuer.
     (3) However, the operator need not comply with a limit under
         subrule (2) if, at the time of the acquisition, the net amount in issue
         of the debt instruments, units in the collective investment scheme or
         money-market instruments cannot be calculated.

7.3.11    Application of pt 7.3—QFC retail schemes
          The provisions of this part do not apply to a QFC retail scheme until
          6 months after the day the initial offer period starts if rule 7.3.1
          (Prudent spread of risk—QFC retail schemes) is complied with
          during that period.
          Note     Month and initial offer are defined in the glossary.




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Division 7.4.A   Transferable securities—QFC retail schemes
Rule 7.4.1




Part 7.4                       Particular kinds of investments—
                               QFC retail schemes
Division 7.4.A                 Transferable securities—QFC retail
                               schemes
7.4.1        General investment requirements for non-approved
             transferable securities—QFC retail schemes
        (1) A QFC retail scheme may invest in a transferable security that is not
            an approved security if the security meets all the following
            requirements:
             (a) the potential loss that the scheme may incur in relation to
                 holding the transferable security is limited to the amount paid
                 for it;
             (b) its liquidity does not compromise the ability of the operator to
                 comply with its obligation under these rules to redeem units on
                 the instructions of any unitholder;
                    Note    See r 8.1.17 (3) (Issue and redemption generally—QFC retail
                            schemes).

             (c) a reliable valuation is available for it (see subrule (2));
             (d) appropriate information is available for it (see subrule (3));
             (e) it is negotiable;
             (f) its risks are adequately captured by the operator’s risk
                 management process.
             Note      Transferable security is defined in r 7.1.6.   Approved security is
                       defined in r 7.1.9.




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                                                                             Rule 7.4.1

     (2) For subrule (1) (c), reliable valuation is available for the
         transferable security if—
          (a) for a transferable security that is an approved security—there
              are accurate, reliable and regular prices that are either market
              prices or prices made available by valuation systems
              independent from issuers; and
          (b) for a transferable security that is not an approved security—
              there is a valuation on a periodic basis that is derived from
              information from the issuer of the security or competent
              independent research.
     (3) For subrule (1) (d), appropriate information is available for the
         transferable security if—
          (a) for a transferable security that is an approved security—there is
              regular, accurate and comprehensive information available to
              the market on the security or, if relevant, on the security’s
              portfolio; and
          (b) for a transferable security that is not an approved security—
              there is regular and accurate information available to the
              scheme’s operator on the security or, if relevant, on the
              security’s portfolio.
     (4) Unless there is information available to the scheme’s operator that
         would lead to a different decision, a transferable security that is an
         approved security is presumed—
          (a) not to compromise the operator’s ability to comply with its
              obligation under these rules to redeem units at the request of
              any unitholder; and
          (b) to be negotiable.




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Division 7.4.A   Transferable securities—QFC retail schemes
Rule 7.4.2


7.4.2        Investments in closed-ended schemes as transferable
             securities—QFC retail schemes
        (1) For this chapter, a unit in a closed-ended scheme is taken to be a
            transferable security (and not a unit in a scheme) if it would meet all
            the requirements mentioned in rule 7.4.1 (General investment
            requirements for non-approved transferable securities—QFC retail
            schemes) if it were a transferable security and—
             (a) for a unit in a closed-ended scheme constituted as a
                 company—both the following requirements are met in relation
                 to that scheme:
                   (i) the scheme is subject to corporate governance applied to
                       companies;
                   (ii) if another person carries out asset management activity
                        for the scheme—the other person is subject to regulation
                        by a regulatory or governmental entity for the purposes of
                        investor protection; or
             (b) for a unit in a closed-ended scheme constituted as a trust—both
                 the following requirements are met in relation to that scheme:
                   (i) the scheme is subject to corporate governance equivalent
                       to that applied to companies;
                   (ii) if another person carries out asset management activity
                        for the scheme—the other person is subject to regulation
                        by a regulatory or governmental entity for the purposes of
                        investor protection; or
             (c) for a unit in a closed-ended scheme constituted as a limited
                 partnership or under contract law—all the following
                 requirements are met in relation to that scheme:
                   (i) the scheme is subject to corporate governance equivalent
                       to that applied to companies;


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                                                                                   Rule 7.4.3

                   (ii) the scheme is managed by a person who is subject to
                        regulation by a regulatory or governmental entity for the
                        purposes of investor protection;
                   (iii) the assets of the scheme are held separately from the
                         property of the operator of that scheme and the property
                         of any other scheme;
                   (iv) the scheme is subject to liquidation rules that adequately
                        protect its investors.
            Guidance for para (b) (i) and (c) (i)
            In assessing whether a closed-ended scheme in trust or contractual form is subject
            to corporate governance equivalent to that applied to companies, the operator of a
            QFC retail scheme should consider whether the trust or contract constituting the
            closed-ended scheme provides its investors with rights—
            (a) to vote on essential decisions affecting the closed-ended scheme, including
                 appointment and removal of its operator, amendment of the trust or contract,
                 changes to its investment objectives, strategies and policy, merger and
                 liquidation; and
            (b) to control the closed-ended scheme’s investment objectives, strategies and
                 policy through appropriate mechanisms.

        (2) However, a QFC retail scheme must not invest in a unit in a closed-
            ended scheme under this rule if the purpose of the investment is to
            circumvent any investment limit or restriction (however described)
            of this chapter.
            Note      Closed-ended scheme is defined in r 1.2.10 (2).

7.4.3       Investments linked etc to other assets as transferable
            securities—QFC retail schemes
        (1) For this chapter, any other investment is taken to be a transferable
            security (and not an investment of another kind) if—
             (a) the investment would meet all the requirements mentioned in
                 rule 7.4.1 (General investment requirements for non-approved



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Part 7.4         Particular kinds of investments—QFC retail schemes
Division 7.4.A   Transferable securities—QFC retail schemes
Rule 7.4.3


                    transferable securities—QFC retail schemes) if it were a
                    transferable security; and
             (b) the investment is backed by or linked to the performance of
                 other assets, which may differ from those in which a QFC
                 retail scheme may otherwise invest.
       (2) If the investment embeds a derivative, the requirements of this
           chapter about derivatives and forward positions apply to the
           embedded derivative component of the investment.
       (3) For subrule (2), an investment embeds a derivative if it contains a
           component that meets all the following requirements:
             (a) by virtue of that component some or all of the cash flows that
                 otherwise would be required by the investment (which
                 functions as host contract) can be modified according to a
                 specified interest rate, financial instrument price, foreign
                 exchange rate, index of prices or rates, credit rating or credit
                 index or other variable, and therefore change in a way similar
                 to a stand-alone derivative;
             (b) the component’s characteristics and risks are not closely
                 related to the economic characteristics and risks of the
                 investment functioning as host contract;
             (c) the component has a significant impact on the risk profile and
                 pricing of the investment;
             (d) the component is not transferable by contract independently of
                 the investment.
             Note     See guidance to r 7.4.8 on transferable securities and money-market
                      instruments that embed derivatives.




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                           Money-market instruments—QFC retail schemes      Division 7.4.B
                                                                                Rule 7.4.4

Division 7.4.B                 Money-market instruments—QFC
                               retail schemes
7.4.4       Investments in approved money-market instruments not
            admitted to eligible markets etc—QFC retail schemes
        (1) This rule applies to an approved money-market instrument that is
            not admitted to or dealt in on an eligible market.
            Note     Approved money-market instrument is defined in r 7.1.5 and eligible
                     market is defined in r 7.1.7.

        (2) A QFC retail scheme may invest in the approved money-market
            instrument if all the following requirements are met:
            (a) the instrument is—
                   (i) issued or guaranteed by—
                       (A) the State or the               central   government     of   a
                           zone 1 country; or
                       (B) the Qatar Central Bank or the central bank of a
                           zone 1 country; or
                       (C) a multilateral development bank; or
                        Note     Zone 1 country and multilateral development bank are
                                 defined in INAP.

                   (ii) issued or guaranteed by—
                       (A) a regional or local authority of the State or a
                           zone 1 country; or
                       (B) an entity owned by an entity mentioned in
                           subparagraph (i) (A) or (ii) (A) if the first entity
                           exercises regulatory or other non-commercial
                           functions; or



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Division 7.4.B   Money-market instruments—QFC retail schemes
Rule 7.4.4


                  (iii) issued by an entity if any of its securities are dealt with on
                        an eligible market; or
                  (iv) issued or guaranteed by an entity that is subject to, and
                       complies with, prudential rules, and meets 1 or more of
                       the following requirements:
                        (A) it is located in Qatar or a zone 1 country;
                        (B) it has at least investment grade rating given by a
                            rating agency;
                               Note       Rating agency is defined in INAP.

                        (C) on the basis of an in-depth analysis of the entity, it
                            can be demonstrated that the prudential rules
                            applying to the entity are at least as stringent as
                            those applied by the Regulatory Authority in the
                            QFC;
             (b) appropriate information in accordance with subrules (3) to (5)
                 is available for the instrument;
             (c) the instrument is freely transferable.
       (3) If the approved money-market instrument is issued or guaranteed by
           an entity mentioned in subrule (2) (a) (i), or issued by an entity
           mentioned in subrule (2) (a) (ii) and guaranteed by an entity
           mentioned in subrule (2) (a) (i), information must be available on
           the issue or the issue programme, or on the legal and financial
           situation of the issuer before the issue of the instrument.




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                          Money-market instruments—QFC retail schemes          Division 7.4.B
                                                                                   Rule 7.4.4

     (4) If the approved money-market instrument is issued or guaranteed by
         an entity mentioned in subrule (2) (a) (ii) but is not guaranteed by an
         entity mentioned in subrule (2) (a) (i), or is issued by an entity
         mentioned in subrule (2) (a) (iii), all the following information must
         be available:
          (a) information on the issue or the issue programme, or on the
              legal and financial situation of the issuer before the issue of the
              instrument;
          (b) updates of that information on a regular basis and whenever a
              significant event happens;
          (c) available and reliable statistics on the issue or the issue
              programme, or other data enabling an appropriate assessment
              of the credit risks related to investment in the instruments.
          Guidance for r (4) (b) and r (5) (b)
          Regular updates of information should normally happen on at least an annual
          basis.

     (5) If the approved money-market instrument is issued or guaranteed by
         an entity mentioned in subrule (2) (a) (iv), all the following
         information must be available:
          (a) information both on the issue or the issue programme, and the
              legal and financial situation of the issuer before the issue of the
              instrument, verified by appropriately qualified third parties not
              subject to instructions from the issuer;
                Guidance for para (a)
                The appropriately qualified third parties should specialise in the verification
                of legal or financial documentation and be composed of persons meeting
                professional standards of integrity.

          (b) updates of that information on a regular basis and whenever a
              significant event happens;
          (c) available and reliable statistics on the issue or the issue
              programme.

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Part 7.4         Particular kinds of investments—QFC retail schemes
Division 7.4.C   Nil and partly paid securities—QFC retail schemes
Rule 7.4.5


Division 7.4.C                 Nil and partly paid securities—QFC
                               retail schemes
7.4.5        Investments in nil and partly paid securities—QFC retail
             schemes
             A QFC retail scheme may invest in a transferable security or
             money-market instrument on which an amount is unpaid only if it is
             reasonably foreseeable that the amount of any existing and potential
             call for any amount unpaid could be paid by the scheme, at the time
             payment is required, without breaching this chapter.
             Note      For other kinds of investments that are taken to be transferable
                       securities, see the following provisions:
                          r 7.4.2 (Investments in closed-ended schemes as transferable
                            securities—QFC retail schemes)
                          r 7.4.3 (Investments linked etc to other assets as transferable
                            securities—QFC retail schemes).

Division 7.4.D                 Collective investment schemes—QFC
                               retail schemes
7.4.6        Investments in collective investment schemes generally
             —QFC retail schemes
        (1) A QFC retail scheme (the investing scheme) may invest in units in a
            collective investment scheme (the second scheme) only if the
            second scheme meets all the following requirements:
             (a) the second scheme is a QFC retail scheme or a non-QFC retail
                 customer scheme;
                    Note     Non-QFC retail customer scheme is defined in r 1.4.1.

             (b) if the second scheme is a non-QFC retail customer scheme—
                 the investment and borrowing powers of the second scheme are



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                                                                                    Rule 7.4.7

                  the same as, or more restrictive than, the investment and
                  borrowing powers of a QFC retail scheme under these rules;
             (c) if the second scheme is a non-QFC retail customer scheme—
                 the second scheme and its operator are required to comply with
                 requirements equivalent to the requirements applying under
                 rule 7.4.7 (Investments in associated schemes—QFC retail
                 schemes) in relation to a QFC retail scheme;
             (d) the second scheme is prohibited from having more than 10% in
                 value of its scheme property consisting of units in collective
                 investment schemes;
             (e) if the second scheme is an umbrella scheme—each subscheme
                 meets the requirements of paragraph (d) and, if the second
                 scheme is a non-QFC retail customer scheme, also of
                 paragraph (c).
             Note 1   Umbrella scheme and subscheme are defined in r 1.2.11.
             Note 2   Investments to which r 7.4.2 (Investments in closed-ended schemes as
                      transferable securities—QFC retail schemes) applies are treated as
                      investments in transferable securities, and not investments in units in a
                      scheme.
             Note 3   See also r 7.3.6 (3) (Spread for units in schemes etc—QFC retail
                      schemes).

        (2) To remove any doubt, this rule is subject to rule 7.4.7.

7.4.7        Investments in associated schemes—QFC retail schemes
        (1) For this rule, a scheme is an associated scheme for a QFC retail
            scheme if the operator of the first scheme is—
             (a) the operator of the QFC retail scheme; or
             (b) an associate of the operator of the QFC retail scheme.
                  Note       Associate is defined in the glossary.




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Division 7.4.D   Collective investment schemes—QFC retail schemes
Rule 7.4.7


       (2) A QFC retail scheme must not invest in units in an associated
           scheme unless the latest filed prospectus of the QFC retail scheme
           clearly states that the scheme property of the QFC retail scheme
           may include units in the associated scheme.
             Note     Latest filed prospectus is defined in the glossary.

       (3) If—
             (a) a QFC retail scheme invests in units in an associated scheme or
                 disposes of units in an associated scheme; and
             (b) there is a charge in relation to the investment or disposal;
             the operator of the QFC retail scheme must pay the QFC retail
             scheme the amount payable under subrule (4) or (5) within
             4 business days after the day the operator agrees to make the
             investment or disposal.
       (4) For an investment mentioned in subrule (3), the operator of the QFC
           retail scheme must pay the QFC retail scheme—
             (a) any amount by which the consideration paid by the QFC retail
                 scheme exceeds the price that would have been paid for the
                 benefit of the associated scheme if the units were newly issued
                 or sold by the associated scheme; or
             (b) if that price cannot be ascertained by the operator—the
                 maximum amount of any charge permitted to be made by the
                 seller of units in the associated scheme.
       (5) For a disposal mentioned in subrule (3), the operator of the QFC
           retail scheme must pay the QFC retail scheme the amount of any
           charge made in relation to the disposal for the operator of the
           associated scheme, the operator of the QFC retail scheme or an
           associate of either operator.




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                      Derivatives and forward transactions—QFC schemes     Division 7.4.E
                                                                               Rule 7.4.8

        (6) For this rule—
             (a) any addition to or deduction from the consideration paid on the
                 acquisition or disposal by a QFC retail scheme of units in an
                 associated scheme that is applied for the benefit of the
                 associated scheme, and is (or is like) a dilution levy made
                 under rule 8.2.16 (Dilution—QFC retail schemes), must be
                 treated as part of the price of the units and not as part of any
                 charge; and
             (b) any charge made in relation to an exchange of units in a
                 subscheme or separate part of the associated scheme for units
                 in another subscheme or separate part of that scheme must be
                 included as part of the consideration paid for the units.

Division 7.4.E               Derivatives and forward
                             transactions—QFC schemes
7.4.8       Derivatives and forward transactions generally—QFC
            retail schemes
        (1) A transaction in a derivative or a forward transaction must not be
            effected for a QFC retail scheme unless the transaction is—
             (a) permitted under rule 7.4.9 (Permitted transactions in
                 derivatives and forward transactions—QFC retail schemes);
                 and
             (b) covered as required by rule 7.5.1 (Cover for transactions in
                 derivatives and forward transactions—QFC retail schemes).
            Note    Derivative is defined in the glossary.

        (2) If a QFC retail scheme invests in a derivative, the exposure to the
            underlying assets must not exceed the limits in part 7.3 (Investment
            diversification—QFC retail schemes), except as provided in
            subrule (4).


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Division 7.4.E   Derivatives and forward transactions—QFC schemes
Rule 7.4.8


       (3) If a transferable security or money-market instrument embeds a
           derivative, the embedded derivative component must be taken into
           account in applying any limit under this chapter.
             Note        See r (7) on working out whether an instrument embeds a derivative.

       (4) If—
             (a) a QFC retail scheme invests in an index-based derivative; and
             (b) rule 7.4.10 (Permitted financial indices—QFC retail schemes)
                 applies to the index;
             the underlying constituents do not have to be taken into account in
             the application of part 7.3 to subrule (2) of this rule.
       (5) The relaxation under subrule (4) is subject to the operator complying
           with rule 7.3.1 (Prudent spread of risk—QFC retail schemes).
       (6) A scheme must not use transferable securities or money-market
           instruments that embed a derivative to circumvent this chapter.
       (7) Rule 7.4.3 (3) (Investments linked etc to other assets as transferable
           securities—QFC retail schemes) applies to subrules (3) and (6) of
           this rule, with any necessary changes, for the purpose of working
           out whether a transferable security or money-market instrument
           embeds a derivative.
             Guidance on transferable securities and money-market instruments that
             embed derivatives
             1      Collateralised debt obligations (CDOs) or asset-backed securities using
                    derivatives, with or without active management, will generally not be
                    considered as embedding a derivative unless—
                    (a) they are leveraged, that is, the CDOs or asset-backed securities are not
                          limited recourse vehicles and an investor’s loss can be higher than the
                          investor’s initial investment; or
                    (b) they are not sufficiently diversified.
             2      If a transferable security or money-market instrument embedding a
                    derivative is structured as an alternative to an OTC derivative, the
                    requirements of rule 7.4.13 (OTC transactions in derivatives—QFC retail


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                                                                                   Rule 7.4.9

                schemes) will apply. This will be the case for tailor-made hybrid instruments,
                such as a single tranche CDO structured to meet the specific need of a QFC
                retail scheme. These tailor-made hybrid instruments should be considered to
                embed a derivative. Such a product offers an alternative to the use of an OTC
                derivative for the same purpose of achieving a diversified exposure to a pre-
                set risk level to a portfolio of entities.
            3   The following list of transferable securities and money-market instruments,
                which is illustrative and non-exhaustive, could be assumed to embed a
                derivative:
                (a) credit linked notes;
                (b) transferable securities and money-market instruments if their
                       performance is linked to the performance of a bond index;
                (c) transferable securities and money-market instruments if their
                       performance is linked to the performance of a basket of shares, with or
                       without active management;
                (d) transferable securities or money-market instruments with a fully
                       guaranteed nominal value if their performance is linked to the
                       performance of a basket of shares, with or without active management;
                (e) convertible bonds;
                 (f) exchange bonds.
            4   Transferable securities and money-market instruments that embed a
                derivative are subject to the requirements of this chapter applying to
                derivatives. It is the operator’s responsibility to ensure that these
                requirements are complied with. The nature, frequency and scope of checks
                performed should depend on the characteristics of the embedded derivatives
                and their impact on the scheme, taking into account its investment objectives,
                strategies and policy and its risk profile.

7.4.9       Permitted transactions in derivatives                         and     forward
            transactions—QFC retail schemes
        (1) A transaction in a derivative by a QFC retail scheme must—
             (a) be in an approved derivative; or
                 Note       Approved derivative is defined in r 7.1.8.




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Division 7.4.E   Derivatives and forward transactions—QFC schemes
Rule 7.4.9


             (b) if the transaction is in an OTC derivative—comply with
                 rule 7.4.13 (OTC transactions in derivatives—QFC retail
                 schemes).
       (2) The underlying of a transaction in a derivative by a QFC retail
           scheme must—
             (a) comply with part 7.2 (Investments generally—QFC retail
                 schemes) and this part; or
             (b) consist of any 1 or more of the following to which the scheme
                 is dedicated:
                     (i) financial indices that are permitted financial indices under
                         rule 7.4.10 (Permitted financial indices—QFC retail
                         schemes);
                    (ii) interest rates;
                    (iii) foreign exchange rates;
                    (iv) currencies.
                    Note     Dedicated is defined in the glossary.

       (3) A transaction in an approved derivative by a QFC retail scheme
           must be effected on, or under the rules of, a derivatives market that
           is an eligible market.
             Note      Eligible market is defined r 7.1.7.

       (4) A transaction in a derivative must not cause a QFC retail scheme to
           diverge from its investment objectives, strategies and policy as
           stated in the constitutional document and the latest filed prospectus.
             Note      Constitutional document is defined in r 3.1.1. Latest filed prospectus is
                       defined in the glossary.




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                   Particular kinds of investments—QFC retail schemes         Part 7.4
                   Derivatives and forward transactions—QFC schemes     Division 7.4.E
                                                                           Rule 7.4.10

     (5) A transaction in a derivative must not be effected by a QFC retail
         scheme if the intended effect is to create the potential for an
         uncovered sale of any of the following:
          (a) transferable securities;
          (b) money-market instruments;
          (c) units in collective investment schemes;
          (d) derivatives.
         Note     Transferable security is defined in r 7.1.6.

     (6) For subrule (5), a sale is not considered uncovered if the
         requirements mentioned in rule 7.4.12 (3) (Requirements to cover
         sales—QFC retail schemes) are met in relation to the sale.
     (7) Any forward transaction by a QFC retail scheme must be made with
         an eligible bank.
         Note     Eligible bank is defined in the glossary.

     (8) A QFC retail scheme may not effect a transaction in a derivative on
         a commodity.
         Note     Commodity is defined in the glossary.

7.4.10   Permitted financial indices—QFC retail schemes
     (1) For rule 7.4.9 (2) (b) (i) (Permitted transactions in derivatives and
         forward transactions—QFC retail schemes), a permitted financial
         index is a financial index that meets all the following requirements:
          (a) the index is sufficiently diversified (see subrule (2));
          (b) the index represents an adequate benchmark for the market to
              which it refers (see subrule (3));
          (c) the index is published in an appropriate way (see subrule (4)).




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Division 7.4.E   Derivatives and forward transactions—QFC schemes
Rule 7.4.10


       (2) For subrule (1) (a), a financial index is sufficiently diversified if—
             (a) it is composed in such a way that price movements or trading
                 activities for a component do not unduly influence the
                 performance of the whole index; and
             (b) its components are at least as diverse as the investments of a
                 QFC retail scheme are required to be under part 7.3
                 (Investment diversification—QFC retail schemes).
       (3) For subrule (1) (b), a financial index represents an adequate
           benchmark for the markets to which it refers if—
             (a) it measures the performance of a representative group of
                 underlyings in a relevant and appropriate way; and
             (b) it is revised and rebalanced periodically, following criteria that
                 are publicly available, to ensure that it continues to reflect the
                 markets to which it refers; and
             (c) the underlyings are sufficiently liquid, allowing users to
                 replicate it if necessary.
       (4) For subrule (1) (c), a financial index is published in an appropriate
           way if—
             (a) its publication process relies on sound procedures to collect
                 prices, and calculate and subsequently publish the index value,
                 including pricing procedures for components for which a
                 market price is not available; and
             (b) material information is provided on a wide and timely basis on
                 matters such as index calculation, rebalancing methodologies,
                 index changes, and any operational difficulties in providing
                 timely or accurate information.
       (5) If the composition of underlyings of a transaction in a derivative
           does not satisfy the requirements mentioned in subrule (1) for a
           permitted financial index, the underlyings for that transaction may

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                                                                                   Rule 7.4.11

         be regarded as a combination of the underlyings if they satisfy the
         requirements of rule 7.4.9 (2) (Permitted transactions in derivatives
         and forward transactions—QFC retail schemes).
         Guidance on financial indices underlying derivatives
         1      An index based on derivatives on commodities or an index on property may
                be regarded as a permitted financial index under rule 7.4.10 if it meets all the
                requirements of the rule.
         2      If the composition of an index is not sufficiently diversified to avoid undue
                concentration, its underlying assets should be combined with the other assets
                of the scheme in assessing compliance with the requirements of rule 7.5.1
                (Cover for transactions in derivatives and forward transactions—QFC retail
                schemes) and part 7.3 (Investment diversification—QFC retail schemes).
         3      To avoid undue concentration, if derivatives on an index composed of assets
                in which a QFC retail scheme cannot invest are used to track or gain high
                exposure to the index, the index should be at least diversified in a way that is
                equivalent to the diversification achieved for the scheme by part 7.3.
         4      If derivatives on that index are used for risk-diversification purposes and the
                exposure of the scheme to the index complies with part 7.3, there is no need
                to look at the underlying components of the index to ensure that it is
                sufficiently diversified.

7.4.11   Delivery of property under transactions in derivatives and
         forward transactions—QFC retail schemes
         A transaction in a derivative or a forward transaction by a QFC
         retail scheme that will or could lead to the delivery of property for
         the scheme may be entered into only if—
         (a) the property can be held for the scheme; and
         (b) the operator, having taken reasonable care, decides that
             delivery of the property under the transaction will not happen
             or will not lead to a breach of these rules.
         Note        Property and breach are defined in the glossary.




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Part 7.4         Particular kinds of investments—QFC retail schemes
Division 7.4.E   Derivatives and forward transactions—QFC schemes
Rule 7.4.12


7.4.12       Requirement to cover sales—QFC retail schemes
       (1) An agreement must not be made by or on behalf of a QFC retail
           scheme to dispose of property or rights unless—
             (a) the obligation to make the disposal and any other similar
                 obligation could immediately be honoured by the scheme by
                 delivery of property or the assignment of rights; and
             (b) the property or rights mentioned in paragraph (a) are owned by
                 the scheme at the time the agreement is made.
       (2) Subrule (1) does not apply to a deposit.
             Note      Deposit is defined in the glossary.

       (3) Subrule (1) does not apply if—
             (a) the risks of the underlying financial instrument of a derivative
                 can be appropriately represented by another financial
                 instrument and the underlying financial instrument is liquid; or
             (b) the operator or independent entity has the right to settle a
                 derivative in cash, and cover exists within the scheme property
                 that falls within 1 or more of the following asset classes:
                     (i) cash;
                    (ii) liquid debt instruments (for example, government bonds
                         of first credit rating) with appropriate safeguards (in
                         particular, haircuts);
                    (iii) other liquid assets having regard to their correlation with
                          the underlying of the financial derivative instrument,
                          subject to appropriate safeguards (for example, haircuts if
                          relevant).
       (4) In the asset classes mentioned in subrule (3), an asset may be
           considered as liquid if the financial instrument can be converted into
           cash in no longer than 7 business days at a price closely


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                                                                                Rule 7.4.13

          corresponding to the current valuation of the instrument on its own
          market.

7.4.13    OTC transactions in derivatives—QFC retail schemes
     (1) A transaction in an OTC derivative under rule 7.4.9 (1) (b)
         (Permitted transactions in derivatives and forward transactions—
         QFC retail schemes) must be—
          (a) with an approved counterparty (see subrule (2)); and
          (b) on approved terms (see subrule (3)); and
          (c) capable of valuation (see subrule (5)); and
          (d) subject to verifiable valuation (see subrule (6)).
          Note      OTC derivative is defined in the glossary.

     (2) For subrule (1) (a), a counterparty is an approved counterparty only
         if the counterparty is an eligible bank.
          Note      Eligible bank is defined in the glossary.

     (3) For subrule (1) (b), the terms of a transaction are approved terms if,
         before the transaction is entered into, the independent entity is
         satisfied that the counterparty has agreed with the operator—
          (a) to provide a reliable and verifiable valuation in relation to the
              transaction corresponding to its fair value at least daily and at
              any other time at the operator’s request; or
          (b) that it or an alternative counterparty will, at the operator’s
              request, enter into a further transaction to sell, liquidate or
              close out the transaction at a fair value at any time.
                 Note       Close out is defined in the glossary.

     (4) For subrule (3) (b), fair value is the amount for which an asset could
         be exchanged, or a liability settled, between knowledgeable, willing
         parties in an arm’s length transaction.


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Division 7.4.E   Derivatives and forward transactions—QFC schemes
Rule 7.4.13


       (5) For subrule (1) (c), a transaction in a derivative is capable of
           valuation if the operator, having taken reasonable care, decides that,
           if the transaction were entered into, it would be able to value the
           investment throughout the life of the derivative with reasonable
           accuracy on a basis of—
             (a) an up-to-date market value that the operator and independent
                 entity have agreed is reliable; and
             (b) if paragraph (a) does not apply—a pricing model that the
                 operator and independent entity have agreed uses an adequate
                 recognised methodology.
       (6) For subrule (1) (d), a transaction in a derivative is subject to
           verifiable valuation if the operator, having taken reasonable care,
           decides that, if the transaction were entered into, the valuation of the
           investment would be verified throughout the life of the derivative
           by—
             (a) an appropriate third party independent of the derivative’s
                 counterparty, at an adequate frequency and in such a way that
                 the operator can check it; or
             (b) a department within the operator that is independent of the
                 department in charge of managing the scheme property and is
                 adequately equipped to verify the valuation.
       (7) Without limiting rule 4.2.3 (Oversight functions of independent
           entity—all QFC schemes), the independent entity must take
           reasonable care to ensure that the operator has systems and controls
           that are adequate to ensure compliance with this rule.




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                                                                                 Rule 7.4.14

7.4.14   Risk management for transactions in derivatives and
         forward transactions—QFC retail schemes
     (1) The operator of a QFC retail scheme must use a risk management
         process that enables it to monitor and measure, as frequently as
         appropriate, the risks associated with—
          (a) the scheme’s derivatives and forward positions; and
          (b) their contribution to the overall risk profile of the scheme.
     (2) The operator must tell the Regulatory Authority about the following
         details of the risk management process before using the process:
          (a) the methods for estimating risks in derivative and forward
              transactions;
          (b) the types of derivatives and forward transactions to be used
              within the scheme together with their underlying risks and any
              relevant quantitative limits.
     (3) The operator must tell the Regulatory Authority in advance about
         any material change proposed for the details of the risk management
         process mentioned in subrule (2) (a) or (b).
         Guidance on risk management process
         1    The risk management process for a QFC retail scheme should take account
              of the investment objectives, strategies and policy of the scheme as stated in
              the constitutional document and latest filed prospectus.
         2    The independent entity should take reasonable care to review the
              appropriateness of the risk management process in accordance with its
              functions under these rules.
         3    The operator is expected to demonstrate more sophistication in its risk
              management process for a QFC retail scheme with a complex risk profile
              than for a QFC retail scheme with a simple risk profile. In particular, the risk
              management process should take account of any characteristic of non-linear
              dependence in the value of a position to its underlying.
         4    The operator should take reasonable care to establish and maintain the
              systems and controls appropriate to its business that are required by CTRL.



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Division 7.4.F   Deposits—QFC retail schemes
Rule 7.4.15

             5      The risk management process should enable the re-calculation required by
                    rule 7.5.3 (Continuing nature of limits and requirements for derivatives and
                    forward positions—QFC retail schemes) to be undertaken at least daily or at
                    each valuation point, whichever the more frequent.
             6      The operator should undertake the risk assessment with the highest degree of
                    care if the counterparty to the derivative is an associate of the operator or the
                    credit issuer.

Division 7.4.F                    Deposits—QFC retail schemes
7.4.15       Investments in deposits—QFC retail schemes
             A QFC retail scheme may invest in a deposit if—
             (a) it is with an eligible bank; and
             (b) it is either—
                      (i) repayable on demand; or
                     (ii) has the right to be withdrawn; and
             (c) it matures in no longer than 12 months.
             Note        Deposit, eligible bank and month are defined in the glossary.




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                             Exposure for derivatives and forward transactions          Part 7.5

                                                                                       Rule 7.5.1




Part 7.5                         Exposure for derivatives and
                                 forward transactions
            Guidance for pt 7.5
            1      A scheme may invest in derivatives and forward transactions if the exposure
                   to which the scheme is committed by the transaction itself is suitably covered
                   from within the scheme property. Exposure will include any initial outlay in
                   relation to the transaction.
            2      Cover ensures that a scheme is not exposed to the risk of loss of property,
                   including money, to an extent greater than the scheme’s net asset value at
                   any time. Therefore, a scheme is required to hold scheme property sufficient
                   in value or amount to match the exposure arising from a derivative obligation
                   to which the scheme is committed. Rule 7.5.1 (Cover for transactions in
                   derivatives and forward transactions—QFC retail schemes) sets out detailed
                   requirements for cover.
            3      In accordance with rule 7.1.3 (2) (b) (Treatment of obligations under ch 7—
                   QFC retail schemes), cover used in relation to a transaction in a derivative or
                   forward transaction must not be used for cover in relation to another
                   transaction in a derivative or forward transaction.

7.5.1       Cover for transactions in derivatives and forward
            transactions—QFC retail schemes
        (1) A transaction in a derivative or a forward transaction may be entered
            into by the operator of a QFC retail scheme only if the maximum
            exposure, in terms of the principal or notional principal created by
            the transaction to which the scheme is or may be committed by
            another person, is covered globally under subrule (2).
            Note        Derivative, principal and notional principal are defined in the glossary.

        (2) Exposure is covered globally if adequate cover from within the
            scheme property is available to meet the scheme’s total exposure,
            taking into account the value of the underlying assets, any
            reasonably foreseeable market movement, counterparty risk, and the
            time available to liquidate any positions.


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Rule 7.5.2


        (3) Cash not yet received into the scheme property but due to be
            received within 1 month is available as cover for subrule (2).
             Note    Month is defined in the glossary.

        (4) Property that is the subject of a transaction under part 7.6 (Stock
            lending and repos—QFC retail schemes) is only available for cover
            if the operator has taken reasonable care to decide that it is
            obtainable (by return or re-acquisition) in time to meet the
            obligation for which cover is required.
        (5) The total exposure relating to derivatives held in the scheme
            property must not at any time exceed the scheme’s net asset value.
             Note    Net asset value is defined in the glossary.

7.5.2        Borrowing not available for cover—QFC retail schemes
        (1) Cash obtained from borrowing by or for a QFC retail scheme, and
            borrowing that the operator of a QFC retail scheme reasonably
            regards an eligible bank to be committed to provide, is not available
            for cover under rule 7.5.1 (Cover for transactions in derivatives and
            forward transactions—QFC retail schemes).
             Note    Borrowing and eligible bank are defined in the glossary.

        (2) If a QFC retail scheme, or the independent entity of a QFC retail
            scheme acting for the scheme on the operator’s instructions—
             (a) borrows an amount of currency from an eligible bank; and
             (b) keeps an amount in another currency, at least equal to that
                 borrowing for the time being, on deposit with the eligible bank
                 (or its agent or nominee);
             this part applies as if the borrowed currency, and not the deposited
             currency, were part of the scheme property.




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                         Exposure for derivatives and forward transactions    Part 7.5

                                                                             Rule 7.5.3

7.5.3       Continuing nature of limits and requirements for
            derivatives and forward positions—QFC retail schemes
        (1) The operator of a QFC retail scheme must, as frequently as
            necessary, re-calculate the amount of cover required in relation to
            derivatives and forward positions already in existence under this
            chapter.
        (2) Derivatives and forward positions may be retained in the scheme
            property only so long as they remain covered globally under rule
            7.5.1 (Cover for transactions in derivatives and forward
            transactions—QFC retail schemes).




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Part 7.6         Stock lending and repos—QFC retail schemes

Rule 7.6.1




Part 7.6                          Stock lending and repos—QFC
                                  retail schemes
             Notes for pt 7.6
             1      This part covers techniques relating to transferable securities and money-
                    market instruments that are used for the purpose of efficient portfolio
                    management. It permits the generation of additional income for the benefit of
                    the QFC retail scheme (and its investors) by entry into stock lending
                    arrangements and repo agreements for the scheme.
             2      The particular method of stock lending permitted in this part is in fact not a
                    transaction that is a loan in the normal sense. Rather it is an arrangement
                    under which the lender transfers securities to the borrower otherwise than by
                    way of sale and the borrower is to transfer the securities, or securities of the
                    same type and amount, back to the lender at a later date. In accordance with
                    good market practice, a separate transaction by way of transfer of assets is
                    also involved in stock lending arrangements to provide collateral to cover the
                    ‘lender’ against the risk that the future transfer back of the securities may not
                    be satisfactorily completed.

7.6.1        Stock lending and repos generally—QFC retail schemes
             A QFC retail scheme may, or the independent entity of a QFC retail
             scheme may on the operator’s instructions, enter into a stock lending
             arrangement or repo agreement if it reasonably appears to the
             operator to be appropriate to be entered into with a view to
             generating additional income for the scheme with an acceptable
             degree of risk.
             Note        Stock lending arrangement and repo agreement are defined in the
                         glossary.




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                            Stock lending and repos—QFC retail schemes          Part 7.6

                                                                               Rule 7.6.2

7.6.2       Stock lending requirements—QFC retail schemes
        (1) A stock lending arrangement may be entered into by or for a QFC
            retail scheme only if all the following requirements are met:
             (a) all the terms of the agreement under which securities are to be
                 reacquired by the independent entity for the scheme are in a
                 form that is acceptable to the independent entity and are in
                 accordance with good market practice;
             (b) the counterparty is—
                  (i) an authorised firm; or
                  (ii) a person authorised (however described) under the law of
                       the State or a zone 1 country to deal in investments as
                       principal in relation to OTC derivatives and the person is
                       principally regulated by a regulatory or governmental
                       entity in that jurisdiction;
                 Note     Authorised firm and OTC derivative are defined in the glossary.
                          Zone 1 country is defined in INAP.

             (c) collateral is obtained to secure the obligation of the
                 counterparty under the terms mentioned in paragraph (a) and
                 the collateral is—
                  (i) acceptable to the independent entity; and
                  (ii) adequate under rule 7.6.3 (1) (Treatment of collateral for
                       stock lending—QFC retail schemes); and
                 (iii) sufficiently immediate under rule 7.6.3 (2).
                 Note     Collateral is defined in the glossary.

        (2) For subrule (1), the counterparty is the person who is obliged under
            the agreement mentioned in subrule (1) (a) to transfer to the
            independent entity—



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Part 7.6         Stock lending and repos—QFC retail schemes

Rule 7.6.3


             (a) the securities transferred by the independent entity under the
                 stock lending arrangement; or
             (b) securities of the same type and amount.

7.6.3        Treatment of collateral for stock lending—QFC retail
             schemes
             Guidance on stock lending—treatment of collateral
             If a stock lending arrangement is entered into for a QFC retail scheme, the value
             of scheme property remains unchanged. The securities transferred cease to be part
             of the scheme property, but there is an obligation by the counterparty to transfer
             back the securities or equivalent securities. The independent entity will also
             receive collateral to set against the risk of default in transfer. The collateral is
             equally irrelevant to the valuation of the scheme property (because it is transferred
             against an obligation of equivalent value by way of re-transfer). This rule
             accordingly makes provision for the treatment of collateral in that context.

        (1) For rule 7.6.2 (1) (c) (ii) (Stock lending requirements—QFC retail
            schemes), collateral is adequate only if it is—
             (a) transferred to the independent entity or its nominee or delegate,
                 as appropriate; and
             (b) at the time of the transfer to the independent entity, at least
                 equal in value to the value of the securities transferred by the
                 independent entity; and
             (c) in the form of 1 or more of the following:
                    (i) cash;
                   (ii) a certificate of deposit;
                  (iii) a letter of credit;
                  (iv) a readily realisable investment;
                   (v) commercial paper with no embedded derivative content.




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                                                                             Rule 7.6.3

                 (vi) units in an eligible money-market fund.
          Note      Collateral, readily realisable investment and eligible money-market
                    fund are defined in the glossary.

     (2) For rule 7.6.2 (1) (c) (iii), collateral is sufficiently immediate if—
          (a) it is transferred before or at the time of the transfer of the
              securities by the independent entity; or
          (b) the independent entity takes reasonable care to decide at the
              time mentioned in paragraph (a) that it will be transferred at
              the latest by the close of business on the day of the transfer.
     (3) The independent entity must ensure that the value of the collateral
         is, at all times, at least equal to the value of the securities transferred
         by the independent entity.
     (4) If the validity of any collateral expires or is about to expire, the
         independent entity’s duty under subrule (3) is satisfied if the
         independent entity takes reasonable care to ensure that sufficient
         collateral will be transferred by close of business on the day of the
         expiry.
     (5) Any agreement for transfer at a future date of securities, collateral,
         or the equivalent of either, under this rule may be regarded, for the
         purposes of valuation under division 8.2.B (Valuation and pricing—
         QFC retail schemes), or this chapter, as an unconditional agreement
         for the sale or transfer of property, whether or not the property is
         part of the property of the scheme.
     (6) Collateral transferred to the independent entity is part of the scheme
         property for these rules, except in the following respects:
          (a) it must not be included in any valuation for division 8.2.B or
              this chapter, because it is offset under subrule (5) by an
              obligation to transfer;
          (b) it does not count as scheme property for any purpose of this
              chapter other than this rule.

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Part 7.6        Stock lending and repos—QFC retail schemes

Rule 7.6.4


        (7) Subrules (5) and (6) (a) do not apply to any valuation of collateral
            itself for this rule.

7.6.4        No limits on stock lending and repos—QFC retail
             schemes
        (1) There is no limit on the value of the scheme property of a QFC retail
            scheme that may be the subject of stock lending arrangements or
            repo agreements under this part.
        (2) However, the use of stock lending arrangements or repo agreements,
            or the reinvestment of cash collateral, must not—
             (a) result in a change of the scheme’s investment objectives,
                 strategies and policy; or
             (b) add substantial supplementary risks to the scheme’s risk
                 profile.
        (3) Collateral in the form of cash may only be invested in 1 or more of
            the following:
             (a) certificates of deposit;
             (b) letters of credit;
             (c) readily realisable investments;
             (d) commercial paper with no embedded derivative component;
             (e) units in an eligible money-market fund;
             (f) deposits, but only if the deposits—
                    (i) are with an eligible bank; and
                    (ii) can be withdrawn within 5 business days or any shorter
                         period required under the stock lending arrangement.
             Note     Readily realisable investment, eligible money-market fund, deposit and
                      eligible bank are defined in the glossary.



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                                                                     Rule 7.6.4

     (4) If a QFC retail scheme generates leverage through the reinvestment
         of collateral, this must be taken into account in calculating the
         scheme’s global exposure.




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Chapter 7       Investment and borrowing—QFC retail schemes
Part 7.7        Cash, borrowing, lending and other provisions—QFC retail schemes

Rule 7.7.1




Part 7.7                      Cash, borrowing, lending and
                              other provisions—QFC retail
                              schemes

7.7.1        Cash and near cash—QFC retail schemes
        (1) Cash and near cash must not be retained in the scheme property of a
            QFC retail scheme except to the extent that its retention may
            reasonably be regarded as necessary to enable any of the following:
             (a) the pursuit of scheme’s investment objectives, strategies and
                 policy;
             (b) the redemption of units;
             (c) the efficient management of the scheme in accordance with its
                 investment objectives, strategies and policy;
             (d) other purposes that may reasonably be regarded as ancillary to
                 the scheme’s investment objectives, strategies and policy.
             Note    Near cash and redemption are defined the glossary.

        (2) However, during the period of the initial offer, the scheme property
            may consist of cash and near cash without any limit.
             Note    Initial offer is defined in the glossary.




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          Cash, borrowing, lending and other provisions—QFC retail schemes        Part 7.7

                                                                                  Rule 7.7.2

7.7.2       General power to borrow—QFC retail schemes
        (1) A QFC retail scheme that is a CIC or CIP may, in accordance with
            this rule and rule 7.7.3 (Borrowing limits—QFC retail schemes),
            borrow money for the use of the scheme on terms that the borrowing
            is to be repaid out of the scheme property.
            Note      CIC and CIP are defined in r 1.3.7 and r 1.3.8 respectively. Borrowing
                      is defined in the glossary.

        (2) The independent entity of a QFC retail scheme that is a CIT may, on
            the operator’s instructions and in accordance with this rule and
            rule 7.7.3, borrow money for the use of the scheme on terms that the
            borrowing is to be repaid out of the scheme property.
            Note      CIT is defined in r 1.3.9.

        (3) Subrules (1) and (2) are subject to the obligation of the scheme to
            comply with any restriction in the constitutional document.
            Note      Constitutional document is defined in r 3.1.1.

        (4) Money may be borrowed under subrule (1) or (2) only from an
            eligible bank.
            Note      Eligible bank is defined in the glossary.

        (5) The operator must ensure that any borrowing is on a temporary basis
            and that borrowings are not persistent.
        (6) For subrule (5), the operator must have regard in particular to the
            following:
             (a) the duration of any borrowing;
             (b) the number of times the scheme borrows in any period.
        (7) Without limiting subrule (5), the operator must ensure that no
            borrowing is for longer than 3 months, whether in relation to a
            particular amount or at all, without the independent entity’s prior
            agreement.


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Part 7.7        Cash, borrowing, lending and other provisions—QFC retail schemes

Rule 7.7.3


        (8) The independent entity may give its agreement under subrule (7) in
            relation to a borrowing only on the conditions that appear to the
            independent entity appropriate to ensure that the borrowing does not
            cease to be on a temporary basis only.
        (9) A CIC or CIP must not issue any debt instrument unless it
            acknowledges or creates a borrowing that complies with
            subrules (1), (3) and (4).
             Note    Debt instrument is defined in the glossary.

      (10) This rule does not apply to back-to-back borrowing.
             Note    Back-to-back borrowing is defined in the glossary.

7.7.3        Borrowing limits—QFC retail schemes
        (1) The operator of a QFC retail scheme must ensure that the scheme’s
            total borrowing does not, on any day, exceed 10% of the value of
            the scheme property.
             Note    Borrowing is defined in the glossary.

        (2) This rule does not apply to back-to-back borrowing.

7.7.4        Restrictions on lending money—QFC retail schemes
        (1) None of the money in the scheme property of a QFC retail scheme
            may be lent.
             Note    Money is defined in the glossary.

        (2) For subrule (1), money is lent by the scheme if it is paid to a person
            on the basis that it must be repaid, whether or not by that person.
        (3) However, for subrule (1), the following are not lending:
             (a) acquiring a debt instrument;
             (b) placing money on deposit or in a current account.
             Note    Debt instrument is defined in the glossary.


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                                                                                      Rule 7.7.5

        (4) This rule does not prevent a QFC retail scheme that is a CIC or CIP
            from—
             (a) providing an officer of the scheme with funds to meet
                 expenditure to be incurred by the officer for the purposes of—
                    (i)    the scheme; or
                    (ii)   to perform duties as an officer of the scheme; or
             (b) doing anything to enable an officer of the scheme to avoid
                 expenditure mentioned in paragraph (a).
             Note      CIC and CIP are defined in r 1.3.7 and r 1.3.8 respectively.

        (5) In this rule:
             officer, of a CIC or CIP, means—
             (a) a member of the governing body of the CIC or CIP; or
             (b) the chief executive, manager, secretary, or other similar officer,
                 of the CIC or CIP.

7.7.5        Restrictions on lending property other than money—QFC
             retail schemes
        (1) The scheme property of a QFC retail scheme other than money must
            not be lent by way of deposit or otherwise.
        (2) For subrule (1), transactions permitted by part 7.6 (Stock lending
            and repos—QFC retail schemes) are not lending.
        (3) The scheme property must not be mortgaged.
        (4) If transactions in derivatives or forward transactions are used for a
            QFC retail scheme in accordance with this chapter, this rule does
            not prevent the scheme, or the independent entity on the operator’s
            instructions, from—
             (a) lending, depositing, pledging or charging scheme property for
                 margin requirements; or

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Part 7.7        Cash, borrowing, lending and other provisions—QFC retail schemes

Rule 7.7.6


             (b) transferring property under the terms of an agreement in
                 relation to margin requirements, if the operator reasonably
                 considers that both the agreement and the margin requirements
                 made under it (including in relation to the level of margin)
                 provide appropriate protection to unitholders.
             Note      Margin is defined in the glossary.

7.7.6        General power to accept or underwrite placings—QFC
             retail schemes
        (1) This rule applies to any agreement entered into by a QFC retail
            scheme—
             (a) that is an underwriting or sub-underwriting agreement; or
             (b) that contemplates that securities will or may be issued,
                 subscribed or acquired for the scheme.
                    Note     Securities is defined in the glossary.

        (2) However, this rule, does not apply to—
             (a) an option; or
             (b) a purchase of a transferable security that gives a right to—
                    (i) subscribe for or acquire a transferable security; or
                    (ii) convert a transferable security into another transferable
                         security.
             Note      Option is defined in the glossary. Transferable security is defined in
                       r 7.1.6.

        (3) Any power in this chapter to invest in transferable securities may be
            used by the QFC retail scheme for the purpose of entering into an
            agreement to which this rule applies, subject to any restriction in the
            constitutional document being complied with.
             Note      Constitutional document is defined in r 3.1.1.



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                                                                                  Rule 7.7.7

        (4) The exposure of the QFC retail scheme to agreements to which this
            rule applies must, on any day, be—
             (a) covered under rule 7.5.1 (Cover for transactions in derivatives
                 and forward transactions—QFC retail schemes); and
             (b) such that, if all possible obligations arising under them had
                 immediately to be met in full, there would be no breach of this
                 chapter.
        (5) In this rule:
             agreement includes understanding.

7.7.7        Guarantees and indemnities—QFC retail schemes
        (1) A QFC retail scheme, and the independent entity of a QFC retail
            scheme, must not provide any guarantee or indemnity in relation to
            the obligation of any person.
        (2) None of the scheme property of a QFC retail scheme may be used to
            discharge any obligation arising under a guarantee or indemnity in
            relation to the obligation of any person.
        (3) This rule does not apply to any of the following:
             (a) any indemnity or guarantee given for margin requirements if
                 the derivatives or forward transactions are being used in
                 accordance with the provisions of this chapter;
                  Note       Margin and derivative are defined in the glossary.

             (b) any indemnity given to the independent entity against any
                 liability incurred by it in safeguarding the scheme property;
             (c) any indemnity given by the scheme or the independent entity to
                 another person if—
                   (i) the other person is engaged to assist the independent
                       entity to safeguard any of the scheme property; and


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Part 7.7        Cash, borrowing, lending and other provisions—QFC retail schemes

Rule 7.7.7


                  (ii) the indemnity is against any liability incurred by the other
                       person in safeguarding scheme property;
             (d) for a CIC or CIP—an indemnity given to a person winding up
                 a corporation or scheme (the relevant entity) if the indemnity is
                 given for the purposes of arrangements by which all or part of
                 the property of the relevant entity becomes the first property of
                 the CIC or CIP and the shareholders or unitholders of the
                 relevant entity become the first unitholders of the CIC or CIP;
                  Note     CIC and CIP are defined in r 1.3.7 and 1.3.8 respectively.
                           Corporation is defined in the glossary.

             (e) for a CIT—an indemnity given to a person winding up a
                 corporation or scheme if all or part of the property of the
                 corporation or scheme is to become part of the scheme
                 property of the CIT by way of unitisation.
                  Note     CIT is defined in r 1.3.9. Unitisation is defined in the glossary.




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                         Operating duties and responsibilities—QFC schemes          Chapter 8
                                                    Dealing—QFC schemes               Part 8.1
                                    Dealing—QFC qualified investor schemes      Division 8.1.A
                                                                                    Rule 8.1.1




Chapter 8                       Operating duties and
                                responsibilities—QFC schemes
            Notes for ch 8
            1      This chapter provides the operating framework within which a QFC scheme
                   must be operated on a day-to-day basis to ensure that persons are treated
                   fairly when they become, while they remain, or as they cease to be,
                   unitholders.
            2      The operator operates the scheme on a day-to-day basis. Its operation is
                   governed particularly by the provisions of this chapter.
            3      The operator does not necessarily have to carry out all the activities it is
                   responsible for and may outsource functions to others. This chapter sets out
                   the parameters of any outsourcing.
            4      The independent entity’s duty is, generally speaking, to safeguard the
                   scheme property and to oversee certain functions of the operator (most
                   notably the dealing, valuation, pricing and investment functions).


Part 8.1                        Dealing—QFC schemes
Division 8.1.A                  Dealing—QFC qualified investor
                                schemes
8.1.1       Application of div 8.1.A to umbrella schemes—QFC
            qualified investor schemes
        (1) This division applies to each subscheme of a QFC qualified investor
            scheme that is an umbrella scheme as if it were a separate QFC
            qualified investor scheme.
            Note       Umbrella scheme and subscheme are defined in r 1.2.11.

        (2) The currency of a subscheme may, if appropriate, be used for the
            subscheme instead of the base currency of the umbrella scheme.
            Note       Base currency is defined in the glossary.


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Part 8.1         Dealing—QFC schemes
Division 8.1.A   Dealing—QFC qualified investor schemes
Rule 8.1.2


8.1.2        Initial offer—QFC qualified investor schemes
        (1) The period of the initial offer for a QFC qualified investor scheme,
            and how it ends, must be set out in the latest filed prospectus and
            must not be of unreasonable length.
             Note     Initial offer and latest filed prospectus are defined in the glossary.

        (2) During the initial offer period, units may only be issued at the initial
            price.
             Note     Initial price is defined in the glossary.

8.1.3        How units are issued and redeemed etc—QFC qualified
             investor schemes
        (1) Units in a QFC qualified investor scheme are issued or redeemed on
            behalf of the scheme by the operator making a record of—
             (a) the issue or redemption; and
             (b) the number or percentage of the units in each class that are
                 issued or redeemed.
             Note     Issue, redemption and class are defined in the glossary.

        (2) Units in a QFC qualified investor scheme cannot be issued or
            redeemed in any other way.
        (3) The time of an issue or redemption under subrule (1) is the time the
            record is made.
        (4) The operator of a QFC qualified investor scheme may arrange for
            the independent entity to issue or redeem units on behalf of the
            scheme if the operator would otherwise be obliged to issue or
            redeem the units on behalf of the scheme.




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                                                  Dealing—QFC schemes                Part 8.1
                                  Dealing—QFC qualified investor schemes       Division 8.1.A
                                                                                   Rule 8.1.4

8.1.4        Controls over issue and redemption of units—QFC
             qualified investor schemes
        (1) The operator of a QFC qualified investor scheme must ensure that at
            each valuation point there are at least as many units in issue of any
            class as there are units registered to unitholders of that class.
             Note    Valuation point and class are defined in the glossary.

        (2) In issuing or redeeming units, the operator must not do, or fail to do,
            anything that would, or might, give the operator, or an associated
            person for the operator, a benefit or advantage at the expense of a
            unitholder or potential unitholder.
             Note    Issue, redemption and associated person are defined in the glossary.

        (3) The operator must, as required by these rules and the latest filed
            prospectus—
             (a) issue and redeem units on behalf of the scheme; and
             (b) arrange for the payment of money or transfer of assets to or
                 from the independent entity for scheme.
             Note    Money and latest filed prospectus are defined in the glossary.

        (4) The operator of must keep a record of the issues and redemptions it
            makes.
        (5) If the operator breaches subrule (1) or (2), it must—
             (a) correct the breach as quickly as possible; and
             (b) reimburse the scheme any costs the scheme may have incurred
                 in correcting the breach, subject to any reasonable minimum
                 level for reimbursement provided in the latest filed prospectus.
             Note    Breach is defined in the glossary.




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Chapter 8        Operating duties and responsibilities—QFC schemes
Part 8.1         Dealing—QFC schemes
Division 8.1.A   Dealing—QFC qualified investor schemes
Rule 8.1.5


8.1.5        Issue and redemption of units in multiple classes—QFC
             qualified investor schemes
        (1) This rule applies to a QFC qualified investor scheme if the scheme
            has 2 or more classes of units in issue.
             Note     Class is defined in the glossary.

        (2) The operator may treat all, or any 2 or more, of the classes (the
            relevant classes) as a single class in deciding how many units are to
            be issued or redeemed by reference to a particular valuation point
            if—
             (a) either—
                    (i) the relevant classes have the same entitlement to
                        participate in the scheme property, and the same liability
                        for charges, expenses, and other payments, that may be
                        recovered from the scheme property; or
                    (ii) the relevant classes differ only as to whether income is
                         distributed or accumulated by periodic credit to capital,
                         and the price of the units in each class is calculated by
                         reference to undivided shares in the scheme property; and
             (b) the independent entity gives its prior agreement.

8.1.6        Issue and redemption generally—QFC qualified investor
             schemes
        (1) The operator of a QFC qualified investor scheme must, at all times
            during a dealing day, be willing to issue units on behalf of the
            scheme to any eligible person in accordance with any conditions
            stated in the constitutional document and the latest filed prospectus,
            unless the operator has reasonable grounds to refuse the issue.
             Note     Dealing day, issue and latest filed prospectus are defined in the
                      glossary. Constitutional document is defined in r 3.1.1.



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                                               Dealing—QFC schemes             Part 8.1
                               Dealing—QFC qualified investor schemes    Division 8.1.A
                                                                             Rule 8.1.6

     (2) Conditions mentioned in subrule (1) must be fair and reasonable as
         between all unitholders and potential unitholders.
     (3) The operator of a QFC qualified investor scheme must, at all times
         during a dealing day, be willing to redeem on behalf of the scheme
         units of an eligible unitholder in accordance with any conditions in
         the constitutional document and the latest filed prospectus, unless
         the operator has reasonable grounds to refuse the redemption.
         Note     Redemption is defined in the glossary.

     (4) On agreeing to redeem units under subrule (3), the operator must
         arrange for the independent entity to pay the appropriate proceeds of
         the redemption to the unitholder within any reasonable period
         provided in the constitutional document or the latest filed
         prospectus, unless the operator or independent entity has reasonable
         grounds for withholding payment.
     (5) Payment of proceeds on redemption must be made in any way
         provided in the latest filed prospectus.
     (6) The way provided for in the latest filed prospectus for subrule (5)
         must be fair as between redeeming unitholders and continuing
         unitholders.
     (7) The operator must issue or redeem units at a price calculated at the
         next valuation point for dealing purposes after receiving the
         instructions to issue or redeem the units.
     (8) If a QFC qualified investor scheme is operating limited redemption
         arrangements, the arrangements must provide for the operator to
         redeem units in the scheme at least once every 6 months.
         Note     Limited redemption arrangements is defined in the glossary.
         Guidance on limited redemption periods
         The maximum period between dealing days for a QFC qualified investor scheme
         will depend on the reasonable expectations of the target investor group and the
         particular investment objectives, strategies and policy of the scheme. For
         example, for a scheme aiming to invest in large property developments, the


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Part 8.1         Dealing—QFC schemes
Division 8.1.A   Dealing—QFC qualified investor schemes
Rule 8.1.7

             expectation would be that it is reasonable to have a longer period between dealing
             days for liquidity reasons than for a scheme investing predominantly in listed
             securities.

8.1.7        When instructions for issue and redemption must be
             given—QFC qualified investor schemes
        (1) The latest filed prospectus of a QFC qualified investor schemes
            must fix a time before a valuation point (the cut-off point) after
            which the operator must not accept instructions to issue or redeem
            units on behalf of the scheme at the valuation point.
        (2) The cut-off point must not be earlier than the close of business on
            the business day before the valuation point to which it relates.
        (3) However, if there are 2 or more valuation points on a day, the cut-
            off point for a valuation point must not be earlier than the valuation
            point immediately before it.
             Examples
             If there are 3 valuations points at 10 am, 12 noon and 2 pm on a business day (the
             relevant day), the cut-off points for the valuations points must comply with the
             following:
             (a) the cut-off point for the 10 am valuation point cannot be earlier than the
                   close of business on the business day before the relevant day;
             (b) the cut-off point for the 12 noon valuation point cannot be earlier than 10
                   am on the relevant day;
             (c) the cut-off point for the 2 pm valuation point cannot be earlier than 12 noon
                   on the relevant day.

        (4) Different cut-off points may be used to differentiate between the
            methods of submitting instructions to redeem to the operator but not
            to differentiate between unitholders or potential unitholders.

8.1.8        Limited issue—QFC qualified investor schemes
            If a QFC qualified investor scheme limits the issue of units in any
            class, units in the class can only be issued if the issue—


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                                                     Dealing—QFC schemes              Part 8.1
                                                Dealing—QFC retail schemes      Division 8.1.B
                                                                                    Rule 8.1.9

             (a) is in accordance with the constitutional document and the latest
                 filed prospectus; and
             (b) will not materially prejudice any existing unitholders.
            Note       Issue, class and latest filed prospectus are defined in the glossary.
                       Constitutional document is defined in r 3.1.1.

8.1.9       Issue only to qualified investors—QFC qualified investor
            schemes
            To remove any doubt, the operator of a QFC qualified investor
            scheme must not issue units in the scheme to a person who is not a
            qualified investor for the scheme.
            Note       Issue is defined in the glossary. Qualified investor, for a QFC scheme,
                       is defined in r 1.2.12 (2).

Division 8.1.B                  Dealing—QFC retail schemes
            Notes for div 8.1.B
            1      The operator of a QFC retail scheme is responsible for issuing and
                   redeeming units on behalf of the scheme. The provisions of this division are
                   intended to ensure that the operator treats persons fairly if they give
                   instructions to the operator to issue or redeem units.
            2      This division also sets out common standards for how the amounts in relation
                   to unit transactions are to be paid. These arrangements include the initial
                   offer of units and the exchange of units for scheme property.

8.1.10      Application of div 8.1.B to umbrella schemes—QFC retail
            schemes
        (1) This division applies to each subscheme of a QFC retail scheme that
            is an umbrella scheme as if it were a separate QFC retail scheme.
            Note       Umbrella scheme and subscheme are defined in r 1.2.11.

        (2) The currency of a subscheme may, if appropriate, be used for the
            subscheme instead of the base currency of the umbrella scheme.
            Note 1     Base currency is defined in the glossary.


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Part 8.1         Dealing—QFC schemes
Division 8.1.B   Dealing—QFC retail schemes
Rule 8.1.11

             Note 2   Details of the initial offer must be provided in any prospectus available
                      during the initial offer period (see r S4.16 (c) (Dealing)).

8.1.11       Initial offers—QFC retail schemes
       (1) During the initial offer period for a QFC retail scheme, units may
           only be issued at the initial price.
             Note     Initial offer and initial price are defined in the glossary.

       (2) The length of the initial offer period must not be unreasonable,
           taking into account the characteristics of the scheme.
       (3) The period of the initial offer comes to an end if the operator
           believes on reasonable grounds that the price that would reflect the
           current value of the scheme property would differ from the initial
           price by more than 2%.

8.1.12       How units are issued and redeemed etc—QFC retail
             schemes
       (1) Units in a QFC retail scheme are issued or redeemed on behalf of
           the scheme by the operator making a record of—
             (a) the issue or redemption; and
             (b) the number or percentage of the units in each class that are
                 issued or redeemed.
             Note     Issue, redemption and class are defined in the glossary.

       (2) Units in a QFC retail scheme cannot be issued or redeemed in any
           other way.
       (3) The time of an issue or redemption under subrule (1) is the time the
           record is made.
       (4) The operator of a QFC retail scheme may arrange for the
           independent entity to issue or redeem units on behalf of the scheme



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                                                    Dealing—QFC schemes              Part 8.1
                                               Dealing—QFC retail schemes      Division 8.1.B
                                                                                  Rule 8.1.13

          if the operator would otherwise be obliged to issue or redeem the
          units on behalf of the scheme.

8.1.13    Controls over issue and redemption of units—QFC retail
          schemes
     (1) The operator of a QFC retail scheme must ensure that at each
         valuation point there are at least as many units in issue of any class
         as there are units registered to unitholders of that class.
          Note      Valuation point and class are defined in the glossary.

     (2) In issuing or redeeming units, the operator must not do, or fail to do,
         anything that would, or might, give the operator, or an associated
         person for the operator, a benefit or advantage at the expense of a
         unitholder or a potential unitholder.
          Note      Issue, redemption and associated person are defined in the glossary.

     (3) The operator must, as required by these rules and the latest filed
         prospectus—
          (a) issue and redeem units on behalf of the scheme; and
          (b) arrange for the payment of money or transfer of assets to or
              from the independent entity for the scheme.
                 Note       Money and latest filed prospectus are defined in the glossary.

     (4) The operator must keep a record of the issues and redemptions it
         makes.
     (5) If the operator breaches subrule (1) or (2), it must—
          (a) correct the breach as quickly as possible; and
          (b) reimburse the scheme any costs the scheme may have incurred
              in correcting the breach, subject to any reasonable level for
              reimbursement provided in the latest filed prospectus.
          Note      Breach is defined in the glossary.



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Chapter 8        Operating duties and responsibilities—QFC schemes
Part 8.1         Dealing—QFC schemes
Division 8.1.B   Dealing—QFC retail schemes
Rule 8.1.14


       (6) The operator must have systems and controls to ensure compliance
           with subrule (1).
             Guidance for controls
             1   CTRL, rule 4.1.1 requires an authorised firm to take adequate steps to ensure
                 that its systems, resources, procedures and controls are at all times
                 appropriate to its business (see also PRIN, principle 4). PRIN, principle 7
                 requires an authorised firm to have regard to its customer’s interests and treat
                 them fairly.
             2   The operator should agree a period with the independent entity during which
                 the operator will issue or redeem units. A period up to the next valuation
                 point, but in all cases within 24 hours, may be acceptable if the provisions
                 mentioned in paragraph 1 are complied with.

8.1.14       Issue and redemption of units in multiple classes—QFC
             retail schemes
       (1) This rule applies to a QFC retail scheme if the scheme has 2 or more
           classes of units in issue.
             Note     Class is defined in the glossary.

       (2) The operator may treat all, or any 2 or more, of the classes (the
           relevant classes) as a single class in deciding how many units are to
           be issued or redeemed by reference to a particular valuation point
           if—
             (a) either—
                    (i) the relevant classes have the same entitlement to
                        participate in the scheme property, and the same liability
                        for charges, expenses, and other payments, that may be
                        recovered from the scheme property; or
                    (ii) the relevant classes differ only as to whether income is
                         distributed or accumulated by periodic credit to capital,
                         and the price of the units in each class is calculated by
                         reference to undivided shares in the scheme property; and



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                                                 Dealing—QFC schemes           Part 8.1
                                            Dealing—QFC retail schemes   Division 8.1.B
                                                                            Rule 8.1.15

          (b) the independent entity gives its prior agreement.

8.1.15    Changes to number of units issued or redeemed—QFC
          retail schemes
     (1) Any instructions to the operator of a QFC retail scheme for the issue
         or redemption of units may be altered to change the number of units
         issued or redeemed if the independent entity, after having taken
         reasonable care in considering the matter—
          (a) is satisfied that—
                 (i) the alteration corrects an error in the instruction; and
                 (ii) the error is an isolated error; and
          (b) agrees with the change.
     (2) However, the instruction may be altered only within the period
         within which payment must be made in relation to the unit under
         rule 8.1.16 (Payment for issued units—QFC retail schemes) or
         rule 8.1.19 (Payment for redeemed units—QFC retail schemes).

8.1.16    Payment for issued units—QFC retail schemes
     (1) The operator of a QFC retail scheme must not issue units in the
         scheme to a person unless the person has paid the independent entity
         the price of the units and any payments required under rule 8.2.16
         (Dilution—QFC retail schemes).
          Note      Issue and price are defined in the glossary.

     (2) Any payment made to the independent entity under this rule must be
         in cash or cleared funds unless rule 8.1.20 (Issue or redemption
         otherwise than for cash—QFC retail schemes) applies.
     (3) If the operator breaches this rule, the operator must reimburse the
         scheme for any lost interest unless the amount involved is not, in the
         independent entity’s opinion, material to the scheme.


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Chapter 8        Operating duties and responsibilities—QFC schemes
Part 8.1         Dealing—QFC schemes
Division 8.1.B   Dealing—QFC retail schemes
Rule 8.1.17


8.1.17       Issue and redemption generally—QFC retail schemes
       (1) The operator of a QFC retail scheme must, at all times during a
           dealing day, be willing to issue units on behalf of the scheme to any
           person in accordance with any conditions stated in the constitutional
           document and the latest filed prospectus, unless the operator has
           reasonable grounds to refuse the issue.
             Note     Dealing day, issue and latest filed prospectus are defined in the
                      glossary. Constitutional document is defined in r 3.1.1.

       (2) Conditions mentioned in subrule (1) must be fair and reasonable as
           between all unitholders and potential unitholders.
       (3) The operator of a QFC retail scheme must, at all times during a
           dealing day, be willing to redeem on behalf of the scheme units of a
           unitholder, unless the operator has reasonable grounds to refuse the
           redemption.
             Note     Redemption is defined in the glossary.

       (4) Subject to rule 8.1.21 (Deferred redemption—QFC retail schemes),
           the operator of a QFC retail scheme must issue or redeem units at a
           price calculated at the next valuation point for dealing purposes after
           the operator receives instructions to issue or redeem the units.

8.1.18       When instructions for issue or redemption must be
             given—QFC retail schemes
       (1) The latest filed prospectus of a QFC retail scheme must fix a time
           before a valuation point (the cut-off point) after which the operator
           must not accept instructions to issue or redeem units on behalf of the
           scheme at the valuation point.
       (2) The cut-off point must not be earlier than the close of business on
           the business day before the valuation point to which it relates.




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                                                 Dealing—QFC schemes              Part 8.1
                                            Dealing—QFC retail schemes      Division 8.1.B
                                                                               Rule 8.1.19

     (3) However, if there are 2 or more valuation points on a day, the cut-
         off point for a valuation point must not be earlier than the valuation
         point immediately before it.
          Examples
         If there are 3 valuations points at 10 am, 12 noon and 2 pm on a business day (the
         relevant day), the cut-off points for the valuations points must comply with the
         following:
         (a) the cut-off point for the 10 am valuation point cannot be earlier than the
               close of business on the business day before the relevant day;
         (b) the cut-off point for the 12 noon valuation point cannot be earlier than 10
               am on the relevant day;
         (c) the cut-off point for the 2 pm valuation point cannot be earlier than 12 noon
               on the relevant day.
         Note     Rule 8.1.21 (Deferred redemption—QFC retail schemes) allows, in
                  certain circumstances, redemptions at a valuation point to be deferred to
                  the next valuation point.

     (4) Different cut-off points may be used to differentiate between the
         methods of submitting instructions to redeem to the operator but not
         to differentiate between unitholders or potential unitholders.

8.1.19    Payment for redeemed units—QFC retail schemes
     (1) If the operator of a QFC retail scheme redeems units on behalf of
         the scheme, the operator must, before the close of business on the 4th
         business day after the day the units are redeemed (or, if later, as
         soon as practicable after delivery to the independent entity of the
         evidence of title to the units that the independent entity may
         reasonably require), request the independent entity to pay the former
         unitholder the price of the units less any deduction required under
         rule 8.2.16 (Dilution—QFC retail schemes).
          Note    Redemption, business day and price are defined in the glossary.

     (2) The independent entity must make the payment to the unitholder
         before the close of business on the 6th business day after the day the
         independent entity receives the request under subrule (1).

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Part 8.1         Dealing—QFC schemes
Division 8.1.B   Dealing—QFC retail schemes
Rule 8.1.20


       (3) If the scheme property does not, and will not within the period
           required by subrule (2), include sufficient cash to make the payment
           in the appropriate currency within that period and the scheme cannot
           borrow the amount needed to make the payment without breaching
           rule 7.7.3 (Borrowing limits—QFC retail schemes)), the period is
           extended, for the relevant currency, until the shortage is rectified.
             Note     Borrowing is defined in the glossary.

       (4) If subrule (3) applies, the operator must take reasonable steps to
           rectify the currency shortage as quickly as possible.
       (5) This rule does not apply if the rule 8.1.20 (Issue or redemption
           otherwise than for cash—QFC retail schemes) applies.
       (6) This rule does not require the independent entity or operator to pay
           an amount or transfer scheme property for a redemption of units if
           an amount is owing on the earlier issue of the units.
             Note     Redemption and issue are defined in the glossary.

8.1.20       Issue or redemption otherwise than for cash—QFC retail
             schemes
             The independent entity of a QFC retail scheme may take into or
             transfer out of the scheme property assets other than cash as
             payment for the issue or redemption of units, but only if—
             (a) it has taken reasonable care to ensure that the assets would not
                 be likely to result in any material prejudice to the interests of
                 unitholders; and
             (b) the constitutional document and the latest filed prospectus
                 permit it.
             Note     Issue and redemption are defined in the glossary. Constitutional
                      document is defined in r 3.1.1.




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                                               Dealing—QFC schemes              Part 8.1
                                          Dealing—QFC retail schemes      Division 8.1.B
                                                                             Rule 8.1.21

8.1.21   Deferred redemption—QFC retail schemes
     (1) If a QFC retail schemes has at least 1 valuation point on each
         business day, the constitutional document and latest filed prospectus
         may permit deferral of redemptions at a valuation point to the next
         valuation point if the requested redemptions exceed—
          (a) 10% of the scheme’s value; or
          (b) if the latest filed prospectus provides another reasonable
              percentage—that percentage of the scheme’s value.
         Note     Constitutional document is defined in r 3.1.1. Latest filed prospectus,
                  business day, redemption and valuation point are defined in the
                  glossary.

     (2) Any deferral of redemptions under subrule (1) must be undertaken
         in accordance with the procedures explained in the latest filed
         prospectus.
     (3) The procedures must ensure—
          (a) the consistent treatment of all unitholders who have sought to
              redeem units at any valuation point at which redemptions are
              deferred; and
          (b) that all deals relating to an earlier valuation point are
              completed before deals relating to a later valuation point are
              considered.
         Note     Deal is defined in the glossary.




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Chapter 8        Operating duties and responsibilities—QFC schemes
Part 8.2         Valuation and pricing—QFC schemes
Division 8.2.A   Valuation and pricing—QFC qualified investor schemes
Rule 8.2.1




Part 8.2                       Valuation and pricing—QFC
                               schemes
Division 8.2.A                 Valuation and pricing—QFC qualified
                               investor schemes
8.2.1        Application of div 8.2.A to umbrella schemes—QFC
             qualified investor schemes
        (1) This division applies in relation to each subscheme of a QFC
            qualified investor scheme that is an umbrella scheme as if it were a
            separate QFC qualified investor scheme.
             Note     Umbrella scheme and subscheme are defined in r 1.2.11.

        (2) The currency of a subscheme may, if appropriate, be used for the
            subscheme instead of the base currency of the umbrella scheme.
             Note     Base currency is defined in the glossary.

8.2.2        Valuation—QFC qualified investor schemes
        (1) For these rules, the value of the scheme property of a QFC qualified
            investor scheme is its net asset value.
             Note     Net asset value is defined in the glossary.

        (2) To calculate the price of units in the scheme, the operator must
            conduct a fair and accurate valuation of all scheme property, on a
            forward price basis, in accordance with—
             (a) these rules; and
             (b) the constitutional document and latest filed prospectus.
             Note     Constitutional document is defined in r 3.1.1. Forward price and latest
                      filed prospectus are defined in the glossary.



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                     Valuation and pricing—QFC qualified investor schemes   Division 8.2.A
                                                                                Rule 8.2.3

        (3) The valuation of investments held as part of the scheme property
            must reflect their mid-market value.
        (4) If single prices are quoted for both buying and selling investments,
            the latest filed prospectus must explain how the investments must be
            valued.
        (5) If the scheme invests in approved money-market instruments, the
            operator must value an approved money-market instrument on an
            amortised cost basis if the instrument has a residual maturity of less
            than 3 months and has no specific sensitivity to market parameters,
            including credit risk.
             Note    Approved money-market instrument is defined in r 7.1.5.

        (6) Any part of the scheme property that is not an investment must be
            valued by the operator at a fair value.
             Note    Investment is defined in the glossary.

        (7) However, an interest in an immovable must be valued by the
            scheme’s standing independent valuer under division 6.2.C.
        (8) Any fiscal charges, commissions, professional fees or other charges
            that were paid, or would be payable, on acquiring or disposing of an
            investment or other part of the scheme property must be excluded
            from the value of the investment or other part of the scheme
            property.

8.2.3        Valuation points—QFC qualified investor schemes
        (1) A QFC qualified investor scheme must have a valuation point on
            each dealing day, other than a dealing day during the initial offer
            period.
             Note    Valuation point, dealing day and initial offer are defined in the
                     glossary.

        (2) The operator must prepare a valuation of the scheme property in
            accordance with rule 8.2.2 at each valuation point.

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Part 8.2         Valuation and pricing—QFC schemes
Division 8.2.B   Valuation and pricing—QFC retail schemes
Rule 8.2.4


8.2.4        Prices of units—QFC qualified investor schemes
        (1) The price of the unit at a valuation point must be calculated by the
            operator—
             (a) on the basis of the valuation under rule 8.2.3 (2) at the
                 valuation point; and
             (b) in a way that is fair and reasonable as between unitholders; and
             (c) in a way that is otherwise in accordance with the constitutional
                 document and latest filed prospectus.
                     Note      Constitutional document is defined in r 3.1.1. Valuation point
                               and latest filed prospectus are defined in the glossary.

        (2) The operator must publish in an appropriate way the price of each
            class of unit in the scheme, based on each valuation under
            rule 8.2.3 (2).
             Note        Price and class are defined in the glossary.

Division 8.2.B                    Valuation and pricing—QFC retail
                                  schemes
             Note for div 8.2.B
                    The operator of a QFC retail scheme is responsible for valuing the scheme
                    property and for calculating the price of units. This division protects
                    unitholders and potential unitholders by—
                    (a) setting out rules to ensure that the price of units is calculated fairly and
                          regularly; and
                    (b) allowing the operator to mitigate the effects of any dilution (reduction)
                          in value of the scheme property caused by buying and selling
                          underlying investments as a result of the issue or redemption of units;
                          and
                    (c) ensuring that prices are made public in an appropriate way.




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                                Valuation and pricing—QFC retail schemes       Division 8.2.B
                                                                                   Rule 8.2.5

8.2.5        Application of div 8.2.B to umbrella schemes—QFC retail
             schemes
        (1) This division applies in relation to each subscheme of a QFC retail
            scheme that is an umbrella scheme as if it were a separate QFC
            retail scheme.
             Note     Umbrella scheme and subscheme are defined in r 1.2.11.

        (2) The currency of a subscheme may, if appropriate, be used for the
            subscheme instead of the base currency of the umbrella scheme.
             Note     Base currency is defined in the glossary.

8.2.6        Duty of operator to rectify breaches of div 8.2.B—QFC
             retail schemes
        (1) The operator of a QFC retail scheme must take immediate action to
            rectify any breach of this division.
             Note     Breach is defined in the glossary.

        (2) If the breach relates to the incorrect pricing of units in relation to the
            issue of units, the rectification must extend to the reimbursement or
            payment of amounts by the operator to unitholders, former
            unitholders or the scheme.
             Note     Issue and money are defined in the glossary.

        (3) However, if the independent entity considers that the breach is of
            minimal significance or that making the reimbursement or payment
            would be inappropriate, the independent entity may direct that
            rectification need not extend to reimbursement or payment.
        (4) The independent entity may consider the breach to be of minimal
            significance if—
             (a) the independent entity has reviewed the operator’s controls
                 (and supporting systems) in accordance with rule 8.2.12
                 (Review by independent entity of operator’s pricing controls
                 etc—QFC retail schemes); and

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Part 8.2         Valuation and pricing—QFC schemes
Division 8.2.B   Valuation and pricing—QFC retail schemes
Rule 8.2.6


             (b) the independent entity is satisfied, based on the review, that the
                 operator’s pricing controls comply with rule 8.2.11 (Pricing
                 controls of operator—QFC retail schemes); and
             (c) the error in pricing of a unit is less than 0.5% of the correct
                 price.
       (5) If the breach was caused by 1 or more factors or existed over a
           period, then, in deciding whether the breach is of minimal
           significance, the independent entity must consider each incorrect
           price separately.
       (6) To remove any doubt, even though the independent entity considers
           the breach to be of minimal significance, the independent entity may
           require reimbursement or payment of amounts by the operator to
           unitholders, former unitholders or the scheme.
       (7) In deciding under subrule (3) whether reimbursement or payment is
           inappropriate, the independent entity must take into account the
           need not to prejudice the rights of unitholders or unitholders of a
           class of units.
       (8) If the independent entity decides that making the reimbursement or
           payment would be inappropriate, the independent entity must tell the
           Regulatory Authority about the breach and its decision immediately,
           but within 1 business day.
             Examples
            See examples to rule 4.1.4 (2) on the meaning of ‘within 1 business day’.
            Note      See also r 4.2.4 (Duty of independent entity to report certain breaches of
                      law etc—all QFC schemes).

       (9) The independent entity must give the Regulatory Authority any
           information about the breach and its decision that the authority
           reasonably requires.




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                                                                                 Rule 8.2.7

     (10) The independent entity must satisfy itself that any reimbursement or
          payment required under this rule is accurately and promptly
          calculated and paid.
     (11) This rule does not require reimbursement to unitholders or former
          unitholders of amounts that the operator and independent entity
          reasonably consider to be immaterial.

8.2.7       Valuation requirement——QFC retail schemes
            To calculate the price of units in a QFC retail scheme, the operator
            must conduct a fair and accurate valuation of all scheme property,
            on a forward price basis, in accordance with—
             (a) these rules; and
             (b) the constitutional document and latest filed prospectus.
            Note     Constitutional document is defined in r 3.1.1. Forward price and latest
                     filed prospectus are defined in the glossary.

8.2.8       General rules for valuation of scheme property—QFC
            retail schemes
        (1) The operator of a QFC retail scheme must value the scheme’s
            investments using a reputable source.
        (2) The operator must keep the reliability of the source of prices under
            regular review.
        (3) For some or all of the investments held as part of the scheme
            property, the operator may quote different prices according to
            whether they are being bought (offer prices) or sold (bid prices).
        (4) The valuation of investments held as part of the scheme property
            must reflect their mid-market value.




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Part 8.2         Valuation and pricing—QFC schemes
Division 8.2.B   Valuation and pricing—QFC retail schemes
Rule 8.2.9


        (5) If single prices are quoted for both buying and selling investments,
            the latest filed prospectus must explain how the investments must be
            valued.
             Note     Latest filed prospectus is defined in the glossary.

        (6) If the scheme invests in approved money-market instruments, the
            operator must value an approved money-market instrument on an
            amortised cost basis if the instrument has a residual maturity of less
            than 3 months and has no specific sensitivity to market parameters,
            including credit risk.
             Note     Approved money-market instrument is defined in r 7.1.5.

        (7) Any part of the scheme property that is not an investment must be
            valued at fair value.
        (8) Any fiscal charges, commissions, professional fees or other charges
            that were paid, or would be payable, on acquiring or disposing of an
            investment or other part of the scheme property must be excluded
            from the value of the investment or other part of the scheme
            property.
        (9) The operator must—
             (a) document the basis of valuation of the scheme property
                 (including any fair value pricing policy for rule 8.2.9) and, if
                 appropriate, the basis of any methodology; and
             (b) act consistently and fairly in making a valuation.

8.2.9        Fair value pricing for securities—QFC retail schemes
        (1) If the operator of a QFC retail scheme has reasonable grounds to
            believe—
             (a) that no reliable price exists for a security at a valuation point;
                 or



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                                                                                  Rule 8.2.9

          (b) that the most recent price available for a security does not
              reflect the operator’s best estimate of the value of the security
              at the valuation point;
          the operator must value the security at a price that, in its opinion,
          reflects a fair and reasonable price for the security (the fair value
          price).
          Note    Security and valuation point are defined in the glossary.

     (2) Without limiting subrule (1), the operator may use the fair market
         price for the security if—
          (a) there has been no recent trade in the security; or
          (b) a significant event has happened since the most recent closure
              of the market where the price of the security is taken.
     (3) For subrule (2) (b), an event is significant if, because of the event,
         the most recent price of the security (or a basket of securities that
         includes the security) is materially different from the price that the
         operator believes on reasonable grounds would have existed at the
         valuation point had the relevant market been open.
     (4) In deciding whether to use a fair value price for the security, the
         operator must consider the following:
          (a) the nature of the QFC retail scheme;
          (b) the kind of security;
          (c) the basis and reliability of the alternative price used;
          (d) the operator’s policy on the valuation of scheme property as
              disclosed in the latest filed prospectus.
     (5) Subrule (4) does not limit the matters the operator may consider.
     (6) If the unit price is calculated by the operator using—




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Part 8.2         Valuation and pricing—QFC schemes
Division 8.2.B   Valuation and pricing—QFC retail schemes
Rule 8.2.10


             (a) properly applied fair value prices in accordance with this rule;
                 and
             (b) a documented fair value pricing policy for the scheme;
             any subsequent information that indicates that the price should (or
             should perhaps) have been different from the price calculated by the
             operator does not, of itself, establish that the price was incorrectly
             calculated by the operator.

8.2.10       Valuation points—QFC retail schemes
       (1) A QFC retail scheme must not have less than 2 regular valuation
           points in any month and, if there are only 2 valuation points in any
           month, the regular valuation points must be at least 2 weeks apart.
             Note     The prospectus of a QFC retail scheme must contain information about
                      its regular valuation points for the purpose of dealing in units in
                      accordance with rule S4.15 (Valuation and pricing).

       (2) No valuation points are required during the initial offer period.
             Note     Initial offer is defined in the glossary.

8.2.11       Pricing controls of operator—QFC retail schemes
       (1) The operator of a QFC retail scheme must be able to demonstrate
           that it has effective controls over its calculations of unit prices.
       (2) Without limiting subrule (1), the controls must be appropriate to
           ensure that—
             (a) prices of units are calculated in accordance with this division;
                 and
             (b) the likelihood of incorrect prices is minimised.
       (3) In particular, the controls must ensure all the following:
             (a) asset prices are accurate and up-to-date;


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                                                                          Rule 8.2.11

         (b) investment transactions are accurately and promptly reflected
             in valuations;
          (c) the components of the valuation (including stock, cash, and
              units in issue) are regularly reconciled to their source or prime
              records and any reconciling items resolved promptly and
              debtors reviewed for recoverability;
         (d) sources of prices not obtained from the main pricing source are
             recorded and regularly reviewed;
          (e) compliance with investment and borrowing powers is regularly
              reviewed;
          (f) dividends are accounted for as soon as securities are quoted ex-
              dividend (unless it is prudent to account for them on receipt);
         (g) fixed interest dividends, interest and expenses are accrued at
             each valuation point;
         (h) tax positions are regularly reviewed and adjusted, if necessary;
          (i) reasonable tolerances are set for movements in the key
              elements of a valuation, and movements outside the tolerances
              are investigated;
          (j) the operator regularly reviews the portfolio valuation for
              accuracy;
         (k) valuation of OTC derivatives is accurate, up-to-date and
             complies with methods agreed with the independent entity.
         Note     OTC derivative is defined in the glossary.

     (4) In exercising its pricing controls, the operator may exercise
         reasonable discretion in deciding the appropriate frequency of the
         operation of the controls and may choose a longer interval, if
         appropriate, given the level of activity in the scheme or the
         materiality of any effect on the price.


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Part 8.2         Valuation and pricing—QFC schemes
Division 8.2.B   Valuation and pricing—QFC retail schemes
Rule 8.2.12


       (5) The operator must keep records to demonstrate the exercise of
           effective pricing controls.

8.2.12       Review by independent entity of operator’s pricing
             controls etc—QFC retail schemes
       (1) This rule sets out the reviews that the independent entity of a QFC
           retail scheme must conduct to be satisfied that the operator has
           controls that are appropriate to ensure that—
             (a) prices of units are calculated in accordance with this division;
                 and
             (b) the likelihood of incorrect prices is minimised.
       (2) A review must extend to pricing functions that the operator has
           outsourced to a third party.
       (3) In conducting a review, the independent entity must—
             (a) thoroughly examine the operator’s controls (and supporting
                 systems) to confirm that they are appropriate; and
             (b) analyse the controls (and supporting systems) to decide the
                 extent to which reliance can be placed on them.
       (4) A review must be conducted when the independent entity is
           appointed and afterwards as it considers appropriate given its
           knowledge of the robustness and stability of the operator’s controls
           (and supporting systems).
       (5) A review must be conducted more frequently if the independent
           entity knows or suspects that the operator’s controls (or any
           supporting systems) are weak or otherwise unsatisfactory.
       (6) In addition, the independent entity must from time to time review
           other aspects of the valuation of the scheme property, verifying on a
           sample basis, if necessary—



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                                                                                  Rule 8.2.13

           (a) the assets, liabilities, accruals, units in issue and securities
               prices (and in particular the prices of securities that are not
               approved securities and the basis for the valuation of unquoted
               securities); and
                  Note       Approved security is defined in r 7.1.9.

           (b) any other relevant matter (for example, an accumulation factor
               or a currency conversion factor).
     (7) The independent entity must ensure that any issue identified in a
         review is properly followed up and resolved.

8.2.13     Recording and reporting incorrect pricing—QFC retail
           schemes
     (1) The operator must make and keep a record of each instance where
         the price of a unit is incorrect.
     (2)   The record must be made as soon as the error is discovered.
     (3) The operator must—
           (a) report each instance to the independent entity as soon a
               practicable; and
           (b) give the independent entity details of the action taken, or to be
               taken, to avoid repetition of the error.
           Note      Rule 4.2.4 deals with the duty of the independent entity to report certain
                     breaches of the law.

8.2.14     Prices of units—QFC retail schemes
     (1) The operator of a QFC retail scheme must ensure that the price of a
         unit in any class is calculated—
           (a) by reference to the scheme’s net asset value at the relevant
               time; and



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Part 8.2         Valuation and pricing—QFC schemes
Division 8.2.B   Valuation and pricing—QFC retail schemes
Rule 8.2.15


             (b) in accordance with these rules, the constitutional document and
                 the latest filed prospectus.
             Note     Class, net asset value and latest filed prospectus are defined in the
                      glossary. Constitutional document is defined in r 3.1.1.

       (2) To remove any doubt and without limiting subrule (1), the
           constitutional document or the latest filed prospectus (or both) may
           make provision for large deals to be conducted at a higher issue
           price or lower redemption price than those published for the scheme,
           if the prices do not exceed the relevant maximum and minimum
           limits applying under this division.
             Note     Large deal and redemption are defined in the glossary.

       (3) Any unit price calculated in accordance with subrule (1) must be
           expressed in a form that is accurate to at least 4 significant figures.
       (4) For each class of units, a single price must be calculated at which
           units are to be issued and redeemed.

8.2.15       Issue and redemption prices—QFC retail schemes
             The operator of a QFC retail scheme must not—
             (a) issue a unit for more than the price of a unit in the relevant
                 class at the relevant valuation point, plus—
                    (i) any issue charge permitted under rule 8.6.4 (Charges on
                        buying and selling units—QFC retail schemes); and
                    (ii) any payments required under rule 8.2.16 (Dilution—QFC
                         retail schemes); or
             (b) redeem a unit for less than the price of a unit in the relevant
                 class at the relevant valuation point, less—
                    (i) any redemption charge permitted under rule 8.6.4; and




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                                    Valuation and pricing—QFC schemes              Part 8.2
                              Valuation and pricing—QFC retail schemes       Division 8.2.B
                                                                                Rule 8.2.16

                 (ii) any deductions required under rule 8.2.16.
          Note      Class, valuation point, issue charge and redemption charge are defined
                    in the glossary.

8.2.16    Dilution—QFC retail schemes
     (1) In issuing or redeeming units in a QFC retail scheme, the operator
         must include in the unit price the dilution adjustment the operator
         considers necessary to reduce the effect of dilution.
          Note 1    Issue, redemption, dilution adjustment and dilution are defined in the
                    glossary.
          Note 2    See the independent entity’s duties under r 8.2.17 (Particular duties of
                    independent entity in relation to dilution—QFC retail schemes).

     (2) In issuing or redeeming units in a QFC retail scheme, the operator
         may, in exceptional circumstances, require the payment or deduction
         of a dilution levy for the purpose of reducing the effect of dilution if
         the independent entity has agreed that the levy should be required.
          Note      Dilution levy is defined in the glossary.

     (3) In applying a dilution adjustment or dilution levy, the operator must
         act in a fair way to reduce dilution and solely for that purpose.
          Note      Dilution is defined in the glossary.

     (4) A dilution adjustment is made—
          (a) as part of the calculation of the unit price for the purpose of
              reducing dilution in the scheme; or
          (b) to recover any amount the scheme has paid, or the operator
              reasonably expects it to pay, in relation to the issue or
              redemption of units.
     (5) A dilution levy is payable at the same time as payment or transfer of
         property is required for the issue or redemption.



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Chapter 8        Operating duties and responsibilities—QFC schemes
Part 8.2         Valuation and pricing—QFC schemes
Division 8.2.B   Valuation and pricing—QFC retail schemes
Rule 8.2.17


       (6) As soon as practicable after a valuation point, the operator must tell
           the independent entity the rate or amount of any dilution adjustment
           or dilution levy.
             Note      Valuation point is defined in the glossary.

8.2.17      Particular duties of independent entity in relation to
            dilution—QFC retail schemes
       (1) The independent entity must take reasonable care to ensure that—
             (a) the operator considers whether or not to exercise the power
                 under rule 8.2.16 (Dilution—QFC retail schemes) to require a
                 dilution levy and, if applicable, the rate or amount of any
                 dilution levy that is required; or
                    Note     Dilution levy is defined in the glossary.

             (b) the operator has, in considering the matters mentioned in
                 paragraph (a), taken into account all factors that are material
                 and relevant to the operator’s decision; and
             (c) the operator has, in considering whether to exercise the power
                 under rule 8.2.16 to require a dilution levy, acted in accordance
                 with the restrictions of that rule.
             Note      See r 4.2.3 (2) for other duties of the independent entity in relation to
                       pricing.

       (2) To remove any doubt, the independent entity has no duty in relation
           to the operator’s exercise of any discretion mentioned in subrule (1).

8.2.18       Publication of prices—QFC retail schemes
       (1) The operator of a QFC retail scheme must make dealing prices
           public in an appropriate way.
             Note      Deal is defined in the glossary.




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                               Valuation and pricing—QFC retail schemes         Division 8.2.B
                                                                                   Rule 8.2.18

     (2) In deciding the appropriate way of making prices public, the
         operator must ensure all the following requirements are met:
          (a) that a unitholder or potential unitholder can obtain the prices at
              a reasonable cost;
          (b) that prices are available at reasonable times;
          (c) that publication is consistent with the way and frequency at
              which the units are dealt in;
          (d) that the way prices are made public is disclosed in the latest
              filed prospectus;
               Note       Latest filed prospectus is defined in the glossary.

          (e) that prices are published in a consistent way.
     (3) Without limiting subrule (1), publication in the following ways may
         be appropriate:
          (a) publication in a national newspaper;
          (b) supply through an advertised local rate or freephone telephone
              number;
          (c) publication on the internet;
          (d) inclusion in a database of prices that is publicly available;
          (e) communication to all existing unitholders.
     (4) The operator must make previous prices available to any unitholder
         or potential unitholder on request.




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Chapter 8        Operating duties and responsibilities—QFC schemes
Part 8.2         Valuation and pricing—QFC schemes
Division 8.2.C   Valuation—money-market funds
Rule 8.2.19


Division 8.2.C                Valuation—money-market funds
8.2.19       Maintaining value—all money-market funds
       (1) This rule applies to a QFC qualified investor scheme or QFC retail
           scheme that is a money-market fund.
             Note     Money-market fund is defined in r 1.3.12.

       (2) The operator must conduct a valuation of the scheme property on a
           mark to market basis at least once every week and at the same
           valuation point used to value the scheme property on an amortised
           cost basis.
             Note     Valuation point is defined in the glossary.

       (3) The operator must ensure that the value of the scheme property
           when valued on a mark to market basis does not differ by more than
           0.5% from the value of the scheme property when valued on an
           amortised cost basis.
       (4) The operator must tell the independent entity in writing whenever a
           valuation discloses that the mark to market value of the money-
           market fund differs from its amortised cost basis value by more than
           0.1%.
       (5) The operator must agree with the independent entity procedures
           designed to stabilise the money-market fund if the mark to market
           value of the scheme differs from its amortised cost basis value by
           0.1%, 0.2% or 0.3%.




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                       Operating duties and responsibilities—QFC schemes                 Chapter 8
                                          Title and register—QFC schemes                  Part 8.3

                                                                                         Rule 8.3.1




Part 8.3                       Title and register—QFC schemes

8.3.1        Unitholder register requirements—all QFC schemes
        (1) The operator of a QFC scheme must ensure that the unitholder
            register includes—
             (a) the name and address of each person (a relevant person) who
                 is or has been a unitholder (for joint unitholders, no more than
                 4 persons need to be included); and
             (b) the number or percentage of units (including fractions of a
                 unit) in each class held by each relevant person; and
             (c) the date each relevant person was registered for the units in the
                 person’s name and, if relevant, ceased to be registered for the
                 units in the person’s name; and
             (d) the number or percentage of units in each class currently in
                 issue.
             Note 1   Unitholder register is defined in the glossary. Unitholder and unit are
                      defined in r 1.2.5 and r 1.2.4 respectively.
             Note 2   For the operator’s obligation to keep the register, see r 4.1.6.

        (2) The operator must not enter notice of any trust (whether express,
            implied or constructive) on the register.
        (3) The operator and independent entity are not bound by notice of any
            trust.
        (4) The operator and independent entity must rely on the register as
            conclusive evidence of the persons entitled to the units entered on it.
        (5) The operator must take all reasonable steps to ensure that the
            information on the register is at all times complete and up to date.



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Part 8.3        Title and register—QFC schemes

Rule 8.3.1


       (6) Without limiting subrule (5), the operator must do the following in
           relation to the register:
             (a) take reasonable steps to update the register on receiving written
                 notice of a change of name or address of a unitholder;
             (b) ensure that the register, or a copy of the register, is available
                 for inspection in the QFC during ordinary business hours by or
                 on behalf of any unitholder, the Regulatory Authority, the
                 independent entity or the auditor of the scheme;
             (c) on request by or on behalf of any unitholder, give the
                 unitholder a copy of the register entries relating to the
                 unitholder free of charge;
             (d) after consultation with the independent entity, carry out the
                 conversion of units allowed under rule 8.3.4 (Conversion of
                 units—all QFC schemes).
       (7) However, subrule (5) (b) does not prevent the operator from closing
           the register for periods of not longer than 30 business days in any
           year.
             Note    Business day and year are defined in the glossary.

       (8) If the operator receives written notice of a change of name of a
           unitholder and a certificate has been issued for the unitholder’s
           units, the operator must also either endorse the existing certificate or
           issue an updated one.




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                                          Title and register—QFC schemes             Part 8.3

                                                                                    Rule 8.3.2

8.3.2        Transfer of units by act of parties—all QFC schemes
        (1) Every unitholder of a QFC scheme is entitled to transfer units
            entered in the unitholder register in the unitholder’s name by an
            instrument of transfer in any form that the operator approves, but the
            operator is under no duty to accept the transfer unless it is permitted
            by the constitutional document and the latest filed prospectus.
             Note    Constitutional document is defined in r 3.1.1. Latest filed prospectus is
                     defined in the glossary.

        (2) However, the operator of a QFC qualified investor scheme must not
            accept the transfer of units entered in the unitholder register unless
            the transferee is a qualified investor for the scheme.
             Note    Qualified investor, for a QFC scheme, is defined in r 1.2.12 (2).

        (3) Every instrument of transfer of units in a QFC scheme must be
            signed by, or on behalf of, the unitholder transferring the units (or, if
            the unitholder is a corporation, may be signed by 2 members of its
            governing body on behalf of the corporation).
             Note    Corporation and governing body are defined in the glossary.

        (4) The transferor must be treated as the unitholder until the transferee’s
            name is entered in the unitholder register.
        (5) Every instrument of transfer must be left for registration with the
            operator accompanied by—
             (a) any document required by the law applying in the QFC; and
             (b) any other evidence reasonably required by the operator.
        (6) The operator must keep an instrument of transfer for at least 6 years
            after the day it is registered.
        (7) On registration of an instrument of transfer, a record of the
            transferor, the transferee and the date of transfer must be made in
            the unitholder register.


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Chapter 8       Operating duties and responsibilities—QFC schemes
Part 8.3        Title and register—QFC schemes

Rule 8.3.3


8.3.3        Certificates for units—all QFC schemes
        (1) If units in a QFC scheme are issued or rule 8.3.2 (Transfer of units
            by act of parties—all QFC schemes) is complied with in relation to
            the transfer of units in a QFC scheme, the operator may issue a
            document evidencing title to the units in accordance with the
            constitutional document.
             Note    Document evidencing title is defined in the glossary. Constitutional
                     document is defined in r 3.1.1.

        (2) However, the operator must issue a document evidencing title as
            soon as practicable if the procedures for redeeming units require
            unitholders to surrender the document evidencing title.

8.3.4        Conversion of units—all QFC schemes
        (1) This rule applies to a QFC scheme if there are 2 or more classes of
            units offered for issue.
             Note    Class and issue are defined in the glossary.

        (2) A unitholder has the right to convert the units from a class to
            another class if converting the units does not breach the latest filed
            prospectus.
             Note    Latest filed prospectus and breach are defined in the glossary.




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     Operator and independent entity appointment and removal—QFC schemes      Part 8.4

                                                                             Rule 8.4.1




Part 8.4                       Operator and independent entity
                               appointment and removal—QFC
                               schemes

8.4.1         Initial appointment of operator and independent entity—
              all QFC schemes
              On the registration of a scheme under these rules—
              (a) the person named in the application for registration as the
                  person who is to become the operator becomes the initial
                  operator of the scheme; and
              (b) the person appointed by the operator, and named in the
                  application for registration, as the person who is to become the
                  independent entity becomes the initial independent entity of the
                  scheme.

8.4.2         Removal of operator—QFC schemes
        (1) The independent entity of a QFC scheme may, by written notice
            given to the operator, remove the operator if any of the following
            events happens:
              (a) a meeting is called to consider a resolution for winding up the
                  operator;
              (b) an application is made to dissolve the operator or strike it off
                  the register of companies;
              (c) a petition is presented for winding up the operator;
              (d) a composition is made or proposed by the operator with any of
                  the operator’s creditors;
              (e) an administrator is appointed for the operator;


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Part 8.4         Operator and independent entity appointment and removal—QFC schemes

Rule 8.4.2


             (f) anything equivalent to an event mentioned in paragraphs (a) to
                 (e) happens in relation to the operator outside the QFC;
             (g) the independent entity forms the reasonable opinion, and states
                 in writing, that a change of operator is desirable in the interest
                 of the unitholders;
             (h) a special resolution of the unitholders is passed to remove the
                 operator;
                   Note      Special resolution is defined in the glossary.

             (i) the unitholders of 75% in value of the units in issue make a
                 written request to the independent entity for the operator’s
                 removal.
       (2) The independent entity must, by written notice given to the operator,
           remove the operator if the operator is no longer eligible to be the
           operator of the scheme under rule 4.1.1 (Requirements for
           operator—all QFC schemes) because of action taken by the
           Regulatory Authority under the Financial Services Regulations,
           whether or not under article 31 (Own initiative action by the
           Regulatory Authority).
       (3) If the independent entity gives the operator a notice under
           subrule (1) or (2), the independent entity must give the Regulatory
           Authority a copy of the notice immediately, but within 1 business
           day after the day the notice is given to the operator.
             Examples
             See examples to rule 4.1.4 (2) on the meaning of ‘within 1 business day’.

       (4) On receipt of a notice by the independent entity under subrule (1) or
           (2)—
             (a) the operator ceases to be the operator of the scheme; and




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                         Operating duties and responsibilities—QFC schemes    Chapter 8
     Operator and independent entity appointment and removal—QFC schemes       Part 8.4

                                                                              Rule 8.4.3

              (b) is released from all further obligations under these rules and
                  the constitutional document.
                    Note     Constitutional document is defined in r 3.1.1.

        (5) Subrule (4) (b) does not affect the rights of the independent entity or
            any other person in relation to an act or omission by the operator
            before its removal.
        (6) The independent entity must appoint another person as the operator
            of the scheme.
        (7) The person appointed must be eligible to be the operator of the
            scheme under rule 4.1.1.
        (8) If the name of the scheme contains a reference to the name of the
            former operator, the former operator is entitled to require the new
            operator and the independent entity to propose a change to the name
            of the scheme.

8.4.3         Retirement of operator—all QFC schemes
        (1) The operator of a QFC scheme is entitled to retire as operator in
            favour of another person if—
              (a) the operator appoints the other person as operator and assigns
                  all its rights and functions as operator to the person; and
              (b) the person is eligible to be the operator of the scheme under
                  rule 4.1.1 (Requirements for operator—all QFC schemes); and
              (c) the independent entity approves the appointment of the person
                  as operator.
        (2) On the appointment of the person taking effect, the former
            operator—
              (a) is released from all further obligations under these rules and
                  the constitutional document; and
                    Note     Constitutional document is defined in r 3.1.1.


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Part 8.4         Operator and independent entity appointment and removal—QFC schemes

Rule 8.4.4


             (b) may keep any consideration paid to it in relation to the change
                 without having to account for it to any unitholder.
        (3) Subrule (2) (a) does not affect the rights of the independent entity or
            any other person in relation to an act or omission by the former
            operator before its retirement.
        (4) On the retirement of the operator, the replacement operator must
            immediately, but within 1 business day after the day the replacement
            operator’s appointment takes effect, tell the Regulatory Authority
            about the retirement and the appointment.
             Examples
             See examples to rule 4.1.4 (2) on the meaning of ‘within 1 business day’.

8.4.4        Consequences of removal or retirement of operator—all
             QFC schemes
        (1) If the operator of a QFC scheme is removed or retires, it is entitled
            to continue to be recorded in the unitholder register for the units it
            holds.
        (2) This rule is subject to any restriction in the latest filed prospectus
            relating to the permitted categories of unitholders.
             Note     Latest filed prospectus is defined in the glossary.

8.4.5        Removal of independent entity by unitholders—all QFC
             schemes
        (1) The independent entity of a QFC scheme may be removed by a
            special resolution of the unitholders.
             Note     Special resolution is defined in the glossary.




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                                                                                      Rule 8.4.6

        (2) On the removal of the independent entity, the operator must—
              (a) tell the Regulatory Authority about the removal immediately,
                  but within 1 business day after the day the independent entity
                  is removed; and
              (b) appoint another person as the independent entity.
              Examples for r (2) (a) and r (4)
              See examples to rule 4.1.4 (2) on the meaning of ‘within 1 business day’.

        (3) The person appointed must be eligible to be the independent entity
            of the scheme under rule 4.2.1 (Requirements for independent
            entity—all QFC schemes).
        (4) On the appointment of the person as the independent entity, the
            operator must tell the Regulatory Authority about the appointment
            immediately, but within 1 business day after the day the
            appointment is made.

8.4.6         Removal of independent entity no longer eligible for
              appointment—all QFC schemes
        (1) This rule applies if the independent entity of a QFC scheme that is
            an authorised firm is no longer eligible to be the independent entity
            of the scheme under rule 4.2.1 (Requirements for independent
            entity—all QFC schemes) because of action taken by the Regulatory
            Authority under the Financial Services Regulations, whether or not
            under article 31 (Own initiative action by the Regulatory Authority).
        (2) The operator must, by written notice given to the independent entity,
            remove the independent entity.
              Note      If the independent entity is not an authorised firm, the independent
                        entity may also be removed under the following rules:
                           r 4.2.12 (Non-QFC independent entities—removal by operators)
                           r 4.2.13 (Non-QFC independent entities—removal by Regulatory
                             Authority).



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Part 8.4         Operator and independent entity appointment and removal—QFC schemes

Rule 8.4.7


        (3) On the removal of the independent entity, the operator must—
             (a) tell the Regulatory Authority about the removal immediately,
                 but within 1 business day after the day the independent entity
                 is removed; and
             (b) appoint another person as the independent entity.
             Examples for r (3) (a) and r (5)
             See examples to rule 4.1.4 (2) on the meaning of ‘within 1 business day’.

        (4) The person appointed must be eligible to be the independent entity
            of the scheme under rule 4.2.1.
        (5) On the appointment of the person as the independent entity, the
            operator must tell the Regulatory Authority about the appointment
            immediately, but within 1 business day after the day the
            appointment is made.

8.4.7        Retirement of independent entity—all QFC schemes
        (1) The independent entity of a QFC scheme may retire voluntarily only
            if—
             (a) the operator has appointed another person (the replacement) as
                 the independent entity; and
             (b) the independent entity has told the Regulatory Authority and
                 the replacement—
                    (i) about any matter relating to its retirement that it considers
                        should be drawn to their attention; and
                   (ii) if there is no such matter—that there is no matter relating
                        to its retirement that it considers should be drawn to their
                        attention.




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                                                                                      Rule 8.4.8

        (2) The replacement must be eligible to be the independent entity of the
            scheme under rule 4.2.1 (Requirements for independent entity—all
            QFC schemes).
        (3) The voluntary retirement of the independent entity takes effect only
            when the appointment of another person as independent entity takes
            effect.
        (4) On the retirement of the independent entity, the operator must
            immediately, but within 1 business day after the day the retirement
            takes effect, tell the Regulatory Authority about the retirement and
            the appointment of the other person as the independent entity.
              Examples
              See examples to rule 4.1.4 (2) on the meaning of ‘within 1 business day’.

8.4.8         Consequences of removal or retirement of independent
              entity—all QFC schemes
        (1) If the independent entity of a QFC scheme is removed or retires, the
            independent entity must, without delay, transfer or deliver the
            scheme property held by it to the replacement independent entity
            unless the QFC Court otherwise orders.
        (2) Until all the scheme property has been transferred or delivered, the
            independent entity remains accountable for it to the unitholders.




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Chapter 8       Operating duties and responsibilities—QFC schemes
Part 8.5        Outsourcing—QFC schemes

Rule 8.5.1




Part 8.5                     Outsourcing—QFC schemes

8.5.1        What is outsourcing?
        (1) For these rules, outsourcing, for a QFC scheme, is any form of
            arrangement that involves the operator or independent entity of the
            scheme relying on a third party service provider (including a
            member of its group) for the exercise of a function in relation to the
            scheme under these rules, any other Rules, the constitutional
            document or the latest filed prospectus.
             Note    Group, exercise, function and latest filed prospectus are defined in the
                     glossary. Rules is defined in INAP. Constitutional document is defined
                     in r 3.1.1.

        (2) However, outsourcing does not include the following arrangements:
             (a) discrete advisory services (including, for example, the
                 provision of legal advice), audit services, procurement of
                 specialised training, billing, and physical security;
             (b) supply arrangements and functions (including, for example, the
                 supply of electricity or water and the provision of catering and
                 cleaning services);
             (c) purchase of standardised services (including, for example,
                 market information services and the provision of prices);
             (d) the appointment of a group employee to exercise a controlled
                 function for an authorised firm.
             Note    Employee, controlled function and authorised firm are defined in the
                     glossary.




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                                               Outsourcing—QFC schemes              Part 8.5

                                                                                   Rule 8.5.2

8.5.2        Outsourcing by operator—all QFC schemes
        (1) The operator of a QFC scheme may outsource its functions in
            relation to the scheme in accordance with this part, and not
            otherwise.
             Note    The outsourcing provisions of CTRL do not apply in relation to an
                     outsourcing of functions under this part (see CTRL, r 1.1.1 (4)).

        (2) However, the operator must not outsource to the independent entity,
            or to a related person for the independent entity, any of the functions
            of the operator under a provision of these rules, the constitutional
            document, or the latest filed prospectus, if rule 4.2.3 (1) (Oversight
            functions of independent entity—all QFC schemes) applies to the
            provision.
             Note    Related person is defined in the glossary.

        (3) Subrule (2) does not apply to the outsourcing to the independent
            entity of the function of providing scheme administration.
             Note    Providing scheme administration is defined in the glossary.

        (4) Also, the operator must not outsource functions if the outsourcing
            may adversely impact on the Regulatory Authority’s ability to
            supervise the operator’s activities.

8.5.3        Outsourcing by independent entity—all QFC schemes
        (1) The independent entity of a QFC scheme may outsource its
            functions in relation to the scheme in accordance with this part, and
            not otherwise.
             Note    The outsourcing provisions of CTRL do not apply in relation to an
                     outsourcing of functions under this part (see CTRL, r 1.1.1 (4)).

        (2) However, the independent entity must not—
             (a) outsource to the operator (or, if the QFC scheme is a CIC or
                 CIP, to a member (however described) of the governing body
                 of the CIC or CIP) any of the functions of the independent

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Chapter 8       Operating duties and responsibilities—QFC schemes
Part 8.5        Outsourcing—QFC schemes

Rule 8.5.4


                    entity under rule 4.2.3 (Oversight functions of independent
                    entity—all QFC schemes) or rule 4.2.6 (Property safeguarding
                    functions of independent entity— all QFC schemes); or
                    Note     CIC and CIP are defined in r 1.3.7 and r 1.3.8 respectively.
                             Governing body is defined in the glossary.

             (b) outsource to a related person for the operator (or, if the QFC
                 scheme is a CIC or CIP, to a related person for a member
                 (however described) of the governing body of the CIC or CIP)
                 any of the functions of the independent entity mentioned in
                 paragraph (a); or
                    Note     Related person is defined in the glossary.

             (c) outsource to a person the function of holding documents
                 evidencing title to scheme property unless the person is
                 prohibited under the outsourcing agreement from giving them
                 to a third party without the independent entity’s agreement.
                    Note     Document evidencing title is defined in the glossary.

        (3) Also, the independent entity must not outsource functions if the
            outsourcing may adversely impact on the Regulatory Authority’s
            ability to supervise the independent entity’s activities in relation to
            the scheme.

8.5.4        Outsourcing notice and information—all QFC schemes
        (1) The operator or independent entity of a QFC scheme must give the
            Regulatory Authority reasonable notice of its intention to outsource
            a function under this part.
        (2) The notice must be given at least 10 business days before the day
            the operator or independent entity outsources the function.
             Note      Business day is defined in the glossary.




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                                                                          Rule 8.5.5

        (3) The operator or independent entity must give the Regulatory
            Authority any information about the proposed outsourcing that the
            authority reasonably needs.

8.5.5       Provisions applying to outsourcing by operator and
            independent entity—all QFC schemes
        (1) This rule applies in relation to an outsourcing of functions made by
            the operator or independent entity (the regulated entity) of a QFC
            scheme under this part to another person (the service provider).
        (2) The outsourcing must be in writing and in the form of, or part of, an
            agreement between the regulated entity and the service provider (the
            outsourcing agreement).
        (3) The outsourcing agreement must—
             (a) describe in adequate detail the functions (the outsourced
                 functions) to be exercised by the service provider under the
                 outsourcing; and
             (b) describe in adequate detail the service standards to be applied
                 by the service provider in exercising the outsourced functions;
                 and
             (c) state that it is an outsourcing agreement under these rules; and
             (d) ensure that the operator and independent entity can, at all
                 times, effectively monitor the exercise of the outsourced
                 functions by the service provider; and
             (e) authorise the regulated entity—
                  (i) to give further instructions to the service provider about
                      the exercise of the outsourced functions; and
                  (ii) to withdraw the outsourcing at any time, including with
                       immediate effect, if this is in the interests of the
                       unitholders; and


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Rule 8.5.5


              (f) not prevent the operator or independent entity from acting in
                  the best interests of the unitholders in relation to the outsourced
                  functions; and
             (g) not prevent the scheme from being managed in the best
                 interests of the unitholders; and
             (h) ensure that the scheme’s auditor can effectively exercise its
                 functions in relation to the scheme; and
              (i) require the service provider to comply with these rules, and
                  any other law applying in the QFC, in relation to the
                  outsourced functions; and
              (j) apply the law of the QFC to the agreement; and
             (k) ensure that the regulated entity and its internal and external
                 auditors have access to books, records and data relating to the
                 exercise of functions under the outsourcing; and
              (l) ensure that the outsourcing provides appropriate protection for
                  confidential information and personal data; and
                  Note     Personal data is defined in the glossary.

             (m) provide appropriate contingency arrangements; and
                  Note     See r 8.5.5 (2) and (3) (Outsourcing management).

             (n) require the service provider to deal with the Regulatory
                 Authority in an open and cooperative way in relation to the
                 exercise of the outsourced functions; and
             (o) require the service provider to give the Regulatory Authority
                 access to books, records and data relating to the exercise of the
                 outsourced functions; and
             (p) require the service provider to give the Regulatory Authority
                 any information it reasonably requires about the outsourced
                 functions; and


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                                                                       Rule 8.5.5

          (q) require the service provider to keep any records made by the
              service provider in relation to the outsourced functions for at
              least 6 years after the day they are made; and
          (r) prevent the service provider from further outsourcing any of
              the outsourced functions to another person without the prior
              approval of—
               (i) if the regulated entity is the operator—the operator; or
               (ii) if the regulated entity is the independent entity—the
                    independent entity and the operator.
     (4) Without limiting subrule (3), the regulated entity must take the steps
         necessary to mitigate against any operational risks in relation to the
         outsourcing.
     (5) The outsourcing agreement may provide that it has effect only in
         stated circumstances or subject to stated conditions, limits and
         directions.
     (6) The outsourcing of the outsourced functions to the service
         provider—
          (a) does not relieve the regulated entity from any regulatory
              obligations in relation to the outsourced functions; and
          (b) does not prevent the regulated entity from exercising all or part
              of the outsourced functions, despite anything in the
              outsourcing agreement or any other agreement.
     (7) The regulated entity remains responsible for ensuring—
          (a) that all applicable QFC regulatory requirements are complied
              with in relation to the outsourced functions; and
          (b) that the outsourced functions are otherwise properly exercised.




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Rule 8.5.6


        (8) The service provider must exercise the outsourced functions subject
            to the terms of the outsourcing agreement, including any conditions,
            limits and directions in the outsourcing agreement.
        (9) So far as the outsourcing agreement is expressed to operate as a
            delegation, these rules, all other laws applying in the QFC, the
            constitutional document and the latest filed prospectus apply to the
            service provider in exercising the outsourced functions as if the
            service provider were the regulated entity.
             Note    Constitutional document is defined in r 3.1.1. Latest filed prospectus is
                     defined in the glossary.

      (10) Without limiting subrule (9), a function may be exercised by the
           service provider on the service provider’s state of mind if—
             (a) the exercise of the function is dependent on the regulated
                 entity’s state of mind; and
             (b) the function is included in the outsourced functions; and
             (c) the outsourcing agreement is expressed to operate as a
                 delegation in relation to the function.
      (11) So far as the outsourcing agreement is expressed to operate as a
           delegation, anything done by or in relation to the service provider in
           relation to the outsourced functions is taken to have been done by or
           in relation to the regulated entity.
      (12) In this rule:
             state of mind includes knowledge, intention, opinion, belief or
             purpose.

8.5.6        Outsourcing management—all QFC schemes
        (1) The operator and independent entity of a QFC scheme must exercise
            appropriate skill, care and diligence in selecting, entering into and
            exiting from outsourcings by them under this part.


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                                                                         Rule 8.5.6

     (2) The operator or independent entity must ensure that—
          (a) 1 or more senior managers approve and periodically review its
              policy and procedures for functions outsourced under this part,
              including its procedures for the following:
               (i) the assessment of feasibility;
              (ii) the assessment of risk;
              (iii) the assessment of impact on its functions;
              (iv) the costing of outsourcings;
              (v) the criteria for selecting service providers; and
              Note       Senior manager is defined in the glossary.

         (b) every service provider has the ability and capacity to exercise
             reliably and professionally the functions to be outsourced to
             the service provider, both at the start of the outsourcing and
             throughout its life cycle, having regard, for example, to—
               (i) whether the service provider is regulated, to what extent
                   and by whom; and
              (ii) whether the exercise of the outsourced functions is
                   subject to specific regulation or supervision; and
              (iii) the risk that outsourced functions are not properly
                    exercised because of the number of other persons using
                    the service provider; and
              (iv) the financial stability and expertise of the service
                   provider; and
              (v) potential conflicts of interest that may arise in relation to
                  the outsourced functions.
     (3) The operator or independent entity must ensure that it has a
         comprehensive contingency arrangement to allow business


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Rule 8.5.7


             continuity if there is a significant loss of services from the service
             provider, including an exit strategy and, if appropriate, partial exit
             and step-in clauses.
        (4) The contingency arrangement must cover, among other things, the
            following:
             (a) a significant loss of resources by the service provider;
             (b) financial failure of the service provider;
             (c) an unexpected termination of the outsourcing.

8.5.7        Application of pt 8.5 to further outsourcing—all QFC
             schemes
        (1) This part applies to the further outsourcing, whether or not by the
            third party service provider, of a function outsourced to the third
            party service provider under this part as if—
             (a) the further outsourcing of the function were an outsourcing of
                 the function; and
             (b) all necessary changes were made.
        (2) To remove any doubt, this rule is subject to rule 8.5.5 (3) (r)
            (Provisions applying to outsourcing by operator and independent
            entity—all QFC schemes).

8.5.8        Systems and           controls       for     outsourcings—all   QFC
             schemes
             If the operator or independent entity of a QFC scheme outsources a
             function in relation to the scheme under this part, the operator or
             independent entity must ensure that, as part of its risk management
             framework, it implements and maintains systems and controls to
             monitor the exercise of the outsourced function.
             Note    Function and exercise are defined in the glossary.



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                               Payments—QFC qualified investor schemes          Division 8.6.A
                                                                                    Rule 8.6.1




Part 8.6                     Payments—QFC schemes
Division 8.6.A               Payments—QFC qualified investor
                             schemes
8.6.1        Payments—QFC qualified investor schemes
        (1) The operator of a QFC qualified investor scheme must ensure that
            the scheme does not incur any expense in relation to any movable or
            immovable property unless—
             (a) investing in the property is in accordance with the scheme’s
                 investment objectives, strategies and policy; or
             (b) the property is necessary for the direct pursuit of the scheme’s
                 business of investing in any investments to which it is
                 dedicated.
        (2) Payments made by the independent entity out of the scheme
            property may be made from capital property rather than from
            income if the basis for this is set out in the latest filed prospectus.
             Note    Capital property and latest filed prospectus are defined in the glossary.

        (3) Subrule (2) does not apply to payments for redemptions of units.

Division 8.6.B               Payments—QFC retail schemes
8.6.2        Payments out of scheme property—QFC retail schemes
        (1) The only payments that may be made from the scheme property of a
            QFC retail scheme are payments in relation to—
             (a) remunerating the persons operating the scheme; or
             (b) the administration of the scheme; or


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Rule 8.6.3


             (c) the investment or safeguarding of the scheme property; or
             (d) any taxes payable by the scheme or on scheme property.
        (2) A payment under subrule (1) (a) to (c) must not be made from
            scheme property if it is unfair to (or materially prejudices the
            interests of) any class of unitholders or potential unitholders.
             Guidance
             The operator should consider whether any payment to an affected person is unfair
             because of its amount or because it gives a disproportionate benefit to the affected
             person.

        (3) To remove any doubt, subrule (2) does not invalidate a payment that
            gives rise to a difference between the rights of separate classes of
            units if the difference relates solely to the payments that may be
            taken out of the scheme property.
        (4) If any annual management charge, or performance fee, (however
            described) that is payable to the operator in accordance with the
            latest filed prospectus is not paid when it is payable, the operator
            must tell the Regulatory Authority about the non-payment
            immediately, but within 1 business day.
             Examples
             See examples to rule 4.1.4 (2) on the meaning of ‘within 1 business day’.

8.6.3        Performance fees—QFC retail schemes
        (1) The latest filed prospectus of a QFC retail scheme may permit a
            payment (a performance fee) for the operator’s periodic charges, or
            to any investment adviser, to be based on a comparison between
            fluctuations in the value or price of—
             (a) 1 or more aspects of the scheme property; and




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                                                                           Rule 8.6.3

         (b) property of any description, an index or another factor
             designed for the purpose.
         Note    Latest filed prospectus and investment adviser are defined in the
                 glossary.

     (2) Any performance fee must be consistent with rule 8.6.2 (Payments
         out of scheme property—QFC retail schemes).
     (3) The following provisions apply in deciding whether a performance
         fee is consistent with rule 8.6.2:
         (a) a performance fee must be calculated and paid after all other
             payments have been considered;
         (b) if a performance fee is to be paid on the basis of the
             performance of the scheme against an index or another
             factor—the index or other factor must be reasonable given the
             scheme’s investment objectives, strategies and policy, and
             must be applied consistently;
         (c) a performance fee may be based on performance above a
             defined positive rate of return (the hurdle rate), which may be
             fixed or variable;
         (d) if paragraph (b) or (c) applies—the index or other factor, or
             hurdle rate, may be carried forward to future accrual periods;
         (e) the period over which the index or other factor, or hurdle rate,
             accrues and the frequency with which it crystallises must be
             reasonable;
          (f) unless allowed by rule 8.6.2 (1), there must be no arrangements
              to adjust the price or value of issue or redemption transactions
              in relation to performance fees accrued or paid if the
              transactions happen within the accrual period of the charge.




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Division 8.6.B   Payments—QFC retail schemes
Rule 8.6.4


8.6.4        Charges on           buying       and      selling     units—QFC           retail
             schemes
        (1) Only the operator of a QFC retail scheme may impose charges on
            unitholders or potential unitholders when they buy or sell units in
            the scheme.
        (2) The operator of a QFC retail scheme must not make any charge or
            levy in relation to—
             (a) the issue of units, except as permitted by subrule (3); or
             (b) the redemption of units, except as permitted by subrule (4).
             Note     Issue and redemption are defined in the glossary.

        (3) Subrule (2) (a) does not prevent an issue charge made in accordance
            with the latest filed prospectus if the charge is a fixed amount or
            calculated as a percentage of the price of a unit.
             Note     Issue charge and latest filed prospectus are defined in the glossary.

        (4) Subrule (2) (b) does not prevent a redemption charge made in
            accordance with—
             (a) the prospectus that was the latest filed prospectus when the
                 units were purchased by the unitholder; and
             (b) rule 8.6.5.
             Note     Redemption charge is defined in the glossary.

        (5) This rule is subject to rule 8.2.16 (Dilution—QFC retail schemes).

8.6.5        Redemption charges—QFC retail schemes
        (1) A redemption charge may be expressed as an amount or percentage.
             Note     Redemption charge is defined in the glossary.




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                                                                              Rule 8.6.6

        (2) A redemption charge may also be expressed as diminishing over the
            time for which the unitholder has held the units or be calculated on
            the basis of the unit price performance of the units.
        (3) However, any redemption charge must not be such that it could be
            reasonably regarded as restricting any right of redemption.
            Note    For the mandatory content of the prospectus of a QFC retail scheme in
                    relation to redemption charges, see r S4.19 (Redemption charges).

8.6.6       Charges on exchange of units in umbrella schemes—
            QFC retail schemes
            For a QFC retail scheme that is an umbrella scheme, the operator
            must not make a charge of more than the amount stated in the latest
            filed prospectus on an exchange of units in a subscheme for units in
            another subscheme.
            Note    Umbrella scheme and subscheme are defined in r 1.2.11. Latest filed
                    prospectus is defined in the glossary.

8.6.7       Allocation of payments to income or capital—QFC retail
            schemes
        (1) The operator of a QFC retail scheme must, in accordance with the
            latest filed prospectus, decide whether a payment is to be made from
            the income property or capital property of the scheme.
            Note    Latest filed prospectus, income property and capital property are
                    defined in the glossary.

        (2) In making a decision under subrule (1), the operator must—
             (a) have appropriate regard to whether the nature of the cost is
                 income related or capital related and the scheme’s investment
                 objectives, strategies and policy; and
             (b) agree with the independent entity about how the payment
                 should be treated.



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Rule 8.6.8


        (3) If, for any class of units for any annual accounting period, the
            amount of the income property is less than the income distributed,
            the shortfall must, as from the end of that period, be charged to the
            capital account and must not later be transferred to the income
            account.
             Guidance
             Any payment as a result of effecting transactions for the scheme should be made
             from the capital property of the scheme. All other payments should be made from
             income property in the first instance, but may be transferred to the capital account
             in accordance with rule 8.6.7 (1).

8.6.8        Prohibition         of     promotional          payments—QFC                retail
             schemes
        (1) A payment must not be made from the scheme property of a QFC
            retail scheme to a person for, or for the promotion of, the issue or
            redemption of units in the scheme.
             Examples of prohibited payments
             1    commission payable to intermediaries
             2    payments in relation to the preparation or dissemination of financial
                  communications (unless subrule (2) applies)

        (2) This rule does not apply to—
             (a) a payment to the operator to reimburse the operator for costs of
                 preparing and printing the product disclosure document
                 required under COND for units in the scheme; or
             (b) any other payment to the operator if the payment is permitted
                 under these rules.

8.6.9        Expenses in relation to property—QFC retail schemes
             The operator of a QFC retail scheme must ensure that the scheme
             does not incur any expense in relation to any property unless



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                                                                                 Rule 8.6.10

          investing in the property is in accordance with the scheme’s
          investment objectives, strategies and policy.

8.6.10    Payment of liabilities on transfer of assets—QFC retail
          schemes
     (1) This rule applies if the scheme property of a QFC retail scheme (the
         first scheme) is transferred to another QFC retail scheme (or to the
         independent entity of the other scheme for the other scheme) in
         consideration of the issue of units in the other scheme to unitholders
         of the first scheme.
          Note      In the circumstance described in subrule (1), the other scheme (or
                    independent entity of the other scheme) becomes successor in title to the
                    scheme property transferred.

     (2) The other scheme (or independent entity of the other scheme) may
         pay out of the scheme property of the other scheme any liability
         arising after the transfer if—
          (a) the liability could properly have been paid out of the scheme
              property transferred had it arisen before the transfer; and
          (b) there is nothing in the constitutional document of the other
              scheme expressly forbidding the payment; and
                 Note       Constitutional document is defined in r 3.1.1.

          (c) the operator of the other scheme is of the opinion that proper
              provision was made for meeting the liabilities that were known
              or could reasonably have been anticipated at the time of the
              transfer.

8.6.11    Attribution of scheme property to subschemes—QFC
          retail schemes
     (1) For a QFC retail scheme that is an umbrella scheme, any assets to be
         received into, or any payments out of, the scheme property that are



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Rule 8.6.11


             not attributable to only a single subscheme must be attributed by the
             operator to the respective subschemes.
       (2) Any attribution under this rule must be made in a way that is fair to
           the unitholders of the QFC retail scheme generally.
             Note     Umbrella scheme and subscheme are defined in r 1.2.11.




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                                                                                    Rule 8.7.1




Part 8.7                        Accounting periods—QFC
                                schemes

8.7.1       Accounting periods—all QFC schemes
        (1) A QFC scheme must have—
             (a) an annual accounting period; and
             (b) a half-yearly accounting period.
        (2) A half-yearly accounting period starts on the first day of an annual
            accounting period and ends—
             (a) on the day 6 months before the last day of the annual
                 accounting period; or
             (b) on another reasonable date stated in the latest filed prospectus.
                   Note       Latest filed prospectus is defined in the glossary.

        (3) The first annual accounting period starts—
             (a) on the first day of the initial offer period; or
             (b) if there is not an initial offer period for the scheme—on the
                 date the scheme is registered;
            and, in either case, ends on the next accounting reference date unless
            subrule (4) applies.
            Note      Initial offer and accounting reference date are defined in the glossary.

        (4) If the accounting reference date falls less than 6 months after the
            start of the first annual accounting period, the operator may extend
            the period to the next accounting reference date.
        (5) Each annual accounting period after the first period is for
            12 months, starting on the next day after the accounting reference


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Rule 8.7.1


             date and ending on the next accounting reference date, unless
             subrule (7) applies.
       (6) Each annual accounting period or half yearly accounting period ends
           at the end of the day worked out under this rule or, if the operator so
           decides, at the last valuation point on that day.
             Note    Day and valuation point are defined in the glossary.

       (7) If the accounting reference date stated in the scheme’s latest filed
           prospectus is changed, the operator may extend or shorten the
           annual accounting period by up to 6 months to end on the next
           accounting reference date.
       (8) Before extending or shortening an annual accounting period under
           subrule (4) or (7), the operator must—
             (a) consult the independent entity; and
             (b) consult the scheme’s auditor; and
             (c) give the Regulatory Authority reasonable notice.
       (9) If the annual accounting period is extended under subrule (4) or (7)
           and this results in a longer than usual period before the publication
           of reports to unitholders, the operator must make summary
           information about the scheme’s investment activities available to
           unitholders during the period in accordance with PRIN, principle 7
           (Customers’ interests) and principle 8 (Communications with
           clients).




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                        Income allocation and distribution—QFC schemes             Part 8.8

                                                                                  Rule 8.8.1




Part 8.8                    Income allocation and
                            distribution—QFC schemes

8.8.1       Application of pt 8.8 to umbrella schemes—all QFC
            schemes
            This part (other than rule 8.8.2 (1) and (2)) applies to a QFC scheme
            that is an umbrella scheme as if each subscheme were a separate
            QFC scheme.
            Note    Umbrella scheme and subscheme are defined in r 1.2.11.

8.8.2       Income allocation and distribution—all QFC schemes
        (1) A QFC scheme must have an annual income allocation date.
            Note    Annual income allocation date is defined in the glossary.

        (2) The annual income allocation date must be within 4 months after the
            scheme’s accounting reference date.
            Note    Month and accounting reference date are defined in the glossary.

        (3) A QFC scheme may have an interim income allocation date and
            interim accounting periods.
            Note    Interim income allocation date and interim accounting period are
                    defined in the glossary.

        (4) An interim income allocation date must be within 4 months after the
            day the relevant interim accounting period ends.
        (5) A QFC scheme must have a distribution account to which the
            amount of income allocated to unit classes that distribute income is
            transferred at the end of the relevant accounting period.
            Note    Distribution account and class are defined in the glossary.




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Rule 8.8.2


       (6) The amount available for income allocations must be calculated
           by—
             (a) taking the net revenue after taxation decided in accordance
                 with appropriate, internationally accepted professional
                 standards specified in the constitutional document and the
                 latest filed prospectus; and
                  Guidance
                  The constitutional document and latest filed prospectus would be expected
                  to specify a document such as the Statement of Recommended Practice for
                  financial statements of authorised funds issued by the United Kingdom
                  Investment Management Association.

             (b) making any transfers, to the extent permitted by the latest filed
                 prospectus, between the income account and the capital
                 account so that the amount available for income allocations is
                 calculated as if the revenue from debt instruments had been
                 decided without regard to the effect of—
                  (i) the change in an index of consumer prices during the
                      period, if the scheme’s investment objectives, strategies
                      and policy are to invest predominantly in debt instruments
                      for which cash flows are decided by reference to the
                      index (or a similar index of consumer prices) and the
                      transfer relates only to amounts in relation to index-
                      linked, gilt-edged securities; or
                  (ii) amortisation, if the amount available for income
                       allocations is not less than if the transfers had not been
                       made; and
             (c) making any other transfers between the income account and
                 the capital account that are required in relation to any of the
                 following:
                  (i) stock dividends;



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                         Income allocation and distribution—QFC schemes          Part 8.8

                                                                                Rule 8.8.2

                (ii) income equalisation included in income allocations from
                     other collective investment schemes;
                (iii) the allocation of payments in accordance with—
                       (A) for a QFC qualified investor scheme—the latest filed
                           prospectus; and
                       (B) for a QFC retail scheme—rule 8.6.7 (Allocation of
                           payments to income or capital—QFC retail
                           schemes);
                (iv) taxation;
                (v) the total amount of income property included in units
                    issued and units redeemed during the period.
         Note      Income account, capital account, debt instrument, income
                   equalisation, income property and latest filed prospectus are defined in
                   the glossary.

     (7) If income is allocated during an accounting period—
          (a) with effect from the end of the accounting period, the amount
              of income allocated to unit classes that accumulate income
              becomes part of the capital property and requires an adjustment
              to the proportion of the value of the scheme property to which
              they relate if other unit classes are in issue during the period;
              and
                Note       Capital property is defined in the glossary.

         (b) the adjustment under paragraph (a) must ensure that the price
             remains unchanged despite the transfer of income; and
          (c) the amount of any interim distribution must not be more than
              the amount that, in the operator’s opinion, would be available
              for allocation if the interim accounting period and all previous
              interim accounting periods in the same annual accounting
              period, taken together, were an annual accounting period.


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Chapter 8       Operating duties and responsibilities—QFC schemes
Part 8.8        Income allocation and distribution—QFC schemes

Rule 8.8.3


8.8.3        Unclaimed, minimal and joint unitholders distributions—all
             QFC schemes
        (1) Any distribution of a QFC scheme that is unclaimed after 6 years
            (or, if the latest filed prospectus provides for a longer period, that
            period) becomes part of the capital property.
             Note    Latest filed prospectus and capital property are defined in the glossary.

        (2) The operator and independent entity of a QFC scheme may agree a
            minimal amount in relation to which a distribution of income is not
            required, and how any such amounts are to be treated.
        (3) A distribution of a QFC scheme made to the joint unitholder named
            first on the unitholder register is as effective a discharge to the
            operator and independent entity as if that joint unitholder had been
            the sole unitholder.
             Note    Unitholder register is defined in the glossary.




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                                                   Names—QFC schemes                  Part 8.9

                                                                                     Rule 8.9.1




Part 8.9                      Names—QFC schemes

8.9.1        Name of scheme etc—all QFC schemes
        (1) The operator of a QFC scheme must ensure that the name of the
            scheme, any subscheme of the scheme, or a class of units, is not
            undesirable or misleading.
             Note     Subscheme is defined in r 1.2.11. Class is defined in the glossary.
             Guidance on names of CIC
             A CIC must not include in its name the following words, abbreviations of the
             following words or similar words or abbreviations:
             (a) limited;
             (b) unlimited;
             (c) public limited company.

        (2) If the Regulatory Authority is of the opinion that the operator is in
            breach of subrule (1) in relation to a name, it may direct the operator
            to take the steps necessary to have the name changed.
        (3) In deciding whether to give a direction under subrule (2) in relation
            to a name for a breach of subrule (1), the Regulatory Authority may
            consider whether the name—
             (a) implies that the scheme (or a part of the scheme) has merits
                 that might, or might not, be justified; or
             (b) implies that the operator has merits that might, or might not, be
                 justified; or
             (c) is inconsistent with the scheme’s investment objectives,
                 strategies or policy; or
             (d) might mislead investors into thinking that a person other than
                 the operator is responsible for managing the scheme (or part of
                 the scheme); or


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Chapter 8        Operating duties and responsibilities—QFC schemes
Part 8.9         Names—QFC schemes

Rule 8.9.1


             (e) incorrectly implies that the scheme is not a collective
                 investment scheme, a scheme registered in the QFC or under
                 these rules, or a particular kind of scheme registered under
                 these rules (for example, a qualified investor scheme); or
             (f) is, in the Regulatory Authority’s opinion, likely to offend the
                 public or a part of the public; or
             (g) is substantially similar to the name of—
                    (i) a scheme registered under PRIV or these rules; or
                   (ii) a subscheme of an umbrella scheme registered under
                        PRIV or these rules; or
                  (iii) a class of units for a scheme registered under PRIV or
                        these rules; or
             (h) implies a degree of security in relation to the capital or income
                 that is not justified.
             Examples of names for para (e)
             names that include the word ‘plan’ or ‘account’
             Examples of names for para (h)
             names that include the word ‘guaranteed’, ‘protected’ or ‘secured’

       (4) Subrule (3) does not limit the matters the Regulatory Authority may
           consider.
       (5) If the name includes the word ‘guaranteed’, ‘protected’ or ‘secured’
           (or a similar word), the Regulatory Authority may regard the name
           as undesirable or misleading unless the operator satisfies it of the
           matters mentioned in subrules (8) and (9).
       (6) If the name indicates or implies a guaranteed capital return, income
           return or both, the Regulatory Authority may regard the name as
           undesirable or misleading unless the operator satisfies it—




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                                                  Names—QFC schemes        Part 8.9

                                                                          Rule 8.9.1

          (a) that the total amount paid for a unit is guaranteed under a
              guarantee; and
          (b) of the matters mentioned in subrules (8) and (9).
     (7) If the name indicates or implies a degree of capital security (for
         example, the words ‘capital protected’ or words with a similar
         meaning), the Regulatory Authority may regard the name as
         undesirable or misleading unless the operator satisfies it—
          (a) that an amount not materially less than the total amount paid
              for a unit is guaranteed under a guarantee; and
          (b) that the scheme’s investment objectives, strategies and policy
              show a clear intention to provide a material degree of security
              in relation to the total amount paid for a unit; and
          (c) that the degree of capital security is apparent from the name
              and clearly stated in the latest filed prospectus; and
          (d) of the matters mentioned in subrules (8) and (9).
     (8) For subrule (5), (6) or (7), the operator must satisfy the Regulatory
         Authority that the scheme has a guarantee in relation to which all
         the following requirements are met:
          (a) the guarantee is given by a person other than the operator, the
              independent entity or an associated person for the operator or
              independent entity;
               Note       Associated person is defined in the glossary.

          (b) the guarantor has the authority and resources to honour the
              terms of the guarantee;
          (c) the guarantee covers all unitholders of the scheme and is
              legally enforceable by each unitholder or by a person acting on
              the unitholder’s behalf;
          (d) the guarantee relates to the total amount paid for a unit;


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Part 8.9        Names—QFC schemes

Rule 8.9.2


             (e) the guarantee provides for payment at a stated date or dates and
                 is unconditional although reasonable commercial exclusions
                 such as force majeure may be included;
             (f) if the guarantee applies to different classes of units—it is
                 identical in its application to all classes except for differences
                 attributable to income already received, or charges already
                 incurred, by the different classes of units.
        (9) For subrule (5), (6) or (7), the operator must also satisfy the
            Regulatory Authority that the terms of the guarantee and the
            credentials of the guarantor are clearly set out in detail in the latest
            filed prospectus and that any exclusions such as force majeure are
            highlighted.
      (10) In deciding whether it is satisfied for subrule (7), the Regulatory
           Authority must take into account whether the degree of capital
           security implied by the name fairly reflects the nature of the
           arrangements for providing the security.
      (11) Subrule (10) does not limit the matters the Regulatory Authority
           may take into account for subrule (7).
      (12) In this rule:
             total amount paid, for a unit, includes any charge or other cost paid
             or incurred when the unit was bought.

8.9.2        Use of certain names—all QFC schemes
        (1) The operator of a QFC scheme must ensure that the name of the
            scheme, or of a class of units, does not state or imply that the
            scheme is an Islamic fund unless the scheme is an Islamic fund.
             Note    Islamic fund is defined in r 1.3.11.

        (2) The operator of a QFC umbrella scheme must ensure that the name
            of a subscheme, or of a class of units of a subscheme, does not state


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                                                                           Rule 8.9.2

         or imply that the subscheme is an Islamic fund unless the subscheme
         is an Islamic fund.
         Note     Umbrella scheme and subscheme are defined in r 1.2.11.

     (3) The operator of a QFC scheme must ensure that the name of the
         scheme, or of a class of units, does not state or imply that the
         scheme is a money-market fund unless the scheme is a money-
         market fund.
         Note     Money-market fund is defined in r 1.3.12.

     (4) The operator of a QFC umbrella scheme must ensure that the name
         of a subscheme, or of a class of units of a subscheme, does not state
         or imply that the subscheme is a money-market fund unless the
         subscheme is a money-market fund.




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Chapter 8        Operating duties and responsibilities—QFC schemes
Part 8.10        Shari’a Supervisory Board—all Islamic funds

Rule 8.10.1




Part 8.10                      Shari’a Supervisory Board—all
                               Islamic funds

8.10.1        Islamic fund must have a supervisory board—all Islamic
              funds
       (1) The operator of a QFC scheme that is an Islamic fund, or is an
           umbrella scheme that has a subscheme that is an Islamic fund, must
           ensure that there is at all times a Shari’a Supervisory Board for the
           fund (or subscheme).
              Note      Islamic fund is defined in r 1.3.11. Umbrella scheme and subscheme
                        are defined in r 1.2.11.

       (2) Any decision relating to the appointment or dismissal of a member
           of the Shari’a Supervisory Board, or to a change affecting the board,
           must be made by the operator and approved by the independent
           entity.
       (3) ISFI, chapter 6 applies to a QFC scheme that is an Islamic fund, or
           is an umbrella scheme that has a subscheme that is an Islamic fund,
           as if—
              (a) the scheme (or subscheme) were an authorised firm to which
                  the chapter applies; and
                     Note    Authorised firm is defined in the glossary.

              (b) a reference to the authorised firm or its governing body were,
                  subject to subrule (2), a reference to the scheme (or
                  subscheme) or the operator, as the context requires; and
              (c) all other necessary changes were made.




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              Suspension, winding up and transfer schemes—QFC schemes    Chapter 9
                        Suspension and restart of dealings—QFC schemes    Part 9.1

                                                                         Rule 9.1.1




Chapter 9                    Suspension, winding up and
                             transfer schemes—QFC
                             schemes

Part 9.1                     Suspension and restart of
                             dealings—QFC schemes

9.1.1        Suspension and restart of dealings—all QFC schemes
        (1) The operator of a QFC scheme may, with the prior agreement of the
            independent entity, temporarily suspend dealings in all units or a
            class of units if, because of exceptional circumstances, it is in the
            interests of all the unitholders of the scheme to do so.
             Note    Deal and class are defined in the glossary.

        (2) If the independent entity requires the operator to suspend dealings in
            all units or a class of units, the operator must do so without delay.
        (3) The independent entity may make a requirement under subrule (2)
            if, because of exceptional circumstances, it is in the interest of all
            the unitholders of the scheme to do so.
        (4) The operator and independent entity must ensure that the suspension
            continues only for as long as it is justified having regard to the
            interests of all the unitholders in the scheme.
        (5) If the operator suspends dealings under subrule (1) otherwise than
            because of a requirement of the independent entity under
            subrule (2), the operator must—
             (a) immediately tell the Regulatory Authority orally, giving its
                 reasons for the suspension; and



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Part 9.1         Suspension and restart of dealings—QFC schemes

Rule 9.1.1


             (b) give written confirmation to the authority of the suspension
                 and its reasons for the suspension within 1 business day.
             Examples for this rule on ‘within 1 business day’
             See examples to rule 4.1.4 (2) on the meaning of ‘within 1 business day’.

       (6) If the operator suspends dealings under subrule (1) because of a
           requirement of the independent entity under subrule (2), the
           independent entity must—
             (a) immediately tell the Regulatory Authority orally, giving the
                 reasons for its action; and
             (b) give written confirmation to the authority of the suspension,
                 and its reasons for its action, within 1 business day.
       (7) If the operator suspends dealings under subrule (1) or (2), the
           operator must—
             (a) notify the unitholders about the suspension immediately but
                 within 1 business day after the day dealing is suspended; and
             (b) from time to time publish (on its website or by other general
                 means) sufficient information to keep unitholders appropriately
                 informed about the suspension, including, if known, its likely
                 duration.
       (8) Notification under subrule (7) (a) must—
             (a) tell the unitholders about the exceptional circumstances that
                 resulted in the suspension; and
             (b) be clear, fair and not misleading; and
             (c) tell the unitholders how to obtain the information it is required
                 to publish under subrule (7) (b).
       (9) During the suspension—




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                                                                       Rule 9.1.1

           (a) none of the obligations under part 8.1 (Dealing—QFC
               schemes) apply; but
           (b) the operator must as far as practicable comply with all relevant
               provisions of part 8.2 (Valuation and pricing—QFC schemes).
     (10) The suspension of dealings must end as soon as practicable after the
          exceptional circumstances mentioned in subrule (1) or (3) cease.
     (11) The operator or independent entity must—
           (a) review the suspension at least every 28 days; and
           (b) tell the Regulatory Authority about the results of the review
               immediately, but with 1 business day after conducting the
               review.
     (12) If the operator or independent entity becomes aware of any material
          change in circumstances that may affect the continuation of the
          suspension, the operator or independent entity must tell the
          Regulatory Authority immediately, but within 1 business day.
     (13) The Regulatory Authority may, at any time, direct the operator to
          end the suspension.
     (14) The operator must immediately comply with the direction.
     (15) If the operator decides to restart dealings, the operator must—
           (a) immediately tell the Regulatory Authority about the decision
               orally; and
           (b) give written confirmation to the authority of its decision within
               1 business day.
     (16) The operator may agree, during the suspension, to deal in units at a
          price calculated by reference to the first valuation point after
          restarting dealings.
     (17) However, if the scheme is a QFC qualified investor scheme that
          operates limited redemption arrangements, and the exceptional

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Chapter 9       Suspension, winding up and transfer schemes—QFC schemes
Part 9.1        Suspension and restart of dealings—QFC schemes

Rule 9.1.1


             circumstances have affected a valuation point, the operator must fix
             an additional valuation point as soon as possible after restarting
             dealings.
             Note 1   Limited redemption arrangements and valuation point are defined in
                      the glossary.
             Note 2   The Regulatory Authority has power under the Financial Services
                      Regulations, art 105 to give certain directions in relation to collective
                      investment schemes (which are called collective investment funds in
                      those regulations), including a direction to cease the issue or redemption
                      of units in the scheme and to wind up the scheme.




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                                             Winding up—QFC schemes         Part 9.2

                                                                           Rule 9.2.1




Part 9.2                  Winding up—QFC schemes

9.2.1   Application of pt 9.2 to subschemes of QFC umbrella
        schemes—all QFC schemes
        This part applies to a subscheme of a QFC umbrella scheme as if—
        (a) a reference to a QFC scheme were a reference to the
            subscheme; and
        (b) a reference to units were a reference to units in the class or
            classes related to the subscheme; and
        (c) a reference to a meeting of unitholders were a reference to a
            meeting of unitholders of the class or classes mentioned in
            paragraph (b); and
        (d) a reference to a special resolution were a reference to a special
            resolution passed at a meeting of unitholders mentioned in
            paragraph (c); and
        (e) a reference to the scheme property were a reference to the
            scheme property attributed to the subscheme; and
           (f) a reference to liabilities were a reference to liabilities of the
               scheme attributable to the subscheme; and
        (g) all other necessary changes were made.
        Note      Subscheme and umbrella scheme are defined in r 1.2.11.

9.2.2   When scheme may be wound up—all QFC schemes
        A QFC scheme may be wound up—
        (a) by order of the QFC Court under the Insolvency Regulations
            2005 or any other regulations in force in the QFC; or

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Part 9.2        Winding up—QFC schemes

Rule 9.2.3


             (b) if not inconsistent with any regulations in force in the QFC or
                 these rules—in the way and circumstances provided in the
                 constitutional document; or
                    Note     Constitutional document is defined r 3.1.1.

             (c) in the way and in any other circumstances provided by these
                 rules or any other rules made by the Regulatory Authority.

9.2.3        Winding-up required by constitutional document—all
             QFC schemes
        (1) The constitutional document of a QFC scheme may provide that the
            scheme is to be wound up—
             (a) at a stated time; or
             (b) in stated circumstances or on the happening of a stated event.
             Note      Constitutional document is defined r 3.1.1.

        (2) However, a provision of the constitutional document that purports to
            provide that the scheme is to be wound up if a particular person
            ceases to be the operator or independent entity is of no effect.

9.2.4        Winding-up at direction of unitholders—all QFC schemes
             The unitholders of a QFC scheme may, by special resolution, direct
             the operator or independent entity to wind up the scheme.
             Note      Special resolution is defined in the glossary.




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                                                                                    Rule 9.2.5

9.2.5       Notification to Regulatory Authority that scheme not
            commercially viable etc—all QFC schemes
        (1) If the operator of a QFC scheme believes, on reasonable grounds,
            that the scheme is not commercially viable or the scheme’s purpose
            cannot be accomplished, the operator must give the Regulatory
            Authority notice about the matter immediately, but within 1 business
            day after the day the operator forms the belief.
            Examples
            See examples to rule 4.1.4 (2) on the meaning of ‘within 1 business day’.

        (2) The notice must include the following information:
             (a) the name of the scheme and its registration number given by
                 the Regulatory Authority;
             (b) the size and type of scheme;
             (c) the number of unitholders;
             (d) whether dealing in the scheme’s units has been suspended;
             (e) why the operator believes that the scheme is not commercially
                 viable or the scheme’s purpose cannot be accomplished;
             (f) what consideration has been given to the scheme entering into
                 a transfer scheme under part 9.3 (Transfer schemes—QFC
                 schemes) with another scheme registered in the QFC or a
                 subscheme of an umbrella scheme registered in the QFC and
                 the reasons why a transfer scheme is not possible;
             (g) whether unitholders have been told of the intention to seek
                 winding-up and, if not, whether and when they will be told of
                 the intention;
             (h) details of any proposed rebate of charges to be made to
                 unitholders who recently purchased units;
             (i) the preferred date for the start of the winding-up.


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Part 9.2        Winding up—QFC schemes

Rule 9.2.6


        (3) The notice must be accompanied by a notice given by the
            independent entity that includes the following:
             (a) a statement that the independent entity, having taken
                 reasonable care in considering the matter, believes that a
                 transfer scheme under part 9.3 is not practicable;
             (b) an explanation of the other steps that have been considered that
                 would result in the scheme not needing to be wound up;
             (c) confirmation that the operator has exercised its functions in
                 accordance with these rules;
                 Note     Exercise and function are defined in the glossary.

             (d) whether the scheme’s investment and borrowing powers have
                 been exceeded.
        (4) The Regulatory Authority may, in writing, require the operator or
            independent entity to provide any further information or documents
            that the authority reasonably needs in relation to the scheme.

9.2.6        Winding-up by operator or independent entity—all QFC
             schemes
        (1) This rule applies if any of the following circumstances (the
            prescribed circumstances) exist in relation to a QFC scheme:
             (a) on a request by the operator or independent entity for the
                 cancellation of the scheme’s registration, the Regulatory
                 Authority agrees in principle that it will cancel the scheme’s
                 registration on the completion of the winding-up of the
                 scheme;
             (b) the operator believes, on reasonable grounds, that the scheme
                 is not commercially viable or the scheme’s purpose cannot be
                 accomplished;



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                                                                           Rule 9.2.6

          (c) if the constitutional document states that the duration of the
              scheme is limited—the stated duration of the scheme ends;
          (d) the unitholders of the scheme direct the operator or
              independent entity under rule 9.2.4 (Winding-up at direction of
              unitholders—all QFC schemes) to wind up the scheme;
          (e) if the scheme is subject to a transfer scheme approved under
              part 9.3 (Transfer schemes—QFC schemes) under which it is
              to be left with no property—the transfer scheme commences.
     (2) If any of the prescribed circumstances apply in relation to the QFC
         scheme—
          (a) the operator and independent entity must cease—
               (i) dealing in the scheme’s units; and
               (ii) investing or borrowing for the scheme; and
              Note     Dealing and borrowing is defined in the glossary.

          (b) the operator or independent entity (or both) must take the steps
              necessary to wind up the scheme in accordance with any
              regulations in force in the QFC that apply to the winding-up,
              these rules, and any other rules made by the Regulatory
              Authority that apply to the winding-up.
     (3) If any of the prescribed circumstances mentioned in subrule (1) (a)
         to (d) apply in relation to the scheme—
          (a) the operator or independent entity must realise the scheme
              property as soon as practicable; and
          (b) after meeting or making provision for all the scheme’s
              liabilities and the costs of the winding-up, the operator or
              independent entity must distribute the proceeds of the
              realisation to the unitholders in proportion to their respective
              interests in the scheme as at the date the relevant prescribed
              circumstances happened; and

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Part 9.2        Winding up—QFC schemes

Rule 9.2.6


             (c) any unclaimed net proceeds or other cash (including unclaimed
                 distribution payments) held by the operator or independent
                 entity after the end of 12 months from the day they became
                 payable must be paid into the QFC Court, after meeting or
                 making provision for the costs of paying them into the QFC
                 Court under this paragraph.
       (4) If the operator or independent entity and 1 or more unitholders
           agree, the requirement to realise the scheme property does not apply
           to the part of the scheme property proportionate to their entitlement.
       (5) The operator and the independent entity may distribute the part of
           the scheme property mentioned in subrule (4) to the unitholders
           mentioned in that subrule, after making the adjustments or
           provisions that appear appropriate to ensure that the unitholders bear
           a proportionate share of the liabilities of the scheme and the costs of
           the winding-up.
       (6) If the prescribed circumstances mentioned in subrule (1) (e) apply in
           relation to the scheme, the operator or independent entity must wind
           up the scheme in accordance with the approved transfer scheme.
       (7) As soon as practicable after starting the winding-up, the operator or
           independent entity must—
             (a) if rule 9.2.4 (Winding-up at direction of unitholders—all QFC
                 schemes) does not apply—tell the unitholders about the
                 winding-up; and
             (b) publish notice of the winding-up in an English and an Arabic
                 language national newspaper and, if the scheme has a website,
                 on the scheme’s website.
       (8) If the winding-up is conducted by the operator, the independent
           entity must approve the terms of the winding-up.




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                                                                          Rule 9.2.7

        (9) Not later than 5 business days after the day the winding-up of the
            QFC scheme is completed, the operator or independent entity
            must—
             (a) tell the Regulatory Authority about the completion of the
                 winding-up; and
             (b) ask the authority to cancel the scheme’s registration.
            Note     Business day is defined in the glossary.

     (10) This rule is subject to any order of the QFC Court.

9.2.7       Accounting and reports during winding-up—all QFC
            schemes
        (1) While a QFC scheme is being wound up, whether under rule 9.2.6
            (Winding-up by operator or independent entity—all QFC schemes)
            or otherwise—
             (a) the annual accounting periods and half-yearly accounting
                 periods of the scheme continue to run; and
             (b) the provisions of these rules about annual and interim
                 allocation of income continue to apply to the scheme; and
             (c) reports to unitholders and the Regulatory Authority continue to
                 be required in relation to the scheme.
        (2) However, if the operator, after consulting the scheme’s auditor and
            the Regulatory Authority, decides on reasonable grounds that timely
            preparation of a report under these rules is not required in the
            interest of unitholders or the Regulatory Authority, the operator may
            dispense with preparation of the report within the time otherwise
            required by these rules.
        (3) A period to which subrule (2) applies must be covered in the next
            relevant report required under these rules.



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Chapter 9      Suspension, winding up and transfer schemes—QFC schemes
Part 9.2       Winding up—QFC schemes

Rule 9.2.7


       (4) At the completion of the winding-up, the accounting period then
           running is regarded as the final annual accounting period.
       (5) Within 2 months after the end of the final annual accounting period,
           the final report of the operator must be sent to the Regulatory
           Authority and each person who was a unitholder immediately before
           the end of the final annual accounting period.
       (6) This rule is subject to any order of the QFC Court.




page 282            Collective Investment Schemes Rules 2010                V2

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              Suspension, winding up and transfer schemes—QFC schemes    Chapter 9
                                        Transfer schemes—QFC schemes      Part 9.3

                                                                         Rule 9.3.1




Part 9.3                    Transfer schemes—QFC
                            schemes

9.3.1       Purpose—pt 9.3
            The purpose of this part is to make rules under the Financial
            Services Regulations, article 103 modifying those regulations,
            part 16 (Control of Business Transfers) in relation to QFC schemes.

9.3.2       Transfer schemes—all QFC schemes
        (1) Financial Services Regulations, part 16 is modified in accordance
            with the following provisions of this rule.
        (2) If, for the purpose of a relevant scheme, it is proposed that scheme
            property of a QFC scheme should become the property of another
            scheme registered in the QFC or the property of a subscheme of a
            QFC umbrella scheme registered in the QFC, the proposal must not
            be implemented without the approval of a special resolution of the
            unitholders of the first scheme, unless subrule (3) applies.
            Note    Subscheme and umbrella scheme are defined in r 1.2.11. Special
                    resolution is defined in the glossary.

        (3) If, for the purpose of a relevant scheme, it is proposed that scheme
            property attributable to a subscheme (the first subscheme) of a QFC
            umbrella scheme (the first umbrella scheme) should become the
            property of another scheme registered in the QFC or another
            subscheme of a QFC umbrella scheme registered in the QFC
            (whether or not of the first umbrella scheme), the proposal must not
            be implemented without the approval of—
             (a) a special resolution of the unitholders in the first subscheme;
                 and


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Chapter 9       Suspension, winding up and transfer schemes—QFC schemes
Part 9.3        Transfer schemes—QFC schemes

Rule 9.3.2


             (b) a special resolution of the unitholders of units in the first
                 umbrella scheme, unless implementation of the scheme is not
                 likely to result in any material prejudice to the interests of the
                 unitholders in any other subscheme of the first umbrella
                 scheme.
       (4) If it is proposed that a QFC scheme or a subscheme of a QFC
           umbrella scheme should receive property (other than its first
           property) under a relevant scheme, or an arrangement equivalent to
           a scheme of arrangement, that is entered into by another scheme
           registered in the QFC, by a subscheme of an umbrella scheme
           registered in the QFC or by corporation, the proposal must not be
           implemented without the approval of a special resolution of the
           unitholders of the first scheme or of the class or classes of units
           related to the first subscheme (as appropriate).
             Note    Corporation is defined in the glossary.

       (5) However, if the operator and either the independent entity or auditor
           of the scheme agree that the receipt of the property by the scheme or
           subscheme as mentioned in subrule (4)—
             (a) is not likely to result in any material prejudice to the interests
                 of the unitholders of the scheme; and
             (b) is consistent with the investment objectives, strategies and
                 policy of the scheme or subscheme; and
             (c) could be effected without breaching chapter 6 (Investment and
                 borrowing—QFC qualified investor schemes) or chapter 7
                 (Investment and borrowing—QFC retail schemes);
             the property may be transferred to the scheme or subscheme, and
             units may be issued in exchange for the property, as part of the
             relevant scheme without the approval of a special resolution.
       (6) To remove any doubt, relevant scheme has the meaning given by
           the Financial Services Regulations, article 94 (4).


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              Financial promotions and investment activities—all schemes   Chapter 10
                            Financial promotions generally—all schemes      Part 10.1

                                                                           Rule 10.1.1




Chapter 10                  Financial promotions and
                            investment activities—all
                            schemes

Part 10.1                   Financial promotions generally—
                            all schemes

10.1.1    Declaration of non-QFC retail customer schemes
     (1) The Regulatory Authority may, by written notice published on an
         approved website, declare that a non-QFC scheme established in a
         stated jurisdiction that is of a stated type is a retail customer scheme.
          Note      Approved website is defined in INAP.

     (2) The Regulatory Authority must not specify a type of scheme under
         subrule (1) unless satisfied that—
          (a) all schemes of that type are—
                 (i) required to be registered, approved or licensed (however
                     described) under the law of the jurisdiction in which they
                     are established; and
                 (ii) subject to appropriate regulation by a regulatory or
                      governmental entity of that jurisdiction for the purpose of
                      consumer protection; and
          (b) the operators of all schemes of that type are—
                 (i) required to be authorised or licensed (however described)
                     under the law of that jurisdiction; and




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Chapter 10       Financial promotions and investment activities—all schemes
Part 10.1        Financial promotions generally—all schemes

Rule 10.1.2


                     (ii) subject to appropriate regulation by a regulatory or
                          governmental entity of that jurisdiction for the purpose of
                          consumer protection.

10.1.2        Certain financial promotions only to qualified investors
              etc—QFC qualified investor schemes
       (1) An authorised firm must not make or approve a financial promotion
           in relation to a QFC qualified investor scheme if the financial
           promotion is addressed to, or disseminated in such a way that it is
           likely to be received by, a person who is not a qualified investor for
           the firm.
              Note      Qualified investor, for an authorised firm, is defined in r 1.2.12 (3).

       (2) An authorised firm must not conduct a relevant investment activity
           for a client in or from the QFC in relation to units in a QFC
           qualified investor scheme unless the client is a qualified investor for
           the firm.
              Note 1    Relevant investment activity is defined in the glossary.
              Note 2    Client is defined in COND, r 1.2.1.

       (3) For this rule, qualified investor includes a person who is a retail
           customer for the authorised firm if the firm believes, on reasonable
           grounds, that the firm could classify the person under COND as a
           business customer for the firm.
              Note 1    Retail customer, for an authorised firm, is defined in r 1.2.12 (5).
              Note 2    Business customer is defined in COND, r 1.2.5. For the classification of
                        retail customers as business customers, see COND, r 2.3.2.

10.1.3        Certain financial promotions only to qualified investors
              etc—non-QFC qualified client schemes
       (1) An authorised firm must not make or approve a financial promotion
           in relation to a non-QFC qualified client scheme if the financial


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                           Financial promotions generally—all schemes             Part 10.1

                                                                                 Rule 10.1.4

         promotion is addressed to, or disseminated in such a way that it is
         likely to be received by, a person who is not a qualified investor for
         the firm.
         Note 1   Non-QFC qualified client scheme is defined in r 1.4.2.
         Note 2   Qualified investor, for an authorised firm, is defined in r 1.2.12 (3).

     (2) An authorised firm must not conduct a relevant investment activity
         for a client in or from the QFC in relation to units in a non-QFC
         scheme unless—
          (a) the scheme is a non-QFC retail customer scheme; or
          (b) the client is a qualified investor for the firm.
         Note 1   Relevant investment activity is defined in the glossary.
         Note 2   Non-QFC retail customer scheme is defined in r 1.4.1.
         Note 3   Client is defined in COND, r 1.2.1.

     (3) For this rule, qualified investor includes a person who is a retail
         customer for the authorised firm if the firm believes, on reasonable
         grounds, that the firm could classify the person under COND as a
         business customer for the firm.
         Note 1   Retail customer, for an authorised firm, is defined in r 1.2.12 (5).
         Note 2   Business customer is defined in COND, r 1.2.5. For the classification of
                  retail customers as business customers, see COND, r 2.3.2.

10.1.4   Pt 10.1 additional to COND
         This part is additional to, and does not limit, COND.




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Chapter 10       Financial promotions and investment activities—all schemes
Part 10.2        Financial promotions—non-QFC schemes

Rule 10.2.1




Part 10.2                      Financial promotions—non-QFC
                               schemes

10.2.1        What is a complying disclaimer for a non-QFC scheme?
              A complying disclaimer for a non-QFC scheme is a written notice
              that contains statements to the effect of the following:
              (a) the scheme is a collective investment scheme that is not
                  registered in the QFC or regulated by the Regulatory
                  Authority;
              (b) any prospectus for the scheme, and any related documents,
                  have not been reviewed or approved by the Regulatory
                  Authority;
              (c) investors in the scheme may not have the same access to
                  information about the scheme that they would have to
                  information about a collective investment scheme registered in
                  the QFC;
              (d) recourse against the scheme, and those involved with it, may
                  be limited or difficult and may have to be pursued in a
                  jurisdiction outside the QFC.

10.2.2        Restrictions generally on financial promotions—all non-
              QFC schemes
       (1) An authorised firm must not make or approve a financial promotion
           in relation to a non-QFC scheme unless the scheme has a written
           constitution (however described) and written prospectus.
              Note    Writing and prospectus are defined in the glossary.

       (2) An authorised firm must not conduct relevant investment activities
           in or from the QFC in relation to units in a non-QFC scheme unless

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                                Financial promotions—non-QFC schemes           Part 10.2

                                                                              Rule 10.2.3

          the scheme has a written constitution (however described) and
          written prospectus.
     (3) Subrule (2) does not apply in relation to an own account transaction
         of an authorised firm.
          Note     Own account transaction is defined in the glossary.

10.2.3    Prospectus and disclaimer must be provided etc—all
          non-QFC schemes
     (1) An authorised firm must not sell, or arrange for the sale of, a unit in
         a non-QFC scheme to a customer unless it has given the customer,
         not later than a reasonable time before the customer becomes
         contractually bound in relation to the sale of the unit—
          (a) a prospectus for the scheme; and
          (b) a complying disclaimer for the scheme.
          Note 1   Customer is defined in COND, r 1.2.3 (2) as a business customer or
                   retail customer. It does not, therefore, include a market counterparty.
          Note 2   Prospectus is defined in the glossary and complying disclaimer is
                   defined in r 10.2.1.

     (2) If an authorised firm in the exercise of its discretion buys a unit in a
         non-QFC scheme for a customer, the firm must—
          (a) tell the customer that the customer may request a prospectus
              for the scheme; and
          (b) give the customer a prospectus for the scheme on request.
     (3) If an authorised firm gives a prospectus for a non-QFC scheme to a
         customer under subrule (2), the firm must also give the customer a
         complying disclaimer for the scheme.
     (4) Subrule (2) (a) does not apply in relation to the purchase by an
         authorised firm of a unit in a non-QFC scheme for a customer if—



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Part 10.2        Financial promotions—non-QFC schemes

Rule 10.2.4


              (a) the firm has told the customer, in its terms of business, or in
                  periodic statements, given to the customer under COND, that
                  the customer may request a prospectus for any non-QFC
                  scheme in which the firm buys units for the customer under a
                  discretionary management agreement; and
              (b) the firm has given the customer a complying disclaimer for the
                  scheme, all non-QFC schemes or a class of non-QFC schemes
                  in which the scheme is included.

10.2.4        Complying disclaimer must be given with                         other
              documents under COND—all non-QFC schemes
       (1) This rule applies if an authorised firm is required under COND to
           give a document to a customer in relation to a non-QFC scheme.
       (2) The authorised firm must, at the same time as it gives the document
           to the customer, give the customer a complying disclaimer.
              Note     Complying disclaimer is defined in r 10.2.1.

10.2.5        Authorised firms must pass on documents etc—all non-
              QFC schemes
       (1) This rule applies if—
              (a) an authorised firm either—
                     (i) sells, or arranges for the sale of, a unit in a non-QFC
                         scheme to a customer; or
                     (ii) buys, or arranges to buy, a unit in a non-QFC scheme for
                          a customer; and
              (b) the firm later receives a document or information about the
                  scheme from its operator.
       (2) The authorised firm must give the document or information to the
           customer.


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                               Financial promotions—non-QFC schemes             Part 10.2

                                                                               Rule 10.2.6

10.2.6   Quarterly returns for financial promotions etc—all non-
         QFC schemes
     (1) This rule applies to an authorised firm in relation to a quarter if,
         during the quarter, the firm—
          (a) makes or approves a financial promotion in relation to a non-
              QFC scheme; or
          (b) conducts relevant investment activities in or from the QFC in
              relation to units in a non-QFC scheme.
               Note     Relevant investment activity is defined in the glossary.

     (2) The authorised firm must give the Regulatory Authority a return
         under this rule for the quarter within 1 month after the day the
         quarter ends.
     (3) The return must include the following information in relation to
         each non-QFC scheme in relation to which the firm made or
         approved a financial promotion, or conducted relevant investment
         activities in or from the QFC, during the quarter:
          (a) the scheme’s name;
          (b) the jurisdiction in which the scheme was established;
          (c) whether the scheme is a non-QFC qualified client scheme or
              non-QFC retail customer scheme;
               Note     Non-QFC retail customer scheme is defined in r 1.4.1 and non-
                        QFC qualified client scheme is defined in r 1.4.2.

          (d) if the scheme is a non-QFC qualified client scheme—whether
              the scheme or its operator is subject to regulation by a
              regulatory or governmental entity of the jurisdiction in which it
              is established or any other jurisdiction and, if so, the
              jurisdiction, the name of the regulating entity and the nature of
              the regulation;



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Chapter 10       Financial promotions and investment activities—all schemes
Part 10.2        Financial promotions—non-QFC schemes

Rule 10.2.7


              (e) whether the following rules were complied with in relation to
                  the scheme during the quarter:
                   rule 10.2.3 (Prospectus and disclaimer must be provided
                       etc—all non-QFC schemes)
                   rule 10.2.4 (Complying disclaimer must be given with
                       other documents under COND—all non-QFC schemes)
                   rule 10.2.5 (Authorised firms must pass on documents
                       etc—all non-QFC schemes).
       (4) In this rule:
              quarter means a 3-month period ending on 31 March, 30 June, 30
              September or 31 December.

10.2.7        Recordkeeping          by      authorised        firms—all      non-QFC
              schemes
              An authorised firm must—
              (a) keep a copy of each prospectus for a non-QFC scheme that it
                  gives to customers for at least 6 years after the day it is last
                  given to a customer; and
              (b) keep a copy of each complying disclaimer for a non-QFC
                  scheme that it gives to customers for at least 6 years after the
                  day it is last given to a customer; and
              (c) keep a record of the version of each prospectus for a non-QFC
                  scheme that it gives to each customer, and the day it is given to
                  the customer, for at least 6 years after the day it is given to the
                  customer; and




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                                                                          Rule 10.2.8

         (d) keep a record of the version of each complying disclaimer for a
             non-QFC scheme that it gives to each customer, and the day it
             is given to the customer, for at least 6 years after the day it is
             given to the customer.
         Note 1   Customer is defined in COND, r 1.2.3 (2) as a business customer or
                  retail customer.
         Note 2   Prospectus is defined in the glossary and complying disclaimer is
                  defined in r 10.2.1.

10.2.8   Pt 10.2 additional to COND
         This part is additional to, and does not limit, COND.




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Chapter 10       Financial promotions and investment activities—all schemes
Part 10.3        Additional retail customer requirements—non-QFC retail customer schemes

Rule 10.3.1




Part 10.3                       Additional retail customer
                                requirements—non-QFC retail
                                customer schemes

10.3.1        Application—pt 10.3
       (1) This part applies to an authorised firm in relation to a retail customer
           of the firm if the firm conducts a relevant investment activity for the
           retail customer in or from the QFC in relation to units in a non-QFC
           retail customer scheme.
              Note 1   Retail customer, for an authorised firm, is defined in r 1.2.12 (5).
              Note 2   Relevant investment activity is defined in the glossary.
              Note 3   Non-QFC retail customer scheme is defined in r 1.4.1. An authorised
                       firm may not conduct a relevant business activity for a retail customer
                       in relation to units in a non-QFC scheme that is not a retail customer
                       scheme (see r 10.1.3 (2)).

       (2) However, this part ceases to apply to the authorised firm in relation
           to the retail customer if the retail customer does not become, or
           ceases to be, a unitholder of the non-QFC retail customer scheme.

10.3.2        Facilities to be maintained in QFC—non-QFC retail
              customer schemes
       (1) The authorised firm must maintain facilities that satisfy the
           requirements of this part.
       (2) The authorised firm must take reasonable steps to ensure that the
           facilities are available during ordinary business hours on each
           business day.
       (3) For this part, a facility is a place of business.



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                                                                                   Rule 10.3.3

         (4) For this part, it is sufficient if a facility is maintained by a person
             other than the authorised firm if the facility is maintained under
             arrangements with the firm.

10.3.3         Retail customer to be informed about availability of
               facilities—non-QFC retail customer schemes
               Before conducting relevant investment activities in relation to units
               in the non-QFC retail customer scheme for the retail customer, the
               authorised firm must give the retail customer a written notice that
               tells the retail customer about—
                (a) the facilities available under this part; and
               (b) the address of the facilities and when the facilities are
                   available.

10.3.4         Documents to be available in QFC—non-QFC retail
               customer schemes
         (1) The authorised firm must maintain facilities in the QFC to allow the
             retail customer to inspect, and obtain copies of, the following
             documents:
                (a) the constitution (however described) of the scheme;
               (b) any instrument amending that constitution;
                (c) the latest prospectus of the scheme;
               (d) the latest annual and interim reports for the scheme.
         (2) If a document mentioned in subrule (1) is not in a required language,
             a translation of the document in that language must also be available
             for inspection and copies of the translation must also be available to
             be obtained.
         (3) The documents mentioned in subrule (1) (including any translation
             in a required language) must be available for inspection free of
             charge.

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Part 10.3        Additional retail customer requirements—non-QFC retail customer schemes

Rule 10.3.5


       (4) Copies of the latest prospectus (including any translation in a
           required language) must be available free of charge.
       (5) Copies of other documents mentioned in subrule (1) (including any
           translation in a required language) must be available for no more
           than the reasonable cost of producing the copy.
       (6) A translation of a document available under this rule must clearly
           state—
              (a) the name and address of the person who made the translation;
                  and
              (b) the person’s qualifications for making the translation.
       (7) In this rule:
              required language, for a document, means—
              (a) English; or
              (b) any other language if the Regulatory Authority, by written
                  notice published on an approved website, requires the
                  document to be available in that language for this rule.
                   Note     Approved website is defined in INAP.

10.3.5        Pricing and redemption facilities to be available in QFC—
              non-QFC retail customer schemes
       (1) The authorised firm must maintain facilities in the QFC—
              (a) where the retail customer may obtain information in a required
                  language about prices of units in the scheme; and
              (b) if the retail customer is a unitholder of the scheme—where or
                  through which the retail customer may redeem units and obtain
                  payment.




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                                                                                   Rule 10.3.6

         (2) The authorised firm is taken to comply with subrule (1) (b) if—
                (a) unitholders can sell their units on an exchange at a price not
                    significantly different from the net asset value of the property
                    to which the units relates; and
               (b) it tells the retail customer about the availability of the
                   exchange.
         (3) Subrule (1) (b) does not entitle the retail customer to have units
             redeemed (or sold as mentioned in subrule (2)) immediately after
             making a demand to that effect.
         (4) In this rule:
                required language, for information, means—
                (a) English; or
               (b) any other language if the Regulatory Authority, by written
                   notice published on an approved website, requires the
                   information to be available in that language for this rule.

10.3.6         Other information facilities to be available in QFC—non-
               QFC retail customer schemes
         (1) The authorised firm must maintain facilities in the QFC to tell the
             retail customer, on request and in a required language—
                (a) the nature of the rights represented by the units in the scheme;
                    and
               (b) whether persons other than the unitholders can vote at
                   meetings of unitholders and, if so, who those persons are.
         (2) In this rule:
                required language, for information, means—
                (a) English; or


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Part 10.3        Additional retail customer requirements—non-QFC retail customer schemes

Rule 10.3.7


              (b) any other language if the Regulatory Authority, by written
                  notice published on an approved website, requires information
                  to be available in that language for this rule.

10.3.7        Complaint facilities to be available in QFC—non-QFC
              retail customer schemes
              The authorised firm must maintain facilities in the QFC to allow the
              retail customer to make complaints to the operator about the
              operation of the scheme.




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                                                          Other provisions      Chapter 11
                                                                  General        Part 11.1

                                                                                Rule 11.1.1




Chapter 11                  Other provisions

Part 11.1                   General

11.1.1    Restitution orders for breach of relevant requirements—
          all schemes
     (1) A private person may apply to the QFC Court for a restitution order
         if the person suffers loss or damage as a result of a breach of a
         relevant requirement in relation to a scheme.
          Note 1   This rule is made under Financial Services Regulations, art 65.
          Note 2   Person, QFC Court, breach and relevant requirement are defined in
                   the glossary.

     (2) In this rule:
          private person means—
          (a) an individual, except when acting in the course of conducting
              any regulated activity; or
          (b) any other person, except when acting in the course of
              conducting business of any kind.
          Note     Regulated activity is defined in the glossary.

11.1.2    Service of notices and other documents on unitholders—
          all QFC schemes
     (1) If a provision of these rules authorises or requires any notice or
         other document to be served on a unitholder of a QFC scheme
         (whether the word ‘serve’, ‘give’, ‘notify’, ‘send’ or ‘tell’, or some
         other word, is used), the notice or other document may be served—



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Part 11.1        General

Rule 11.1.3


              (a) by sending it by prepaid post to the unitholder’s postal address
                  shown in the unitholder register; or
              (b) by leaving it at the unitholder’s business or residential address
                  shown in the unitholder register; or
              (c) by sending it to the unitholder using an electronic medium in
                  accordance with rule 11.1.3 (Notices and other documents to
                  be in legible form etc—all schemes).
              Note    Unitholder is defined in r 1.2.5. Document and unitholder register are
                      defined in the glossary.

       (2) Any notice or other document served by post under this rule is taken
           to have been served when it would have been received in the
           ordinary course of post.
       (3) For subrule (2), it is presumed (unless evidence sufficient to raise
           doubt about the presumption is presented) that a postal article sent
           by prepaid post is received on the 5th business day after the day it is
           posted.
              Note    Business day is defined in the glossary.

       (4) Any document left at an address, or served otherwise than by post,
           under this rule is taken to have been served on that day.

11.1.3        Notices and other documents to be in legible form etc—
              all schemes
       (1) If a provision of these rules authorises or requires any notice or
           other document to be served on, or information to be given to any
           person (other than the Regulatory Authority), (whether the word
           ‘serve’, ‘give’, ‘notify’, ‘send’ or ‘tell’, or some other word, is
           used), the document or information must be served or given in a
           legible form.
              Note    Document is defined in the glossary.




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                                                                         Rule 11.1.3

     (2) For subrule (1), any form is a legible form if the form—
          (a) is consistent with the knowledge that the person serving the
              document, or giving the information, has about how the
              recipient of the document or information wishes or expects to
              receive it; and
          (b) can be provided in a durable medium by the person serving the
              document or giving the information; and
          (c) enables the recipient to know or record the time of receipt; and
          (d) is reasonable in the context.
     (3) In these rules, any requirement that a document be signed may be
         satisfied by an electronic signature or electronic evidence of assent.




V2                    Collective Investment Schemes Rules 2010             page 301

                                  Effective: 1/7/11
Chapter 11       Other provisions
Part 11.2        Fees—QFC schemes

Rule 11.2.1




Part 11.2                   Fees—QFC schemes

11.2.1        Application fees—all QFC schemes
       (1) An applicant under these rules for registration of a scheme
           established in the QFC must pay the Regulatory Authority an
           application fee of the relevant amount.
       (2) The fee must be paid when the application is filed with the
           Regulatory Authority.
       (3) The Regulatory Authority may also, by written notice given to the
           applicant, require the applicant to pay a supplementary fee to the
           authority not later than the time stated in the notice if it expects to
           incur substantial costs in dealing with the application.
       (4) If subrule (2), or a notice under subrule (3), is not complied with,
           the application is taken not to have been made until the fee is paid.
       (5) The fee is non-refundable, whether or not the application is
           successful.
       (6) In this rule:
              relevant amount, for a scheme, means—
              (a) if the scheme is not an umbrella scheme or is an umbrella
                  scheme with only 1 subscheme—US$ 2 000; or
              (b) if the scheme is an umbrella scheme with 2 or more
                  subschemes—whichever is the lesser of the following:
                   (i) US$ 1 000 x number of subschemes;
                  (ii) US$ 10 000.




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                                                           Other provisions   Chapter 11
                                                       Fees—QFC schemes        Part 11.2

                                                                              Rule 11.2.2

11.2.2    Annual fees—all QFC schemes
     (1) The operator of a QFC scheme must pay the Regulatory Authority
         an annual fee for each year that the scheme is registered.
          Note     Year is defined in the glossary.

     (2) The annual fee for the first year of registration is the amount
         calculated as follows:
            relevant amount x whole months in year after registration day
                                                      12
          Note     Month is defined in the glossary.

     (3) The annual fee for the first year of registration must be paid within
         21 days after the day the scheme is registered.
     (4) The annual fee for a subsequent year of registration is the relevant
         amount.
     (5) The annual fee for a subsequent year of registration must be paid on
         or before 1 January in the year.
     (6) If an annual fee is not paid in accordance with this rule, the amount
         of the fee is increased by 1% for each month, or part of a month,
         that it remains unpaid after the date it became payable.
     (7) Subrule (6) does not limit any action that the Regulatory Authority
         may take if an annual fee is not paid in accordance with this rule.
     (8) In this rule:
          relevant amount, for a QFC scheme, means—
          (a) if the scheme is not an umbrella scheme or is an umbrella
              scheme with only 1 subscheme—US$ 2 000; or
          (b) if the scheme is an umbrella scheme with 2 or more
              subschemes—whichever is the lesser of the following:
                 (i) US$ 1 000 x number of subschemes;

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Chapter 11       Other provisions
Part 11.2        Fees—QFC schemes

Rule 11.2.3


                   (ii) US$ 10 000.

11.2.3        Waiver etc of fees—all QFC schemes
              The Regulatory Authority may, if it considers it equitable to do so,
              reduce, waive or refund all or part of a fee payable under this part.




page 304              Collective Investment Schemes Rules 2010                  V2

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                                                    Other provisions   Chapter 11
                  Providing scheme administration—non-QFC schemes       Part 11.3

                                                                       Rule 11.3.1




Part 11.3                Providing scheme
                         administration—non-QFC
                         schemes

11.3.1   Client money and assets—all non-QFC schemes
     (1) An authorised firm that is providing scheme administration for a
         non-QFC scheme must not hold or control money or assets
         belonging to third parties in relation to providing scheme
         administration for the scheme.
         Note    Providing scheme administration and money are defined in the
                 glossary.

     (2) However, subrule (1) does not apply to the holding of a cheque to
         the order of the non-QFC scheme’s bank account if the cheque is
         securely held for a maximum of 3 business days before being
         deposited into the bank account or returned to the drawer of the
         cheque.




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Chapter 12      Transitional


Rule 12.1.1




Chapter 12                     Transitional

12.1.1        Existing applications for registration
       (1) This rule applies if—
              (a) before the commencement of this rule, an application had been
                  made under the Collective Investment Funds Rulebook for the
                  registration of a scheme; but
              (b) the application had not been finally dealt with before the
                  commencement of this rule.
       (2) If the scheme’s constitutional document does not contain a
           statement that the scheme is a private placement fund, the
           application must be dealt with as if it had been made under these
           rules.
       (3) If the scheme’s constitutional document contains a statement that
           the scheme is a private placement fund, the application must be
           dealt with as if it had been made under PRIV.

12.1.2        Existing registered QFC qualified investor funds
       (1) This rule applies if, immediately before its commencement, an
           entity was registered under the Collective Investment Funds
           Rulebook as a qualified investor fund and was not a private
           placement fund.
       (2) The entity is taken, on the commencement of this rule, to be
           registered under these rules as a qualified investor scheme.
       (3) However, if—
              (a) immediately before the commencement of this rule, the entity’s
                  constitutional document and latest filed prospectus complied


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                                                                        Rule 12.1.2

               with the Collective Investment Funds Rulebook, after taking
               into account any waiver or modification in force under the
               Financial Services Regulations in relation to the entity; but
               Note    Constitutional document is defined in r 3.1.1. Latest filed
                       prospectus is defined in the glossary

          (b) after the commencement the constitutional document or latest
              filed prospectus (or both) do not comply with a provision of
              these rules;
         then—
          (c) the constitutional document and latest filed prospectus need not
              comply with the provision until 31 December 2011; and
          (d) until the constitutional document and latest filed prospectus are
              amended, as required, to comply with the provision, the
              provision has effect subject to the constitutional document and
              latest filed prospectus.
     (4) Any waiver or modification in force in relation to the entity under
         the Financial Services Regulations continues to apply in relation to
         the entity in accordance with its terms until the earlier of the
         following:
          (a) the waiver or modification is revoked;
          (b) 31 December 2011.
     (5) Subrules (3) and (4) and this subrule expire on 31 December 2011.




V2                    Collective Investment Schemes Rules 2010            page 307

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 Schedule 1          Arrangements not collective investment schemes


 Rule S1.1




Schedule 1                     Arrangements not collective
                               investment schemes
(see r 1.2.1)

S1.1            Individual investment management arrangements
                An arrangement is not a scheme if—
                (a) the property to which the arrangement relates (other than
                    cash awaiting investment) consists of investments of 1 or
                    more of the following kinds:
                     (i) shares;
                     (ii) debt instruments;
                    (iii) warrants;
                    (iv) options;
                     (v) units in a collective investment scheme;
                    (vi) long term insurance contracts; and
                    Note     Investment, share, debt instrument, warrant, option and
                             long term insurance contract are defined in the glossary.
                             Unit is defined in r 1.2.4.

                (b) each participant in the arrangement is entitled to a part of
                    the property and to withdraw the part at any time; and
                (c) each of the         following      provisions     applies   to   the
                    arrangement:
                     (i) the contributions of the participants are not pooled;
                     (ii) the profits or income out of which payments are to be
                          made are not pooled;



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                                                                          Rule S1.2


                  (iii) the parts of the property to which the different
                        participants are entitled are bought and sold
                        separately only when a person becomes or ceases to
                        be a participant.

S1.2       Pure deposit-based arrangements
           An arrangement is not a scheme if the whole amount of the
           contribution of each participant in the arrangement is a deposit
           accepted by an authorised firm with an authorisation for deposit
           taking.
           Note      Authorised firm, authorisation and deposit taking are defined in
                     the glossary.

S1.3       Arrangements not operated by way of business
           An arrangement is not a scheme if it is operated otherwise than
           by way of business.

S1.4       Debt issues
       (1) An arrangement is not a scheme if it is an arrangement under
           which the rights or interests of participants in the arrangement
           are represented by investments of 1, and only 1, of the following
           kinds:
            (a) debt instruments if they are—
                   (i) issued by—
                       (A) a single corporation that is not a CIC; or
                       (B) a single issuer that is not a corporation; and
                  (ii) for instruments mentioned in subparagraph (i) (B)—
                       issued or guaranteed by—
                       (A) the government of any jurisdiction; or



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Schedule 1        Arrangements not collective investment schemes


Rule S1.4


                        (B) a public or local authority of any jurisdiction;
                            and
                (iii) not convertible or exchangeable for investments of
                      any other kind;
                 Note      Debt instrument, corporation, jurisdiction and investment
                           are defined in the glossary. CIC is defined in r 1.3.7.

             (b) debt instruments if—
                  (i) they are instruments to which paragraph (a) (other
                      than subparagraph (iii)) applies; and
                 (ii) they are convertible or exchangeable for shares; and
                (iii) the shares are issued by—
                        (A) the same person that issued the debt instruments;
                            or
                        (B) a single other issuer;
                 Note      Share is defined in the glossary.

             (c) warrants if—
                  (i) they are issued otherwise than by a CIC; and
                 (ii) they give rights to investments that—
                        (A) are issued by the same issuer; and
                        (B) are debt instruments mentioned in paragraph (a)
                            or (b) or shares.
                 Note      Warrant is defined in the glossary.

      (2) An arrangement must not be taken not to be an arrangement to
             which subrule (1) applies only because 1 or more of the
             participants is a person (the counterparty)—



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                 Arrangements not collective investment schemes        Schedule 1


                                                                         Rule S1.4


          (a) whose ordinary business—
                (i) involves the person in conducting 1 or more relevant
                    activities; or
                (ii) would, apart from any exclusions under the Financial
                     Services Regulations, schedule 3 (Regulated
                     Activities and Permitted Activities), part 2 (Specified
                     Activities), involve the person in conducting 1 or
                     more relevant activities; and
          (b) whose rights or interests in the arrangement are or include
              rights or interests under a swap arrangement.
     (3) In this rule:
         relevant activities means regulated activities of any of the
         following kinds:
          (a) dealing in investments;
          (b) arranging deals in investments;
          (c) providing custody services;
          (d) arranging the provision of custody services;
          (e) managing investments;
          (f) advising on investments;
          (g) providing credit facilities;
          (h) arranging credit facilities;
          (i) operating collective investment schemes.
         Note      Regulated activity and the regulated activities mentioned in para
                   (a) to (i) are defined in the glossary.




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Schedule 1        Arrangements not collective investment schemes


Rule S1.5


             swap arrangement means an arrangement—
             (a) the purpose of which is to facilitate the making of
                 payments to participants, whether or not of a particular
                 amount, in a particular currency or at a particular time or
                 rate of interest; and
             (b) under which the counterparty—
                  (i) is entitled to receive amounts, whether representing
                      principal or interest, payable in relation to any
                      property subject to the arrangement or amounts
                      worked out by reference to those amounts; and
                 (ii) makes payments, whether or not of the same amount
                      or in the same currency as amounts mentioned in
                      subparagraph (i), that are worked out in accordance
                      with an agreed formula by reference to those
                      amounts.

S1.5         Common accounts
             An arrangement is not a scheme if—
             (a) it is an arrangement under which the rights or interests of
                 participants are rights to or interests in money held in a
                 common account; and
             (b) that money is held in the account on the understanding that
                 an amount representing the contribution of each participant
                 is to be applied—
                  (i) in making payments to the participant; or
                 (ii) in satisfaction of amounts owed by the participant; or
                 (iii) in the acquisition of property for the participant or the
                       provision of services to the participant.



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                                                                          Rule S1.6


S1.6       Arrangements entered into for commercial purposes
           related to existing businesses
       (1) An arrangement is not a scheme if each of the participants in the
           arrangement—
            (a) conducts a business activity other than an excluded
                activity; and
            (b) enters into the arrangement for commercial purposes
                related to the business activity.
       (2) However, subrule (1) does not apply if the participant will
           conduct the business activity only because the participant is a
           participant in the arrangement.
       (3) In this rule:
           excluded activity means regulated activities of any of the
           following kinds:
            (a) dealing in investments;
            (b) arranging deals in investments;
            (c) providing custody services;
            (d) arranging the provision of custody services;
            (e) managing investments;
            (f) advising on investments;
            (g) providing credit facilities;
            (h) arranging credit facilities;
            (i) operating collective investment schemes.
           Note     Regulated activity and the regulated activities mentioned in para
                    (a) to (i) are defined in the glossary.




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Schedule 1          Arrangements not collective investment schemes


Rule S1.7


S1.7         Group arrangements
             An arrangement is not a scheme if each of the participants is a
             corporation in the same group as the person responsible for
             managing the property held for or in the arrangement.
             Note     Corporation, group and property are defined in the glossary.

S1.8        Franchise arrangements
        (1) A franchise arrangement is not a scheme.
        (2) In this rule:
             franchise arrangement means an arrangement under which a
             person earns profits or income by exploiting a right given by the
             arrangement to use—
             (a) a trade mark or design or other intellectual property; or
             (b) the goodwill attached to it.

S1.9         Timeshare arrangements
             An arrangement is not a scheme if the rights or interests of the
             participants are timeshare rights.

S1.10        Other arrangements relating to use or enjoyment of
             property
             An arrangement is not a scheme if—
             (a) the predominant purpose of the arrangement is to enable
                 the participants in the arrangement to share in the use or
                 enjoyment of property or to make its use or enjoyment
                 available free of charge to others; and
             (b) the property to which the arrangement relates—
                    (i) does not consist of the currency of any jurisdiction;
                        and


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                                                                              Rule S1.11


                   (ii) does not consist of or include—
                        (A) a specified product; or
                        (B) a product that would be a specified product apart
                            from any exclusion in Financial Services
                            Regulations, schedule 3 (Regulated Activities
                            and Permitted Activities), part 3 (Specified
                            Products).
            Note      Property, jurisdiction and specified product are defined in the
                      glossary.

S1.11       Arrangements involving issue of certificates
            representing investments
            An arrangement is not a scheme if the rights or interests of the
            participants in the arrangement are securities receipts in relation
            to securities of a single issuer.
            Note      Securities receipt and security are defined in the glossary.

S1.12       Clearing services
            An arrangement is not a scheme if its purpose is the provision of
            clearing services and the services are provided by an authorised
            firm.
            Note      Authorised firm is defined in the glossary.

S1.13       Contracts of insurance
            A contract of insurance is not an arrangement that is a scheme.
            Note      Contract of insurance is defined in the glossary.

S1.14       Corporations
        (1) A corporation incorporated in the QFC is not an arrangement
            that is a scheme unless it is—
            (a) a CIC; or

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Schedule 1          Arrangements not collective investment schemes


Rule S1.14


             (b) a CIP; or
             (c) another permitted form of QFC scheme.
             Note     Corporation is defined in the glossary. CIC, CIP and another
                      permitted form of QFC scheme are defined in div 1.3.B.

     (2) A corporation (other than a partnership) incorporated outside
             the QFC is not an arrangement that is a scheme unless the
             arrangement meets the property condition in subrule (3) and the
             investment condition in subrule (4).
     (3) For subrule (2), an arrangement meets the property condition
             if—
             (a) it is made in relation to property that belongs beneficially
                 to, and is managed by or on behalf of, the corporation; and
             (b) the corporation has for its purpose the investment of its
                 property with the aim of—
                    (i) spreading investment risk; and
                    (ii) giving its members the benefit of the results of the
                         management of its property.
             Note     Property is defined in the glossary.

     (4) For subrule (2), an arrangement meets the investment condition
             if, in relation to the corporation, a reasonable investor would, if
             the investor were to take part in the arrangement—
             (a) expect to be able to realise, within a period appearing to
                 the investor to be reasonable (or, for a closed-ended
                 corporation, at the end of the corporation’s operation), the
                 investor’s investment in the arrangement (represented, at
                 any time, by the value of shares in, or securities of, the
                 corporation held by the investor as a participant in the
                 arrangement); and


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                                                                    Rule S1.15


            (b) be satisfied that the investment, if realised, would be
                realised on a basis calculated completely or mainly by
                reference to the value of property in relation to which the
                corporation makes arrangements.
        (5) In deciding whether the investment condition is met, no account
            may be taken of any actual or potential redemption or
            repurchase of shares or securities under provisions in force in
            any jurisdiction other than the QFC corresponding to the
            Companies Regulations 2005, article 31 (Redemption or
            purchase of own shares).
        (6) However, the Regulatory Authority may, by written notice
            given to the corporation, declare that subrule (1) or (2) does not
            apply in relation to the corporation.
        (7) The Regulatory Authority may make a declaration under
            subrule (6) if it considers that making the declaration is
            desirable to protect—
             (a) the interests of participants or potential participants in the
                 corporation; or
            (b) the financial system operating in or from the QFC.
        (8) If the Regulatory Authority gives the corporation a notice under
            subrule (6), the notice must—
             (a) give reasons for the decision to make the declaration; and
            (b) tell the corporation that it may appeal to the Regulatory
                Tribunal against the decision.

S1.15       Partnerships
        (1) A partnership incorporated or otherwise established in the QFC
            as a partnership (and not a branch) is not an arrangement that is
            a scheme unless it is—


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Schedule 1          Arrangements not collective investment schemes


Rule S1.15


             (a) a CIP; or
             (b) another permitted form of QFC scheme.
             Note     CIP and another permitted form of QFC scheme are defined in
                      div 1.3.B.

     (2) A partnership incorporated or otherwise established outside the
             QFC is not an arrangement that is a scheme unless the
             arrangement meets the property condition in subrule (3) and the
             investment condition in subrule (4).
     (3) For subrule (2), an arrangement meets the property condition
             if—
             (a) it is made in relation to property that belongs beneficially
                 to, and is managed by or on behalf of, the partnership; and
             (b) the partnership has for its purpose the investment of its
                 property with the aim of—
                    (i) spreading investment risk; and
                    (ii) giving its members the benefit of the results of the
                         management of its property.
             Note     Property is defined in the glossary.

     (4) For subrule (2), an arrangement meets the investment condition
             if, in relation to the partnership, a reasonable investor would, if
             the investor were to take part in the arrangement—
             (a) expect to be able to realise, within a period appearing to
                 the investor to be reasonable (or, for a closed-ended
                 corporation, at the end of the corporation’s operation), the
                 investor’s investment in the arrangement (whether or not
                 represented, at any time, by the value of the investor’s
                 percentage interest in, or securities of, the partnership held
                 by the investor as a participant in the arrangement); and


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                                                                    Rule S1.16


             (b) be satisfied that the investment, if realised, would be
                 realised on a basis calculated completely or mainly by
                 reference to the value of property in relation to which the
                 partnership makes arrangements.
        (5) However, the Regulatory Authority may, by written notice
            given to the partnership, declare that subrule (1) or (2) does not
            apply in relation to the partnership.
        (6) The Regulatory Authority may make a declaration under
            subrule (5) if it considers that making the declaration is
            desirable to protect—
             (a) the interests of participants or potential participants in the
                 partnership; or
             (b) the financial system operating in or from the QFC.
        (7) If the Regulatory Authority gives the partnership a notice under
            subrule (5), the notice must—
             (a) give reasons for the decision to make the declaration; and
             (b) tell the partnership that it may appeal to the Regulatory
                 Tribunal against the decision.

S1.16       Profit sharing investment accounts
        (1) A profit sharing investment account is not an arrangement that
            is a scheme.
        (2) In this rule:
            profit sharing investment account means an account, portfolio
            or fund of an investor if—




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Schedule 1           Arrangements not collective investment schemes


Rule S1.16


             (a) it is managed by an authorised firm—
                     (i) in relation to any investment permitted under the
                         Financial Services Regulations that is held for or in
                         the account, portfolio or fund;
                    (ii) in accordance with Shari’a and held out as such; and
                    (iii) under an agreement with the firm under which—
                         (A) the investor agrees to share any profit with the
                             firm in accordance with a predetermined
                             specified percentage or ratio; and
                         (B) the investor agrees that the investor alone will
                             bear any loss unless the loss is caused by the
                             firm’s negligence or breach of contract; and
             (b) the management of the account, portfolio or fund is the
                 conduct of a regulated activity by the firm.
             Note      Investment and regulated activity are defined in the glossary.




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                       Constitutional document content—QFC schemes           Schedule 2
                          Constitution requirements—all QFC schemes            Part S2.1

                                                                               Rule S2.1




Schedule 2                      Constitutional document
                                content—QFC schemes
(see r 3.1.2)



Part S2.1                       Constitution requirements—all
                                QFC schemes
S2.1            Name of scheme
                A statement of the name of the scheme.

S2.2            Scheme is established in QFC etc
                A statement that—
                (a) the scheme is a collective investment scheme established
                    in the QFC; and
                (b) the constitutional document is governed by the law
                    applying in the QFC in relation to collective investment
                    schemes.

S2.3            Legal form of scheme etc
                A statement of the legal form of the scheme.
                Note    For the permitted legal forms of QFC schemes, see r 1.3.6.

S2.4            Islamic funds
                For an Islamic fund—
                (a) a statement that the scheme (or subscheme) is an Islamic
                    fund and consequently that its entire business operations
                    are conducted in accordance with Shari’a; and



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Schedule 2          Constitutional document content—QFC schemes
Part S2.1           Constitution requirements—all QFC schemes

Rule S2.5


             (b) a statement providing details of its Shari’a Supervisory
                 Board.
             Note     Islamic fund is defined in r 1.3.11. Shari’a Supervisory Board is
                      defined in the glossary.

S2.5         Investment objectives and policy etc
             The following statements:
             (a) a statement of the scheme’s investment objectives
                 (including its financial objectives) and, in particular—
                    (i) the types of investments in which it (and, if
                        applicable, each subscheme) may invest; and
                    (ii) the scheme’s investment strategies, including its
                         approach to borrowing and gearing;
             (b) that the object of the scheme is to invest in investments of
                 those types with the aim of spreading investment risk and
                 giving unitholders the benefits of the investments;
             (c) a statement of the scheme’s policy for achieving its
                 investment objectives.
             Note     Investment and borrowing are defined in the glossary. Subscheme
                      is defined in r 1.2.11.

S2.6         Duration of limited schemes
             If the duration of the scheme is limited, a statement to that
             effect, of the duration of the scheme and, if appropriate, of any
             conditions for extending the duration of the scheme.

S2.7       Unitholder’s liability to pay
       (1) A provision that—
             (a) a unitholder is not liable to make any further payment for a
                 unit after paying the price for the unit; and


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                                                                            Rule S2.8


           (b) no further liability can be imposed on the unitholder in
               relation to the unit.
           Note     Unit and unitholder are defined in r 1.2.4 and r 1.2.5 respectively.
                    Price is defined in the glossary.

       (2) A provision that the unitholders are not liable for—
            (a) the debts or other liabilities of the scheme; or
           (b) acts or omissions of the operator; or
            (c) acts or omissions of the independent entity.

S2.8       Fees, charges and other expenses of scheme
           Each of the following statements:
            (a) that fees, charges and other expenses in relation to the
                scheme may be taken out of scheme property;
           (b) a statement of how the amounts of fees, charges and other
               expenses are to be calculated.
           Note     Scheme property is defined r 1.2.3.

S2.9       Classes of units
           A statement of—
            (a) the classes of units that may be issued for the scheme; and
           (b) for an umbrella scheme—the classes of units that may be
               issued for each subscheme of the scheme; and
            (c) the rights attaching to units in each class, including any
                provision for the expression of the rights in 2 or more
                denominations.
           Note     Class and issue are defined in the glossary. Umbrella scheme and
                    subscheme are defined in r 1.2.11.




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Part S2.1           Constitution requirements—all QFC schemes

Rule S2.10


S2.10       Income and capital distribution
        (1) A statement providing details of—
             (a) the distribution policy of the scheme; and
             (b) the person responsible for calculating, transferring,
                 allocating and distributing income or capital for any class
                 of unit in issue during an accounting period; and
             (c) any provision for payment of income or capital and when
                 income or capital must be distributed.
        (2) If relevant, a provision for income equalisation.
             Note     Income equalisation is defined in the glossary.

S2.11       Investment and borrowing restrictions
        (1) A statement providing details of all investment restrictions
            applying to the scheme.
        (2) A statement providing details of all borrowing restrictions
             applying to the scheme, including, for a qualified investor
             scheme, the scheme’s permitted percentage under rule 6.4.1
             (Borrowing—QFC qualified investor schemes).
             Note     Investment and borrowing are defined in the glossary.

S2.12        Management of borrowing risks
             A statement providing details of how any risks posed by
             borrowings of the scheme are to be managed.
             Note     Borrowing is defined in the glossary.

S2.13       Valuation and pricing
        (1) A statement setting out the basis for, and frequency of,
            valuation of the scheme.




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                                                                          Rule S2.14


        (2) A statement setting out the basis for, and frequency of, pricing
            of each class of units in the scheme.
            Note     Class is defined in the glossary.

S2.14       Base currency
            A statement of the base currency of the scheme.
            Note     Base currency is defined in the glossary.

S2.15       Functions of operator and independent entity
        (1) A statement providing details of the functions of the operator
            under these rules in relation to the scheme.
        (2) A statement providing details of the functions of the
            independent entity under these rules in relation to the scheme.

S2.16       Responsibility statement
            A provision stating that nothing in the constitutional document
            has the effect of exempting the operator or independent entity
            from, or indemnifying the operator or independent entity
            against, any liability of the operator or independent entity to a
            participant under the law applying in the QFC.
            Note     Operator is defined in r 1.2.8. Independent entity is defined in r
                     1.2.9. Participant is defined in r 1.2.2.

S2.17       Meetings
            A statement providing details of the following:
             (a) the procedures for calling meetings of unitholders;
            (b) resolutions and voting at meetings of unitholders;
             (c) the voting rights of unitholders;
            (d) the matters that require the approval of unitholders;



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Part S2.1           Constitution requirements—all QFC schemes

Rule S2.18


             (e) the matters that require the approval of an ordinary
                 resolution;
             (f) the matters that require the approval of a special resolution.
             Note     Ordinary resolution and special resolution are defined in the
                      glossary.

S2.18       Other statements and provisions for CIC
        (1) For a CIC, the following statements:
             (a) a statement that the scheme is an open-ended company
                 with variable share capital;
             (b) a statement providing particulars of the scheme’s capital
                 structure, including the maximum and minimum sizes of
                 the scheme’s capital;
             (c) a statement of the proportion of a larger denomination
                 share represented by a smaller denomination share for any
                 relevant class of units.
             Note     CIC is defined in r 1.3.7. Larger denomination share and smaller
                      denomination share are defined in r 3.2.2 (2).

        (2) For a CIC, a provision authorising the allocation of redeemable
             shares without limit by reference to the CIC’s net asset value at
             the relevant time.
             Note     Net asset value is defined in the glossary.

S2.19        CIP partnership agreement binding etc
             For a CIP, a statement that the partnership agreement—
             (a) is binding on each unitholder as if the unitholder had been
                 a party to it; and




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                                                                       Rule S2.20


        (b) authorises and requires the operator and independent entity
            to do everything required or permitted of them by its
            terms.
        Note      CIP is defined in r 1.3.8. Partnership agreement is defined in the
                  glossary.

S2.20   CIT trust deed binding etc
        For a CIT, a statement that the trust instrument—
        (a) is binding on each unitholder as if the unitholder had been
            a party to it; and
        (b) authorises and requires the operator and independent entity
            to do everything required or permitted of them by its
            terms.
        Note      CIT is defined in r 1.3.9. Trust instrument is defined in the
                  glossary.

S2.21   CIT declaration of trust
        For a CIT, a statement that, subject to the trust instrument and
        the Collective Investment Schemes Rules 2010—
        (a) the scheme property (other than amounts in any
            distribution account) is held by the independent entity on
            trust for the unitholders—
               (i) according to the number of units held by each
                   unitholder; or
               (ii) if relevant, according to the number of individual
                    shares in the scheme property represented by the units
                    held by each unitholder; and




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Part S2.1           Constitution requirements—all QFC schemes

Rule S2.22


             (b) the amounts in any distribution account are held by the
                 independent entity on trust to distribute or apply in
                 accordance with the trust instrument and those rules.
             Note     CIT is defined in r 1.3.9. Trust instrument and distribution
                      account are defined in the glossary. Scheme property is defined in
                      r 1.2.3.

S2.22        Assets other than cash for issue or redemption
             If relevant, a statement authorising payment for the issue or
             redemption of units in the scheme to be made by the transfer of
             assets other than cash.
             Note     Issue and redemption are defined in the glossary.

S2.23        Suspension and winding-up
             A statement providing details of—
             (a) the grounds on which the operator may initiate a
                 suspension of the scheme; and
             (b) the methodology for working out the rights of unitholders
                 to participate in the scheme property on winding-up.

S2.24        Amendment of constitutional document
             A statement providing details of how the constitutional
             document may be amended.

S2.25        Redemption of units held in breach of QFC law
             A statement that, if the holding of units by a unitholder is (or is
             reasonably considered by the operator to be) in breach of the
             Collective Investment Schemes Rules 2010, any other law
             applying in the QFC or the constitutional document, the units
             must be redeemed.
             Note     Redemption is defined in the glossary.



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                                                                            Rule S2.26


S2.26     Documents evidencing title to units
          A statement providing details of any documents evidencing title
          to units.
          Note      Document evidencing title is defined in the glossary.

S2.27     Other relevant matters
          A statement providing details of the matters—
           (a) necessary to enable the scheme, the operator and
               independent entity to obtain any privilege or power
               provided in these rules that is not otherwise provided in the
               constitutional document; and
           (b) otherwise required by these rules to be provided in the
               constitutional document.


Part S2.2                    Extra constitution
                             requirements—qualified
                             investor schemes
S2.28     Qualified investor scheme statement—QFC qualified
          investor schemes
          A statement that the scheme is a qualified investor scheme.

S2.29     Only qualified investors can be unitholders in
          qualified investor schemes—QFC qualified investor
          schemes
          A statement that units in the scheme can only be recorded in the
          unitholder register in the name of a person who is a qualified
          investor.
          Note      Qualified investor, for a QFC scheme, is defined in r 1.2.12 (2).




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Part S2.3           Extra constitution requirement—UCITS type schemes

Rule S2.30


S2.30        Limits on unit issue and redemption—QFC qualified
             investor schemes
             A statement providing details of—
             (a) when the issue of units of any particular class may be
                 limited; and
             (b) the provisions relating to any restrictions on the right to
                 redeem units of any class.
             Note     Issue, class and redemption are defined in the glossary.


Part S2.3                     Extra constitution
                              requirement—UCITS type
                              schemes
S2.31        UCITS type scheme statement—QFC UCITS type
             schemes
             A statement that the scheme is a UCITS type scheme.


Part S2.4                     Extra constitution
                              requirements—money-market
                              funds
S2.32        Money-market fund statement—QFC money-market
             funds
             A statement that the scheme is a money-market fund.




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                                                                                  Rule S2.33


S2.33       Primary investment objective etc—QFC money-market
            funds
        (1) A statement that the scheme’s primary investment objective is
            to maintain the scheme’s net asset value.
            Note       Net asset value is defined in the glossary.

        (2) The statement mentioned in subrule (1) must specify whether
            the scheme’s net asset value is to be maintained—
            (a) constant at par (net of earnings); or
            (b) at the value of a participant’s initial capital plus earnings.
        (3) A statement that, with a view to achieving the scheme’s primary
            investment objective, the scheme may invest only in—
            (a) high quality approved money-market instruments; and
            (b) on an ancillary basis, deposits with eligible banks.
            Note 1     Approved money market instrument is defined in r 7.1.5.
            Note 2     For the meaning of high quality approved money-market
                       instrument, see the following: .
                                r 6.1.5 (2) (Investments by money-market funds—QFC
                                  qualified investor schemes)
                                r 7.2.4 (2) (Investments by money-market funds—
                                   QFC retail schemes).
            Note 3     Deposit and eligible bank are defined in the glossary. .




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 Rule S3.1




Schedule 3                     Prospectus      content—QFC
                               qualified investor schemes
(see r 5.2.3)


S3.1            Document status
                A statement that the document is the prospectus of the QFC
                qualified investor scheme as at a particular date.

S3.2            Description of scheme etc
                The following information and statements:
                (a) the name of the scheme;
                (b) that the scheme is registered as a qualified investor scheme
                    under the Collective Investment Schemes Rules 2010;
                (c) the registration number given to the scheme by the
                    Regulatory Authority;
                (d) the legal form of the scheme and that it is an open-ended
                    scheme;
                (e) if the scheme (or a subscheme) is an Islamic fund—that the
                    scheme (or subscheme) is an Islamic fund;
                (f) if the scheme (or a subscheme) is a money-market fund—
                    that the scheme (or subscheme) is a money-market fund;
                (g) that the unitholders are not liable for—
                     (i) the debts and other liabilities of the scheme; or
                     (ii) acts or omissions of the operator; or
                    (iii) acts or omissions of the independent entity;

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                                                               Rule S3.3


       (h) if the scheme has not started to operate—when the scheme
           is expected to start to operate;
        (i) whether it is a listed scheme or intended to become a listed
            scheme;
        (j) if the duration of the scheme is limited—a statement to that
            effect, an indication of the duration of the scheme and, if
            appropriate, of any conditions for extending the duration of
            the scheme;
       (k) the base currency of the scheme;
        (l) if the scheme is a CIC—its capital structure, including the
            maximum and minimum sizes of its capital;
       (m) if applicable, any minimum initial investment in the
           scheme;
       (n) that any notice or other document may be served on the
           operator or independent entity at its registered address in
           the QFC or, if the independent entity is not an authorised
           firm, at its address for service;
       (o) the circumstances in which the scheme may be wound up
           and a summary of the procedure for, and the rights of the
           unitholders under, a winding-up;
       (p) the governing law for the scheme.

S3.3   Islamic funds
       If the scheme (or a subscheme) is an Islamic fund, the following
       information:
       (a) that all operations of the scheme (or subscheme) must be
           conducted in accordance with Shari’a;
       (b) the names of the members of the Shari’a Supervisory
           Board and their qualifications and education;

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Rule S3.4


             (c) the manner and frequency of Shari’a reviews;
             (d) the disclosure required by AAOIFI FAS 14.
             Note      Shari’a Supervisory Board and AAOIFI are defined in the
                       glossary.

S3.4       Investment objectives and policy etc
       (1) Sufficient information to enable a unitholder to ascertain the
           following:
             (a) the scheme’s investment objectives (including its financial
                 objectives) and, in particular—
                     (i) the types of investments in which it (and, if
                         applicable, each subscheme) may invest; and
                    (ii) the scheme’s investment strategies, including its
                         approach to borrowing and gearing;
             (b) the scheme’s policy for achieving its investment
                 objectives, including—
                     (i) the general nature of the portfolio and any intended
                         specialisation; and
                    (ii) any policy for the spreading of risk in the scheme
                         property; and
                    (iii) its policy in relation to the exercise of borrowing
                          powers;
             (c) a description of any restrictions in the assets in which
                 investments may be made;
             (d) the extent (if any) to which the investment policy does not
                 envisage the scheme property remaining fully invested at
                 all times;



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                                                                        Rule S3.4


          (e) the scheme’s policy for managing any risks posed by
              borrowings of the scheme.
         Note     Rule 5.2.3 (1) (General information requirements for prospectus—
                  all QFC schemes) requires the prospectus to contain information in
                  relation to—
                  (a)     the merits and risks of participating in the scheme; and
                  (b)     the extent and characteristics of the risks accepted by
                          participating in the scheme.
     (2) Details of all borrowing restrictions applying to the scheme,
         including the scheme’s permitted percentage under rule 6.4.1
         (Borrowing—QFC qualified investor schemes).
     (3) For investments in immovables, the following information:
          (a) the jurisdictions where immovables in which the scheme
              may invest are located;
         (b) the scheme’s policy in relation to insurance of immovables
             forming part of the scheme property;
          (c) the scheme’s policy in relation to granting options over
              immovables in the scheme property and the purchase of
              options on immovables;
         (d) if investment in a non-Qatari immovable has been, or is to
             be, made through an intermediate holding vehicle or a
             series of intermediate holding vehicles—a statement
             disclosing the existence of the intermediate holding vehicle
             or series of intermediate holding vehicles and confirming
             that the purpose of the vehicle, or each of the vehicles, is to
             enable the scheme to hold immovables located outside
             Qatar.
     (4) If intended, a statement that the scheme property may consist of
         units in a scheme (the second scheme) that is managed or
         operated by the operator or a person in the same group as the
         operator, and a statement about—

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Rule S3.5


             (a) the basis of the maximum amount of the charges in relation
                 to transactions in the second scheme; and
             (b) the extent to which the charges must be reimbursed to the
                 scheme.
       (5) If intended, a statement that stock lending arrangements or repo
             agreements may be entered into for the scheme, the procedures
             that must be applied in relation to them and the collateral that
             must be required.

S3.5       Distributions, accounting dates etc
       (1) Relevant details of accounting and distribution dates (including
           the accounting reference date), and a description of the
           procedures—
             (a) for calculating and applying income and capital (including
                 how any distributable income and capital is to be paid);
                 and
             (b) relating to unclaimed distributions.
       (2) Details of the main taxes levied on the scheme’s income and
             capital, including tax (if any) deducted on distributions to
             unitholders.

S3.6         Characteristics of units in the scheme
             Information about the following:
             (a) if there are 2 or more classes of units in issue or available
                 for issue—the name of each class and the rights attached to
                 each class so far as they differ from the rights attached to
                 other classes;
             (b) how unitholders may exercise their voting rights and what
                 these are;



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                                                               Rule S3.7


       (c) if mandatory redemption or conversion of units from one
           class to another may be required—in what circumstances
           that may be required;
       (d) for a CIT—the fact that the nature of the right represented
           by units is that of a beneficial interest under a trust;
       (e) if applicable, the circumstances where conversion from
           one class of units to another is not permitted;
       (f) if applicable, the terms on which a unit in one class may be
           converted to a unit in another class.

S3.7   Operator
       The following information about the operator:
       (a) its name;
       (b) the nature of its legal status;
       (c) the date and place of its incorporation;
       (d) the address of its registered office in the QFC;
       (e) if it is a subsidiary—the name of its ultimate parent entity
           and the jurisdiction where the parent entity is incorporated;
       (f) if the duration of its legal status is limited—when its legal
           status will or may cease;
       (g) if it has share capital—the amount of its issued share
           capital and how much is paid up;
       (h) a summary of its functions under these rules in relation to
           the scheme;
       (i) a summary of the material provisions of the contracts to
           which it is a party in relation to the scheme that may be
           relevant to unitholders, including provisions (if any)


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Rule S3.8


                  relating to remuneration, remuneration sharing,
                  termination, compensation on termination, and indemnity;
             (j) a summary of any outsourcings entered into by it under
                 these rules in relation to the scheme;
             (k) the operator’s policy in relation to the operator holding
                 units in the scheme.

S3.8       Independent entity
       (1) The following information about the independent entity:
             (a) its name;
             (b) the nature of its legal status;
             (c) the date and place of its incorporation;
             (d) whether it is an authorised firm;
             (e) if it is an authorised firm—the address of its registered
                 office in the QFC;
             (f) if it is not an authorised firm—the following:
                   (i) its contact details and address for service;
                  (ii) the regulatory regimes and legal systems (including
                       insolvency laws) to which it is subject;
                 (iii) the regulatory authorisations (however described)
                       held by it;
                 (iv) its arrangements for safeguarding the scheme
                      property and its use of agents and service providers;
                  (v) the obligations applying to it, and the recourse
                      available against it by the operator, the Regulatory
                      Authority and unitholders, under those regulatory



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                                                                 Rule S3.8


                    regimes and legal systems in relation to anything
                    done or not done by it in relation to the scheme;
              (vi) whether it has submitted to the jurisdiction of the
                   Regulatory Authority, the QFC Court or both;
         (g) if it is a subsidiary—the name of its ultimate parent entity
             and the jurisdiction where that parent entity is
             incorporated;
         (h) if the duration of its legal status is limited—when its legal
             status will or may cease;
          (i) if it has share capital—the amount of its issued share
              capital and the amount paid up;
          (j) a summary of its functions under these rules in relation to
              the scheme;
         (k) a summary of the material provisions of the contracts to
             which it is a party in relation to the scheme that may be
             relevant to unitholders, including provisions (if any)
             relating to remuneration, remuneration sharing,
             termination, compensation on termination, and indemnity;
          (l) a description of its main business activity;
         (m) a summary of any outsourcings entered into by it under
             these rules in relation to the scheme.
     (2) If the independent entity is not an authorised firm, a statement
         that the scheme property may be held in a jurisdiction outside
         the QFC and that the market practices, insolvency law and legal
         system applying in that jurisdiction may differ from those
         applying in the QFC.




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Rule S3.9


S3.9        Investment adviser and standing independent valuer
        (1) If an investment adviser is retained in relation to the business of
            the scheme—
             (a) its name; and
             (b) whether it is an authorised firm; and
             (c) if it conducts a significant activity other than providing
                 services to the scheme as an investment adviser—what the
                 significant activity is; and
             (d) a summary of the material provisions of the contracts to
                 which it is a party in relation to the scheme that may be
                 relevant to unitholders, including provisions (if any)
                 relating to remuneration, remuneration sharing,
                 termination, compensation on termination, and indemnity.
        (2) If the scheme has a standing independent valuer—
             (a) its name; and
             (b) a summary of the material provisions of the contracts to
                 which it is a party in relation to the scheme that may be
                 relevant to unitholders, including provisions (if any)
                 relating to remuneration, remuneration sharing,
                 termination, compensation on termination, and indemnity.

S3.10        Auditor
             The name and address of the auditor of the scheme.

S3.11        Register of unitholders
             Details of the address in the QFC where the unitholder register,
             or a copy of the unitholder register, is available for inspection
             by unitholders and when it can be inspected.




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                                                                     Rule S3.12


S3.12       Payments out of scheme property
        (1) The payments that may be made out of the scheme property to
            any person, whether by way of remuneration or charges for
            services, or reimbursement of expenses.
        (2) For each category of remuneration, charges or expenses, the
            following information:
            (a) the current rates or amounts of the remuneration, charges
                or expenses;
            (b) how the remuneration, charges or expenses must be
                calculated and accrue and when they must be paid;
            (c) if notice has been given to unitholders of the operator’s
                intention to—
                 (i) introduce a new category of remuneration for its
                     services; or
                 (ii) increase the basis of any current charge; or
                (iii) change the basis of the treatment of a payment from
                      the capital property;
                 particulars of that introduction, increase or change and
                 when it will take place;
            (d) the types of any other charges and expenses that may be
                taken out of the scheme property;
            (e) if all or part of the remuneration or expenses is to be
                treated as a charge to capital—
                 (i) that fact; and
                 (ii) the basis of the charge that may be treated as a capital
                      charge.



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Rule S3.12


     (3) A table substantially in the form of table S3.12 illustrating the
             effect of charges and expenses, together with the notes and
             statements following the table.
      Table S3.12            Charges and expenses for the scheme

        One-off charges taken before or after you invest
        Entry charge [insert percentage]%1
        Exit charge       [insert percentage]%1
        This is the maximum that might be taken out of your money [insert as applicable before
        it is invested or before the proceeds of your investment are paid out].

        Charges taken from the fund over a year
        Ongoing charges       [insert percentage]%2

        Charges taken from the fund under certain specific conditions
        Performance fees [insert percentage]% a year of any returns the
        fund achieves above the [insert name of benchmark].



             Note 1     The percentages shown in the entry and exit charges are the
                        maximum figures. In some cases you might pay less.
             Note 2     The percentage for the ongoing charges is based on expenses for
                        the year ending [insert year]. This figure may vary from year to
                        year. Ongoing charges excludes—
                            performance fees
                            portfolio transaction costs, other than entry and exit charges
                              incurred when buying or selling units in another collective
                              investment scheme.

             Statements about charges and expenses
             The charges you pay are used to pay the costs of running the scheme,
             including the costs of marketing and distributing it. These charges reduce
             the potential growth, and rate of return, of your investment.




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                                                                   Rule S3.13


S3.13       Dealing
        (1) Details of the following:
             (a) the dealing days, and times on a dealing day, when the
                 operator must receive instructions to issue or redeem units;
            (b) the procedures for—
                  (i) the issue and redemption of units; and
                  (ii) the settlement of transactions;
             (c) the initial offer period and how it ends;
            (d) the steps that must be taken by a unitholder in redeeming
                units before the unitholder can receive the proceeds in the
                redemption, including any relevant notice periods and the
                circumstances in which, and periods for which, payment
                may be deferred;
             (e) the circumstances in which the redemption of units may be
                 deferred, limited or suspended and how unitholders must
                 be notified if this happens;
             (f) how unitholders must be notified when the redemption of
                 units is no longer deferred, limited or suspended;
            (g) details of the minimum number, percentage or value of
                each class of unit in the scheme that—
                  (i) any single person may hold; and
                  (ii) may be the subject of any single transaction of issue
                       or redemption;
            (h) if relevant, the circumstances in which the operator may
                arrange for, and the procedure for, the issue or redemption
                of units otherwise than in cash;



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Rule S3.14


             (i) the circumstances in which the issue of units in any class
                 may be limited and the procedures relating to this,
                 including the conditions to be met for the issue of units in
                 the class;
             (j) if the scheme is operating limited issue arrangements or
                 limited redemption arrangements—details of the
                 arrangements.
                  Note    Limited issue arrangements and limited redemption
                          arrangements are defined in the glossary.

S3.14       Valuation and pricing
        (1) A provision stating that there must be only a single forward
            price for any unit calculated from time to time by reference to a
            particular valuation point.
        (2) Details about the following:
             (a) how frequently, and at what times of the day, the scheme
                 property must be regularly valued to calculate the price at
                 which units in the scheme may be issued or redeemed, and
                 a description of any circumstances in which the scheme
                 property may be specially valued;
             (b) how the value of the scheme property must be calculated in
                 relation to each purpose for which it must be valued;
             (c) how the price of units in each class must be calculated.

S3.15        Issue and redemption charges
             If the operator makes any charges on the issue and redemption
             of units, details of the charging structure and how notice must
             be provided to unitholders of any increase.




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                                                              Rule S3.16


S3.16   General information
        Details of the following:
        (a) when annual and half-yearly reports must be published;
        (b) the scheme’s accounting standard;
        (c) the address in the QFC where copies of the constitutional
            document, any amending or supplemental instruments, and
            the most recent annual and half-yearly reports, may be
            inspected and copies may be obtained.

S3.17   Mandatory statement about prospectus
        The following statement prominently displayed on the first page
        (not including any cover page) of the prospectus:
        ‘This prospectus relates to a collective investment scheme
        established in the Qatar Financial Centre and registered by the
        Qatar Financial Centre Regulatory Authority (the Regulatory
        Authority) as a qualified investor scheme.
        The Regulatory Authority is not responsible for reviewing or
        verifying this prospectus or any related documents. The
        Regulatory Authority has not approved this prospectus or any
        related documents nor has the Regulatory Authority taken any
        steps to verify the statements, information or provisions in the
        prospectus or any related documents. The Regulatory Authority
        takes no responsibility for the accuracy of statements,
        information or provisions in this prospectus or any related
        documents.
        The units to which this prospectus relates may be difficult, and
        take some time, to sell. Payments of redemption proceeds may
        also be delayed.
        Returns from units can go down as well as up and you may also
        lose all or part of your investment.


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Rule S3.18


             Past performance of units is not a reliable indication of the
             future performance.
             Prospective purchasers of the units offered should conduct their
             own due diligence and consider seeking independent legal and
             financial advice before deciding to invest in the scheme.
             This prospectus is intended for distribution only to a limited
             type of investor (a ‘qualified investor’ as defined in the
             Regulatory Authority’s Collective Investment Schemes Rules
             2010) and must not be given to, or relied on, by anyone else’.

S3.18        Additional information for feeder funds
             For a feeder fund, the following information:
             (a) a prominent risk warning to alert participants to the fact
                 that they may be subject to higher fees arising from the
                 layered investment structure;
             (b) details of the fees arising at the level of the feeder fund
                 itself and the scheme (or subscheme) to which its
                 investments are dedicated.

S3.19        Additional information for fund of funds
             For a fund of funds, the following information:
             (a) a prominent risk warning to alert participants to the fact
                 that they may be subject to higher fees arising from the
                 layered investment structure;
             (b) details of the fees arising at the level of the fund of funds
                 itself and, to the extent known, the schemes (and
                 subschemes of umbrella schemes) to which its investments
                 are dedicated.




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                                                              Rule S3.20


S3.20   Additional statements and information for property
        funds
        For a property fund, the following statements and information:
        (a) the nature of the commitment that participants will enter
            into;
        (b) a prominent risk warning that refers to the particular
            circumstances in property markets that can cause
            difficulties in meeting redemptions;
        (c) details of transactions or agreements entered into, or
            proposed to be entered into, with affected persons;
        (d) full particulars of the nature and extent of the interest (if
            any) of affected persons in the immovables owned, or
            proposed to be acquired, by the scheme;
        (e) details of significant participants and the number or
            percentage of units held, or proposed to be held, by each of
            them;
        (f) a statement to explain the standards according to which
            property valuations are conducted for the scheme;
        (g) the maximum percentage of the scheme’s net asset value at
            any time that may consist of property-related assets that
            are not traded or dealt in on markets provided for in the
            constitutional document;
        (h) the maximum percentage of the scheme’s net asset value at
            any time that may be invested in any single immovable
            and, if applicable, the conditions under which the scheme
            may depart from this restriction;
        (i) the maximum percentage of the scheme’s net asset value at
            any time that may consist of immovables that are



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Rule S3.21


                  unoccupied and non-income producing or in the course of
                  substantial development, redevelopment or refurbishment;
             (j) the maximum percentage of the scheme’s net asset value at
                 any time that may be invested in immovables that are
                 subject to a security interest held otherwise than by the
                 independent entity or its nominee or delegate.

S3.21        Information on umbrella schemes
             For an umbrella scheme, the following information:
             (a) that a unitholder may exchange units in a subscheme for
                 units in any other subscheme (other than a subscheme that
                 has limited the issue of units);
             (b) that an exchange of units in a subscheme for units in
                 another subscheme is treated as a redemption and issue;
             (c) that a unitholder who exchanges units in a subscheme for
                 units in any other subscheme does not have the right to
                 withdraw from or cancel the transaction;
             (d) the operator’s policy for allocating between subschemes
                 any assets of, or costs, charges and expenses payable out
                 of, scheme property that are not attributable to any
                 particular subscheme;
             (e) what charges (if any) may be made on exchanging units in
                 a subscheme for units in another subscheme;
             (f) for each subscheme—the currency in which the scheme
                 property attributed to it must be valued, and the price of
                 units calculated and payments made, if this currency is not
                 the base currency of the umbrella scheme;
             (g) for an umbrella scheme constituted by a CIC—that the
                 subschemes are not ‘ring-fenced’ and, if the umbrella
                 scheme cannot meet liabilities attributable to any particular

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                                                              Rule S3.22


            subscheme out of the assets attributable to that subscheme,
            the remaining liabilities may have to be met out of the
            assets attributable to other subschemes.

S3.22   Application of prospectus contents to umbrella
        scheme
        For an umbrella scheme, information, statements and provisions
        required must be provided—
        (a) for each subscheme if the information, statements or
            provisions for any subscheme differ from those for any
            other; and
        (b) for the umbrella scheme as a whole, but only if the
            information, statements or provisions are relevant to the
            umbrella scheme as a whole.




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 Rule S4.1




Schedule 4                     Prospectus     content—QFC
                               retail schemes
(see r 5.2.3)

S4.1            Document status
                A statement that the document is the prospectus of the QFC
                retail scheme as at a particular date.

S4.2            Description of scheme etc
                The following information and statements:
                (a) the name of the scheme;
                (b) that the scheme is registered as a retail scheme under the
                    Collective Investment Schemes Rules 2010;
                (c) the registration number given to the scheme by the
                    Regulatory Authority;
                (d) the legal form of the scheme and that it is an open-ended
                    scheme;
                (e) that it is a UCITS type scheme;
                (f) if the scheme (or a subscheme) is an Islamic fund—that the
                    scheme (or subscheme) is an Islamic fund;
                (g) if the scheme (or subscheme) is a money-market fund—
                    that the scheme (or subscheme) is a money-market fund;
                (h) that the unitholders are not liable for—
                     (i) the debts and other liabilities of the scheme; or
                     (ii) acts or omissions of the operator or independent
                          entity;


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                                                              Rule S4.3


        (i) if the scheme has not started to operate—when the scheme
            is expected to start to operate;
        (j) whether it is a listed scheme or intended to become a listed
            scheme;
       (k) if the duration of the scheme is limited—a statement to that
           effect, an indication of the duration of the scheme and, if
           appropriate, of any conditions for extending the duration of
           the scheme;
        (l) the base currency of the scheme;
       (m) if the scheme is a CIC—its capital structure, including the
           maximum and minimum sizes of its capital;
       (n) if applicable, any minimum initial investment;
       (o) that any notice or other document may be served on the
           operator or independent entity at its registered address in
           the QFC or, if the independent entity is not an authorised
           firm, at its address for service;
       (p) the circumstances in which the scheme may be wound up
           and a summary of the procedure for, and the rights of the
           unitholders under, a winding-up;
       (q) the governing law for the scheme.

S4.3   Islamic funds
       If the scheme (or a subscheme) is an Islamic fund, the following
       information:
       (a) that all operations of the scheme (or subscheme) must be
           conducted in accordance with Shari’a;
       (b) the names of the members of the Shari’a Supervisory
           Board and their qualifications and education;


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Rule S4.4


             (c) the manner and frequency of Shari’a reviews;
             (d) the disclosure required by AAOIFI FSA 14.
             Note      Shari’a Supervisory Board and AAOIFI are defined in the
                       glossary.

S4.4         Investment objectives and policy etc
             The following information in relation to the scheme’s
             investment objectives, strategies and policy:
             (a) the scheme’s investment objectives (including its financial
                 objectives) and, in particular—
                     (i) the types of investments in which it (and, if
                         applicable each subscheme) may invest; and
                    (ii) the scheme’s investment strategies, including its
                         approach to borrowing and gearing;
             (b) the scheme’s policy for achieving its investment
                 objectives, including—
                     (i) the general nature of the portfolio and any intended
                         specialisation; and
                    (ii) the policy for the spreading of risk in the scheme
                         property; and
                    (iii) the policy in relation to the exercise of borrowing
                          powers;
             (c) an indication of any limits on the investment policy;
             (d) the types of assets that the capital property may consist of;
             (e) the proportion of the capital property that may consist of
                 an asset of any description;
             (f) the kind of transactions that may be effected for the
                 scheme and an indication of any techniques and

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                                                              Rule S4.4


          instruments or borrowing powers that may be used in the
          scheme’s management;
     (g) for rule 7.1.7 (1) (b) (What is an eligible market?), a list of
         the markets through which the scheme may invest or deal
         in investments in accordance with these rules;
     (h) any restrictions in the assets in which scheme property
         may be invested, including restrictions in the extent to
         which the scheme may invest in any type of asset and an
         indication of whether the restrictions are more onerous
         than those otherwise applying under these rules;
      (i) the borrowing restrictions applying to the scheme;
      (j) if the scheme may invest in other schemes—the extent to
          which the scheme property may be invested in units in
          schemes that are managed by the operator or any associate
          of the operator;
     (k) if the scheme is a feeder fund that (in relation to
         investment in units in schemes) is dedicated to units in a
         single scheme—details of the master scheme and the
         minimum (and, if relevant, maximum) investment that the
         feeder fund may make in it;
      (l) if the scheme invests mainly in units in schemes, deposits
          or derivatives, or replicates an index—a prominent
          statement about this investment policy;
     (m) if derivatives transactions may be used in the scheme—a
         prominent statement about whether the transactions are for
         the purpose of efficient portfolio management (including
         hedging) or meeting the investment objectives (or both),
         and the possible outcome of the use of derivatives on the
         scheme’s risk profile;



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Rule S4.5


             (n) the profile of the typical investor for whom the scheme is
                 designed;
             (o) the historical performance of the scheme;
                 Note     For the obligations of authorised firms in relation to
                          information about actual past performance in financial
                          promotions, see COND, r 3.3.3.

             (p) if the scheme invests a substantial part of the scheme
                 property in other schemes—a statement of the maximum
                 level of management fees that may be charged to the
                 scheme and to the schemes in which it invests;
             (q) if the scheme’s net asset value is likely to have high
                 volatility because of its portfolio composition or the
                 portfolio management techniques that may be used—a
                 prominent statement to that effect;
             (r) if the scheme may invest substantially in deposits or
                 money-market instruments—a risk warning drawing
                 attention to the difference between the nature of a deposit
                 and the nature of an investment in the scheme, with
                 particular reference to the risk that the principal invested in
                 the scheme may fluctuate;
             (s) a statement that any unitholder may obtain on request the
                 kinds of information (which must be listed) mentioned in
                 rule 5.2.2 (2) (Prospectus etc to be made available).

S4.5       Distributions, accounting and reporting dates etc
       (1) Information about reporting, accounting and distribution,
           including the following:
             (a) the accounting and distribution dates;




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                                                                  Rule S4.6


           (b) a description of procedures—
                (i) for calculating and applying income (including how
                    any distributable income must be paid); and
                (ii) relating to unclaimed distributions; and
               (iii) if relevant, for calculating, paying and accounting for
                     income equalisation;
           (c) the accounting reference date and when annual and half-
               yearly long reports must be published;
           (d) when annual and half-yearly short reports must be sent to
               unitholders.
       (2) Details of the main taxes levied on the scheme’s income and
           capital, including tax (if any) deducted on distributions to
           unitholders.

S4.6       Characteristics of units in the scheme
           Information about the following:
           (a) if there are 2 or more classes of units in issue or available
               for issue—the name of each class and the rights attached to
               each class so far as they differ from the rights attached to
               other classes;
           (b) how unitholders may exercise their voting rights and what
               these are;
           (c) if mandatory redemption or conversion of units from a
               class to another class may be required—in what
               circumstances that may be required;
           (d) for CIT—the fact that the nature of the right represented by
               units is that of a beneficial interest under a trust;
           (e) documents evidencing title to units.


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Rule S4.7


S4.7         Operator
             The following information about the operator;
             (a) its name;
             (b) the nature of its legal status;
             (c) the date and place of its incorporation;
             (d) the address of its registered office in the QFC;
             (e) if it is a subsidiary—the name of its ultimate parent entity
                 and the jurisdiction where the parent entity is incorporated;
             (f) if the duration of its legal status is limited—when its legal
                 status will or may cease;
             (g) if it has share capital—the amount of its issued share
                 capital and the amount paid up;
             (h) a summary of its functions under these rules in relation to
                 the scheme;
             (i) a summary of the material provisions of the contracts to
                 which it is a party in relation to the scheme that may be
                 relevant to unitholders, including provisions (if any)
                 relating to remuneration, remuneration sharing,
                 termination, compensation on termination, and indemnity;
             (j) a summary of any outsourcings entered into by it under
                 these rules in relation to the scheme;
             (k) the operator’s policy in relation to the operator holding
                 units in the scheme.

S4.8       Independent entity
       (1) The following information about the independent entity:
             (a) its name;


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                                                               Rule S4.8


     (b) the nature of its legal status;
     (c) the date and place of its incorporation;
     (d) whether it is an authorised firm;
     (e) if it is an authorised firm—the address of its registered
         office in the QFC;
     (f) if it is not an authorised firm—the following:
           (i) its contact details and address for service;
          (ii) the regulatory regimes and legal systems (including
               insolvency laws) to which it is subject;
         (iii) the regulatory authorisations (however described)
               held by it;
         (iv) its arrangements for safeguarding the scheme
              property and its use of agents and service providers;
          (v) the obligations applying to it, and the recourse
              available against it by the operator, the Regulatory
              Authority and unitholders, under those regulatory
              regimes and legal systems in relation to anything
              done or not done by it in relation to the scheme;
         (vi) whether it has submitted to the jurisdiction of the
              Regulatory Authority, the QFC Court or both;
     (g) if it is a subsidiary—the name of its ultimate parent entity
         and the jurisdiction where the parent company is
         incorporated;
     (h) if the duration of its legal status is limited—when its legal
         status will or may cease;
     (i) if it has share capital—the amount of its issued share
         capital and the amount paid up;


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Rule S4.9


             (j) a summary of its functions under these rules in relation to
                 the scheme;
             (k) a summary of the material provisions of the contracts to
                 which it is a party in relation to the scheme that may be
                 relevant to unitholders, including provisions (if any)
                 relating to remuneration, remuneration sharing,
                 termination, compensation on termination, and indemnity;
             (l) a description of its main business activity;
            (m) a summary of any outsourcings entered into by it under
                these rules in relation to the scheme.
       (2) If the independent entity is not an authorised firm, a statement
             that the scheme property may be held in a jurisdiction outside
             the QFC and that the market practices, insolvency law and legal
             system applying in that jurisdiction may differ from those
             applying in the QFC.

S4.9         Investment adviser
             If an investment adviser is retained in relation to the business of
             the scheme—
             (a) its name; and
             (b) whether it is an authorised firm; and
             (c) if it conducts a significant activity other than providing
                 services to the scheme as an investment adviser—what the
                 significant activity is; and
             (d) a summary of the material provisions of the contracts to
                 which it is a party in relation to the scheme that may be
                 relevant to unitholders, including provisions (if any)
                 relating to remuneration, remuneration sharing,
                 termination, compensation on termination, and indemnity.


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                                                               Rule S4.10


S4.10   Auditor
        The name and address of the auditor of the scheme.

S4.11   Relationships with other parties
        The relevant details of the following:
        (a) the names of each member (however described) of the
            governing body of the operator, the independent entity or,
            for a CIC or CIP, the CIC or CIP;
        (b) the business activities of each person named under
            paragraph (a) if these activities are of significance to the
            scheme’s business;
        (c) if any person named under paragraph (a) is a corporation in
            a group of which any other corporation member (however
            described) of the governing body is a member—that fact;
        (d) if an investment adviser retained in relation to the business
            of the scheme is a corporation in a group of which any
            corporation member (however described) of the governing
            body of the operator, the independent entity or, for a CIC
            or CIP, the CIC or CIP is also a member—that fact;
        (e) if an investment adviser retained in relation to the business
            of the scheme has the operator’s authority to make
            decisions for the operator—that fact and a description of
            the matters in relation to which it has authority;
        (f) what functions (if any) the operator or independent entity
            has outsourced and to whom;
        (g) in what capacity (if any) the operator acts in relation to any
            other schemes and the name of each of those schemes.




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Rule S4.12


S4.12        Register of unitholders
             Details of the address in the QFC where the register of
             unitholders, or a copy of the unitholder register, is available for
             inspection by unitholders and when it can be inspected.

S4.13       Payments out of scheme property
        (1) In relation to each type of payment from the scheme property,
            details of the following:
             (a) who the payment is made to;
             (b) what the payment is for;
             (c) if available, the rate or amount;
             (d) if the rate or amount is not available—how it must be
                 calculated and accrued;
             (e) when must it be paid;
             (f) if a performance fee is taken—a plain English statement of
                 the maximum amount or percentage of the scheme
                 property that the performance fee might represent in an
                 annual accounting period together with examples of the
                 operation of the performance fee.
        (2) How notice must be given to unitholders of the operator’s
             intention to do any of the following:
             (a) introduce a new category of remuneration for its services;
             (b) increase the basis of any current charge;
             (c) change the basis of the treatment of a payment from the
                 capital property.
        (3) A table substantially in the form of table S4.13 illustrating the
             effect of charges and expenses, together with the notes and
             statements following the table.

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                                                                              Rule S4.14

        Table S4.13         Charges and expenses for the scheme

         One-off charges taken before or after you invest
         Entry charge [insert percentage]%1
         Exit charge       [insert percentage]%1
         This is the maximum that might be taken out of your money [insert as applicable before
         it is invested or before the proceeds of your investment are paid out].

         Charges taken from the fund over a year
         Ongoing charges       [insert percentage]%2

         Charges taken from the fund under certain specific conditions
         Performance fees [insert percentage]% a year of any returns the
         fund achieves above [insert name of benchmark].



            Note 1    The percentages shown in the entry and exit charges are the
                      maximum figures. In some cases you might pay less.
            Note 2    The percentage for the ongoing charges is based on expenses for
                      the year ending [insert year]. This figure may vary from year to
                      year. Ongoing charges excludes—
                           performance fees
                           portfolio transaction costs, other than entry and exit charges
                             incurred when buying or selling units in another collective
                             investment scheme.

            Statements about charges and expenses
            The charges you pay are used to pay the costs of running the scheme,
            including the costs of marketing and distributing it. These charges reduce
            the potential growth, and rate of return, of your investment.

S4.14       Allocation of payments
            If, in accordance with these rules, any income expense
            payments may be treated as a capital expense—
            (a) that fact; and



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Rule S4.15


             (b) the operator’s policy for treating any income expense as a
                 capital expense; and
             (c) a statement that this policy may result in capital erosion or
                 constrain capital growth.

S4.15       Valuation and pricing
        (1) A provision stating that there must be only a single forward
            price for any unit calculated from time to time by reference to a
            particular valuation point.
        (2) Details of the following:
             (a) how frequently, and at what times of the day, the scheme
                 property must be regularly valued to calculate the price at
                 which units in the scheme may be issued or redeemed, and
                 a description of any circumstances in which the scheme
                 property may be specially valued;
             (b) how the value of the scheme property must be calculated in
                 relation to each purpose for which it must be valued;
             (c) how the price of units in each class must be calculated;
             (d) where, and at what frequency, the most recent prices must
                 be published.

S4.16        Dealing
             Details of the following:
             (a) the dealing days, and times on a dealing day, when the
                 operator must receive instructions to issue or redeem units;
             (b) the procedures for—
                   (i) the issue and redemption of units; and
                  (ii) the settlement of transactions;


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                                                             Rule S4.16


     (c) for a prospectus available during the initial offer period—
          (i) the initial offer period; and
          (ii) the initial price of a unit (in the base currency); and
         (iii) the arrangements for issuing units during the initial
               offer period, including the operator’s intentions on
               investing the subscriptions received during the initial
               offer period; and
         (iv) the circumstances when the initial offer must end; and
          (v) whether units may be issued in a currency other than
              the base currency; and
         (vi) any other relevant details of the initial offer;
     (d) the steps that must to be taken by a unitholder in
         redeeming units before the unitholder can receive the
         proceeds of the redemption, including any relevant notice
         periods and the circumstances in which, and periods for
         which, a payment may be deferred;
     (e) the circumstances in which the redemption of units may be
         deferred or suspended and how unitholders must be
         notified if this happens;
     (f) how unitholders must be notified when the redemption of
         units is no longer deferred or suspended;
     (g) details of the minimum number, percentage or value of
         each class of unit in the scheme that—
          (i) any single person may hold; and
          (ii) may be the subject of any single transaction of issue
               or sale;
     (h) whether certificates may be issued in relation to registered
         units;

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Rule S4.17


             (i) if relevant, the circumstances in which the operator may
                 arrange for, and the procedure for, the issue or redemption
                 of units otherwise than for cash;
             (j) the investment exchanges (if any) on which units in the
                 scheme are or will be listed or dealt.

S4.17        Dilution
             Details of what is meant by dilution, including—
             (a) a statement explaining—
                  (i) that is not possible to predict accurately whether
                      dilution is likely to happen; and
                  (ii) that a dilution adjustment is required to reduce the
                       effect of dilution; and
                 (iii) the operator’s policy in relation to requiring a dilution
                       levy together with an explanation of how this policy
                       may affect the future growth of the scheme; and
             (b) a statement of the following:
                  (i) the operator’s policy in deciding when to require a
                      dilution levy, including the operator’s policy on large
                      deals;
                  (ii) the estimated rate or amount of any dilution levy or
                       dilution adjustment based either on historical data or
                       future projections;
                 (iii) the likelihood that the operator may require a dilution
                       levy or make a dilution adjustment and the basis
                       (historical or projected) on which the statement is
                       made.




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                                                               Rule S4.18


S4.18   Issue charges
        If relevant, a statement authorising the operator to make an issue
        charge and specifying the basis for, and current amount or rate
        of, the charge.

S4.19   Redemption charges
        If relevant—
        (a) a statement authorising the operator to deduct a redemption
            charge out of the proceeds of redemption; and
        (b) if the operator makes a redemption charge—
              (i) the current amount of the charge or, if it is variable,
                  the rate or method of calculating it; and
             (ii) if the amount, rate or method has been changed—that
                  details of any previous amount, rate or method may
                  be obtained from the operator on request; and
            (iii) the order in which the units acquired at different
                  times by a unitholder are taken to be redeemed for the
                  imposition of the redemption charge.

S4.20   Meeting of unitholders
        Details of the following:
        (a) the procedures for calling meetings of unitholders;
        (b) resolutions and voting at meetings of unitholders;
        (c) voting rights of unitholders;
        (d) the matters that require the approval of unitholders;
        (e) for a CIC—whether annual general meetings must be held.




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Rule S4.21


S4.21        General information
             Details of the following:
             (a) the scheme’s accounting standard;
             (b) the address in the QFC where copies of the constitutional
                 document, any amending or supplemental instrument, and
                 the most recent annual and half-yearly reports, may be
                 inspected and copies may be obtained;
             (c) how any notice or other document must or may be served
                 on unitholders;
             (d) the extent to which and the circumstances in which—
                   (i) the scheme is liable to pay or incur 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;
             (e) any possible fees or expenses not otherwise mentioned in
                 this schedule, distinguishing between those to be paid by a
                 unitholder and those to be paid out of the scheme property;
             (f) if applicable, the names and addresses of any banker,
                 lawyer, registrar, and any other person, conducting any
                 significant activities in relation to the scheme.

S4.22        Mandatory statement about prospectus
             The following statement prominently displayed on the first page
             (not including any cover page) of the prospectus:
             ‘This prospectus relates to a collective investment scheme
             established in the Qatar Financial Centre and registered by the

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                                                             Rule S4.23


        Qatar Financial Centre Regulatory Authority (the Regulatory
        Authority) as a retail scheme.
        The Regulatory Authority is not responsible for reviewing or
        verifying this prospectus or any related documents. The
        Regulatory Authority has not approved this prospectus or any
        related documents nor has the Regulatory Authority taken any
        steps to verify the statements, information or provisions in the
        prospectus or any related documents. The Regulatory Authority
        takes no responsibility for the accuracy of statements,
        information or provisions in this prospectus or any related
        documents.
        Returns from units go down as well as up and you may also lose
        all or part of your investment.
        Past performance of units is not a reliable indicator of future
        performance.
        Prospective purchasers of the units offered should conduct their
        own due diligence and consider seeking independent legal and
        financial advice before deciding to invest in the scheme.’

S4.23   Additional information for feeder funds
        For a feeder fund, the following information:
        (a) a prominent risk warning to alert participants to the fact
            that they may be subject to higher fees arising from the
            layered investment structure;
        (b) details of the fees arising at the level of the feeder fund
            itself and the scheme (or subscheme) to which its
            investments are dedicated.




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Rule S4.24


S4.24        Additional information for fund of funds
             For a fund of funds, the following information:
             (a) a prominent risk warning to alert participants to the fact
                 that they may be subject to higher fees arising from the
                 layered investment structure;
             (b) details of the fees arising at the level of the fund of funds
                 itself and, to the extent known, the schemes (and
                 subschemes of umbrella schemes) to which its investments
                 are dedicated.

S4.25        Information on umbrella schemes
             For an umbrella scheme, the following information:
             (a) that a unitholder may exchange units in a subscheme for
                 units in any other subscheme;
             (b) that an exchange of units in a subscheme for units in
                 another subscheme is treated as a redemption and issue;
             (c) that a unitholder who exchanges units in a subscheme for
                 units in any other subscheme does not have the right to
                 withdraw from or cancel the transaction;
             (d) the policy for allocating between subschemes any assets
                 of, or costs, charges and expenses payable out of, scheme
                 property that are not attributable to any particular
                 subscheme;
             (e) what charges (if any) may be made on exchanging units in
                 a subscheme for units in another subscheme;
             (f) for each subscheme—the currency in which the scheme
                 property allocated to it must be valued, and the price of
                 units calculated and payments made, if this currency is not
                 the base currency of the umbrella scheme;


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                                                               Rule S4.26


        (g) for an umbrella scheme constituted by a CIC—that the
            subschemes are not ‘ring-fenced’ and, if the umbrella
            scheme cannot meet liabilities attributable to any particular
            subscheme out of the assets attributable to that subscheme,
            the remaining liabilities may have to be met out of the
            assets attributable to other subschemes.

S4.26   Application of prospectus contents to umbrella
        scheme
        For an umbrella scheme, information, statements and provisions
        required must be provided—
        (a) in relation to each subscheme if the information,
            statements or provisions for any subscheme differ from
            those for any other; and
        (b) for the umbrella scheme as a whole, but only if the
            information, statements or provisions are relevant to the
            umbrella scheme as a whole.

S4.27   Additional information
        The following information:
        (a) if there is any arrangement intended to result in a particular
            capital or income return from a holding of units in the
            scheme or any investment objective of giving protection to
            the capital value of, or income return from, such a
            holding—
             (i) details of the arrangement or protection; and
             (ii) for any related guarantee—sufficient details of the
                  guarantor and the guarantee to enable a fair
                  assessment of the value of the guarantee; and
            (iii) a description of the risks that could affect achieving
                  the return or protection; and

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Rule S4.27


                 (iv) details of the arrangements by which the operator
                      must give the unitholders notice of any action
                      required by the unitholders to obtain the benefit of
                      any related guarantee;
             (b) whether notice has been given to unitholders of the
                 operator’s intention to propose a change to the scheme and,
                 if so, particulars of the notice.




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Glossary
(see r 1.1.4)

                AAOIFI means the Accounting and Auditing Organisation for
                Islamic Financial Institutions.
                accounting reference date, for a QFC scheme, means the date stated
                in the scheme’s latest filed prospectus as the date when the scheme’s
                annual accounting period ends.
                Note    Latest filed prospectus and annual accounting period are defined in this
                        glossary.

                accumulation unit means a unit in a QFC retail scheme in relation
                to which income is credited periodically to capital property under
                rule 8.8.2 (Income allocation and distribution—all QFC schemes).
                Note    Capital property is defined in this glossary.

                advising on investments means the regulated activity described in
                the Financial Services Regulations, schedule 3, part 2, paragraph 11.
                Note    Regulated activity is defined in this glossary.

                affected person, for a QFC scheme, has the meaning given by
                rule 5.1.1.
                annual accounting period, for a QFC scheme, means an annual
                accounting period of the scheme under these rules.
                annual income allocation date, for a QFC scheme, means the date
                in any year stated in the scheme’s latest filed prospectus as the date
                on or before which an allocation of income is to be made in relation
                to each annual accounting period.
                Note    Year, latest filed prospectus and annual accounting period are defined
                        in this glossary.




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              another permitted form of QFC scheme has the meaning given by
              rule 1.3.10.
              approved derivative has the meaning given by rule 7.1.8.
              approved money-market instrument has the meaning given by
              rule 7.1.5.
              approved security has the meaning given by rule 7.1.9.
              arranging credit facilities means the regulated activity described in
              the Financial Services Regulations, schedule 3, part 2, paragraph 7.
              Note      Regulated activity is defined in this glossary.

              arranging deals in investments means the regulated activity
              described in the Financial Services Regulations, schedule 3, part 2,
              paragraph 5.
              Note      Regulated activity is defined in this glossary.

              arranging the provision of custody services means the regulated
              activity described in the Financial Services Regulations, schedule 3,
              part 2, paragraph 9.
              Note      Regulated activity is defined in this glossary.

              articles of association, for a CIC, means the CIC’s articles of
              association as amended from time to time.
              Note      CIC is defined in r 1.3.7 and in this glossary.

              associate, for a legal person (A), means any legal person in the same
              group as A.
              Note      Legal person and group are defined in this glossary.

              associated person, for a person (A), means any of the following:
              (a) if A is a legal person—a legal person in the same group as A;
                     Note     Legal person and group are defined in this glossary.



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     (b) any other person whose business or domestic relationship with
         A might reasonably be expected to give rise to a community of
         interest between them that may involve a conflict of interest in
         dealing with third parties.
     Note    Legal person, group and person are defined in this glossary.

     authorisation means an authorisation granted under the Financial
     Services Regulations, part 5.
     authorised firm means a person that has an authorisation.
     Note    Person and authorisation are defined in this glossary.

     back-to-back borrowing means a borrowing under which a QFC
     scheme, or the independent entity of a QFC scheme on the
     operator’s instructions—
     (a) borrows an amount of currency from an eligible bank; and
     (b) keeps an amount in another currency, at least equal to that
         borrowing for the time being, on deposit with the eligible bank
         (or its agent or nominee).
     Note    Borrowing and eligible bank is defined in this glossary.

     base currency, for a QFC scheme, means the currency stated in the
     constitutional document as the base currency of the scheme.
     Note    Constitutional document is defined in r 3.1.1.

     borrowing, for a scheme, includes any arrangement (including a
     combination of derivatives) designed to achieve a temporary
     injection of money into the scheme property in the expectation that
     the amount will be repaid.
     Note    Derivative is defined in this glossary.

     breach includes fail or refuse to comply with.
     business day means a day that is not a Friday, Saturday, or a public
     or bank holiday in Qatar.

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              capital property, for a QFC scheme, means the scheme property,
              other than income property and any amount in the distribution
              account.
              Note      Scheme property is defined in r 1.2.3. Income property and distribution
                        account are defined in this glossary.

              CIC means a QFC collective investment company.
              Note      QFC collective investment company is defined in r 1.3.7.

              CIP means a QFC collective investment partnership.
              Note      QFC collective investment partnership is defined in r 1.3.8.

           CIT means a QFC collective investment trust.
              Note      QFC collective investment trust is defined in r 1.3.9.

              class, for a QFC scheme, means—
              (a)    a particular class of units in the scheme; or
              (b) if the scheme is an umbrella scheme—
                     (i) all the units relating to a single subscheme of the scheme;
                         or
                     (ii) a particular class of units relating to single subscheme of
                          the scheme.
              Note      Unit is defined in r 1.2.4. Umbrella scheme and subscheme are defined
                        in r 1.2.11.

              closed-ended scheme has the meaning given by rule 1.2.10 (2).




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     close out a transaction (the original transaction) means enter into a
     further transaction under which the obligation to deliver or receive
     property that arises (or, at the option of the other party to the
     transaction, may arise) under the original transaction is offset by an
     equivalent and opposite obligation or right to receive or deliver
     property.
     Note      Property is defined this glossary.

     COLL means these rules.
     collateral—
     (a) in relation to a stock lending arrangement, repo agreement or
         derivative transaction, means—
            (i) a transfer of assets (otherwise than by way of a sale)
                subject to a right of the transferor to have transferred back
                to it the same, or equivalent, assets; or
            (ii) a letter of credit;
            if the assets are transferred, or the letter of credit is issued, to
            secure the performance of a party to the transaction; and
     (b) in any other case—means any form of security, guarantee or
         indemnity provided by way of security for the discharge of any
         liability arising from a transaction.
     Note      Stock lending arrangement, repo agreement and derivative are defined
               in this glossary.

     collective investment scheme has the meaning given by rule 1.2.1.
     commodity means a physical asset (other than a financial instrument
     or cash) that is capable of delivery.
     complying disclaimer, for a non-QFC scheme, has the meaning
     given by rule 10.2.1.
     COND means the Conduct of Business Rulebook.

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              constitutional document, for a QFC scheme, has the meaning given
              by rule 3.1.1.
              contract for differences means the specified product described in
              the Financial Services Regulations, schedule 3, part 3, paragraph 9.
              Note     Specified product is defined in this glossary.

              contract of insurance means the specified product described in the
              Financial Services Regulations, schedule 3, part 3, paragraph 10.
              Note     Specified product is defined in this glossary.

              controlled function has the meaning given by the Financial
              Services Regulations, article 41 (2).
              Note     See INDI, ch 2 for the functions that are controlled functions.

              corporation—to remove any doubt, a corporation includes, but is
              not limited to—
              (a) a company; and
              (b) a limited partnership; and
              (c) a limited liability partnership.
              covered bond means a bond that—
              (a) is issued by an eligible bank; and
              (b) is subject by law to special public supervision designed to
                  protect bondholders, and in particular protection under which
                  amounts deriving from the issue of the bond must be invested
                  in accordance with the law in assets—
                     (i) that, during the entire period of the bond, can cover
                         claims attaching to the bond; and




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            (ii) that, if the issuer fails, would be used on a priority basis
                 for the reimbursement of the principal and payment of the
                 accrued interest.
     Note      Eligible bank is defined in this glossary.

     CTRL means the Controls Rulebook.
     currency class unit, for a QFC retail scheme, means a class of unit
     denominated in a currency that is not the base currency or, if
     allowed under rule 3.2.7 (3) (Currency class units—QFC retail
     schemes), denominated in the base currency.
     Note      Base currency is defined in this glossary.

     day means a period of 24 hours starting at midnight.
     deal—
     (a) for units in a QFC scheme—means issue or redeem the units;
         or
            Note     Issue and redemption are defined in this glossary.

     (b) for any other investment or other property—means buy, sell,
         otherwise acquire, subscribe for or underwrite the investment
         or other property or offer or agree to do so, either as principal
         or agent, and includes, for an investment that is a contract of
         insurance, carry out the contract.
            Note     Investment and contract of insurance are defined in this
                     glossary.

     dealing day, for a QFC scheme, means the period in a business day
     during which, in accordance with the latest filed prospectus, the
     operator must receive instructions to issue or redeem units in the
     scheme.
     Note      Business day, latest filed prospectus, issue and redemption are defined
               in this glossary.




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              dealing in investments means the regulated activity described in the
              Financial Services Regulations, schedule 3, part 2, paragraph 4.
              Note    Regulated activity is defined in this glossary.

              dealing period, for a QFC scheme, means the period between a
              valuation point and the next.
              Note    Valuation point is defined in this glossary.

              debt instrument means the specified product described in the
              Financial Services Regulations, schedule 3, part 3, paragraph 2.
              Note    Specified product is defined in this glossary.

              dedicated, for investments of a scheme, means intended that the
              unitholders of units in the scheme should participate or receive—
              (a) profits or income arising from the acquisition, holding,
                  management or disposal of investments of that kind; or
              (b) amounts paid out of profits or income mentioned in
                  paragraph (a).
              Note    Investment is defined in this glossary.

              deposit means the specified product described in the Financial
              Services Regulations, schedule 3, part 3, paragraph 11.
              Note    Specified product is defined in this glossary.

              deposit taking means the regulated activity described in the
              Financial Services Regulations, schedule 3, part 2, paragraph 1.
              Note    Regulated activity is defined in this glossary.

              derivative means a future, option or contract for differences.
              Note    Future, option and contract for differences are defined in this glossary.

              dilution, for a QFC scheme, means the amount of costs for dealing
              in investments incurred, or expected to be incurred, by the operator
              to the extent that these costs may reasonably be expected to result,


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     or have resulted, from the acquisition, holding, management or
     disposal of investments by the operator as a consequence (whether
     or not immediate) of the increase or decrease of the cash resources
     of the scheme resulting from the issue or redemption of units over a
     period, including—
     (a) the costs of dealing in investments, and professional fees
         incurred, or expected to be incurred, in relation to the
         acquisition or disposal of an immovable; and
     (b) if there is a spread between the buying and selling prices of the
         investment—the indirect cost resulting from the difference
         between the prices.
     Note    Investment, issue and redemption are defined in this glossary.

     dilution adjustment, for a QFC scheme, means an adjustment to the
     price of a unit required under these rules for the purpose of reducing
     the effect of dilution.
     Note    Price and dilution are defined in this glossary.

     dilution levy, for a QFC scheme, means a charge at the rate, or of
     the amount, required by the operator under these rules for the
     purpose of reducing the effect of dilution.
     Note    Dilution is defined in this glossary.

     director, for an entity, includes any person named as director of the
     entity and any person in accordance with whose instructions the
     entity is accustomed to act.
     Note    Entity and person are defined in this glossary.

     distribution account, for a QFC scheme, means the account (if any)
     to which the income property must be transferred as at the end of
     each annual accounting period.
     Note    Income property and annual accounting period are defined in this
             glossary.



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              document means a record of information in any form (including
              electronic form), and includes, for example—
              (a) anything in writing or on which there is writing; and
              (b) anything on which there are figures, marks, numbers,
                  perforations, symbols or anything else having a meaning for
                  individuals qualified to interpret them; and
              (c) a drawing, map, photograph or plan; and
              (d) any other item or matter (in whatever form) that is, or could
                  reasonably be considered to be, a record of information.
              Note      Writing is defined in this glossary.

              document evidencing title means any means of evidencing title,
              whether or not in documentary form.
              efficient portfolio management, for a scheme, means the use of
              techniques and instruments that—
              (a) relate to transferable securities and money-market instruments;
                  and
              (b) are economically appropriate in that they are realised in a cost-
                  effective way; and
              (c) are entered into for 1 or more of the following specific aims:
                      (i) reduction of risk;
                     (ii) reduction of costs;
                     (iii) generation of additional capital or income for the scheme
                           with a risk level consistent with the risk profile of the
                           scheme and the risk diversification required by these
                           rules.
              Note      Transferable security is defined in r 7.1.6.




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     eligible bank means—
     (a) an eligible bank as defined in INAP, glossary; or
     (b) a person that would be an eligible bank as so defined if it
         accepted deposits.
     eligible market has the meaning given by rule 7.1.7.
     eligible money-market fund means—
     (a) a QFC scheme that is a money-market fund; or
            Note     Money-market fund is defined in r 1.3.12.

     (b) a non-QFC scheme with investment objectives and powers that
         are the same as, or the same in all significant respects as, the
         investment objectives and powers of a QFC scheme that is a
         money-market fund.
     employee, of a person (A), means an individual—
     (a) who is employed or appointed by A, whether under a contract
         of service or services or otherwise; or
     (b) whose services are, under an arrangement between A and a
         third party, placed at the disposal and under the control of A.
     entity means any kind of entity, and includes, for example, any
     person.
     Note      Person is defined in this glossary.

     execute a transaction means carry into effect or perform the
     transaction, whether as principal or agent, and includes instructing
     another person to effect or perform the transaction.
     exercise a function means exercise or perform the function.
     Note      Function is defined in this glossary.




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              feeder fund means a scheme dedicated to investments in a single
              other scheme.
              Note      Dedicated and investment are defined in this glossary.

              financial promotion means a communication made using any
              medium (for example, brochures, telephone calls, the internet,
              emails and presentations) if the purpose or effect of the
              communication is—
              (a) to promote or advertise—
                     (i) a specified product; or
                     (ii) a regulated activity (or any activity that would be a
                          regulated activity if it were conducted in or from the
                          QFC); or
              (b) to invite or induce any person—
                     (i) to enter into an agreement with any person in relation to a
                         specified product; or
                     (ii) to engage in a regulated activity (or an activity that would
                          be a regulated activity if it were conducted in or from the
                          QFC).
              Note      Specified product, regulated activity and person are defined in the
                        glossary.

              forward price, for units in a QFC scheme, means a price calculated
              by reference to the next valuation point after the operator receives
              instructions to issue or redeem the units.
              Note      Issue, redemption, price and valuation point are defined in this
                        glossary.

              function means any function, authority, duty or power.




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     fund of funds means a scheme dedicated to investments in 2 or
     more of the following:
     (a) schemes;
     (b) subschemes of umbrella schemes.
     Note    Subscheme and umbrella scheme are defined in r 1.2.11.

     future means the specified product described in the Financial
     Services Regulations, schedule 3, part 3, paragraph 8.
     Note    Specified product is defined in this glossary.

     GENE means the General Rulebook.
     governing body, of an entity, means its board of directors,
     committee of management or other governing body (whatever it is
     called).
     Note    Entity is defined in this glossary.

     government or public security means a debt instrument issued by or
     for—
     (a) a jurisdiction; or
     (b) a public, regional or local authority of a jurisdiction.
     Note    Debt instrument and jurisdiction are defined in this glossary.

     group means the following:
     (a) a legal person (A);
     (b) any parent entity of A;
     (c) any subsidiary (direct or indirect) of A or of any parent entity
         of A.
     Note    Legal person, parent entity and subsidiary are defined in this glossary.

     half-yearly accounting period, for a QFC scheme, means a half-
     yearly accounting period of the scheme under these rules.

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              INAP means the Interpretation and Application Rulebook.
              income equalisation, for a QFC scheme, means a capital amount
              that, in accordance with a power in the constitutional document, is
              included in an allocation of income for a unit issued during the
              accounting period in relation to which the income allocation is
              made.
              Note    Constitutional document is defined in r 3.1.1. Issue is defined in this
                      glossary.

              income property, for a QFC scheme, means all amounts considered
              by the operator, after consultation with the scheme’s auditor, to be
              of the nature of income received or receivable in relation to the
              scheme property, other than any amount in the distribution account.
              Note    Scheme property is defined in r 1.2.3. Distribution account is defined
                      in this glossary.

              independent entity, of a scheme, has the meaning given by
              rule 1.2.9.
              INDI means the Individuals Rulebook.
              initial offer means—
              (a) for a QFC scheme—an offer for the issue of units in the
                  scheme if all or part of the consideration paid to the scheme for
                  the units is to be used to acquire the initial scheme property;
                  and
              (b) for a subscheme of a QFC umbrella scheme—an offer for the
                  issue of units in the subscheme if all or part of the
                  consideration paid to the subscheme for the units is to be used
                  to acquire the initial scheme property to be attributable to the
                  subscheme.
              Note    Scheme property is defined in r 1.2.3. Umbrella scheme and
                      subscheme are defined in r 1.2.11. Issue is defined in this glossary.



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     initial outlay, for a QFC scheme, means the amount that the scheme
     is required to provide to obtain rights in a transaction in derivatives,
     excluding any payment or transfer on exercise of rights.
     Note    Derivative is defined in this glossary.

     initial price, of a unit in any class in a QFC retail scheme, means the
     price to be paid during the initial offer period.
     Note    Class and initial offer are defined in this glossary.

     instrument means an instrument of any kind, and includes, for
     example, any writing or other document.
     Note    Writing and document are defined in this glossary.

     interim accounting period, for a QFC scheme, means a period in an
     annual accounting period of the scheme in relation to which an
     allocation of income is to be made.
     Note    Annual accounting period is defined in this glossary.

     interim income allocation date, for a QFC scheme, means any date
     stated in the scheme’s latest filed prospectus as the date on or before
     which an allocation of income is to be made.
     Note    Latest filed prospectus is defined in this glossary.

     intermediate holding vehicle, for a QFC scheme, means an entity
     (other than a scheme) if the purpose of the entity is to enable the
     holding of immovables located outside Qatar for the scheme.
     Note    Entity is defined in this glossary.

     investment means any investment, including any asset, right or
     interest.
     investment adviser, for a QFC scheme, means a person who is
     retained by the operator, under a commercial arrangement that is not
     a contract of service, to provide the operator with advice about—
     (a) the merits of investment opportunities for the scheme; or

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   Glossary




              (b) information relevant to the making of judgments about the
                  merits of investment opportunities for the scheme.
              ISFI means the Islamic Finance Rulebook.
              Islamic fund has the meaning given by rule 1.3.11.
              issue, of a unit in a QFC scheme, means the issue of a new unit in
              the scheme by the operator on behalf of the scheme.
              issue charge, for a QFC scheme, means an amount levied by the
              operator under these rules on the issue of units.
              Note      Issue is defined in this glossary.

              jurisdiction means any kind of legal jurisdiction, and includes, for
              example—
              (a) the State; and
              (b) a foreign country (whether or not an independent sovereign
                  jurisdiction), or a state, province or other territory of such a
                  foreign country; and
              (c) the Qatar Financial Centre or a similar jurisdiction.
              Note      The State is defined in this glossary.

              large deal, for a QFC scheme, means a transaction (or series of
              transactions in a single dealing period) by any person for the issue
              or redemption of units in the scheme if—
              (a) the transaction (or series of transactions) is executed for the
                  purpose of—
                     (i) a dilution adjustment; or
                     (ii) a dilution levy; and




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     (b) the transaction (or series of transactions) is a large deal under
         the latest filed prospectus.
     Note        Series of transactions, issue, dealing period, dilution levy, dilution
                 adjustment, redemption and latest filed prospectus are defined in this
                 glossary.

     larger denomination share has the meaning given by rule 3.2.2 (2).
     latest filed prospectus, of a QFC scheme, means the prospectus
     (including any revised or supplementary prospectus) of the scheme
     most recently filed with the Regulatory Authority under these rules.
     Note        Prospectus is defined in this glossary.

     latest filed translation, of a prospectus of a QFC scheme in relation
     to a language, means the translation of the prospectus in that
     language most recently filed with the Regulatory Authority under
     these rules.
     Note        Prospectus is defined in this glossary.

     legal person means an entity (other than an individual) on which the
     legal system of a jurisdiction confers rights and imposes duties, and
     includes, for example, any entity that can own, deal with or dispose
     of property.
     Examples
     1      a company
     2      any other corporation
     3      a partnership, whether or not incorporated
     4      an association or other undertaking, whether or not incorporated
     Note        Entity, jurisdiction and property are defined in this glossary.

     limited issue arrangements, for a QFC qualified investor scheme,
     means arrangements for the issue of units in the scheme under
     which the operator limits the issue of units in the scheme in
     accordance with the latest filed prospectus.
     Note        Issue and latest filed prospectus are defined in this glossary.


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   Glossary




              limited redemption arrangements, for a QFC qualified investor
              scheme, means arrangements for the redemption of units in the
              scheme under which the operator redeems units in the scheme less
              frequently than twice in the month.
              Note     Redemption and month are defined in this glossary.

              long term insurance contract means a contract of insurance of the
              type described in the Financial Services Regulations, schedule 3,
              part 3, paragraph 10.4.
              Note     Contract of insurance is defined in this glossary.

              managing investments means the regulated activity described in the
              Financial Services Regulations, schedule 3, part 2, paragraph 10.
              Note     Regulated activity is defined in this glossary.

              margin means cash or other property—
              (a) paid, transferred or deposited under the terms of a derivative;
                  or
              (b) required to be paid, transferred or deposited in relation to a
                  derivative to comply with a requirement imposed by a market
                  on which it is made or traded.
              Note     Property and derivative are defined in this glossary.

              money means any form of money, including cheques and other
              payable orders.
              money-market fund has the meaning given by rule 1.3.12.
              month means calendar month.
              near cash means any of the following:
              (a) money that is deposited with an eligible bank in—
                     (i) a current account; or



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                                                                            Glossary




            (ii) a deposit account, if the money can be withdrawn
                 immediately and without payment of a penalty exceeding
                 7 days interest calculated at ordinary commercial rates;
     (b) certificates of deposit issued by an eligible bank, if
         immediately redeemable at the holder’s option;
     (c) government or public securities, if redeemable at the holder’s
         option or bound to be redeemed within 2 years;
     (d) bills of exchange that are government or public securities.
     Note     Money, eligible bank and government or public security are defined in
              this glossary.

     net asset value, of a QFC scheme at any time, means the value of
     the assets (including current assets) of the scheme at that time after
     deducting—
     (a) the current liabilities (including accrued expenses) of the
         scheme at that time; and
     (b) the longer-term liabilities of the scheme.
     net asset value per unit, for a QFC scheme at any time, means the
     net asset value of the scheme at that time divided by the number of
     units in issue at that time.
     Note     Net asset value is defined in this glossary. Unit is defined in r 1.2.4.

     non-QFC qualified client scheme means a non-QFC scheme that is
     a qualified client scheme.
     Note     Qualified client scheme is defined in r 1.4.2.

     non-QFC retail customer scheme means a non-QFC scheme that is
     a retail customer scheme.
     Note     Retail customer scheme is defined in r 1.4.1.

     non-QFC scheme has the meaning given by rule 1.2.7.


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   Glossary




              notional principal, for a contract for differences, means—
              (a) if the contract is an index derivative that resembles a future—
                  the current mark-to-market valuation of the derivative; or
              (b) if the contact is an index derivative that resembles an option—
                  the exercise value of the derivative; or
              (c) in any other case—the notional lot size of the contract.
              Note    Contract for differences, derivative, future and option are defined in
                      this glossary.

              office includes position.
              open-ended scheme has the meaning given by rule 1.2.10 (1).
              operating collective investment schemes means the regulated
              activity described in the Financial Services Regulations, schedule 3,
              part 2, paragraph 12 as Operating a Collective Investment Fund.
              Note    Regulated activity is defined in this glossary.

              operator, of a scheme, has the meaning given by rule 1.2.8.
              option means the specified product described in the Financial
              Services Regulations, schedule 3, part 3, paragraph 7.
              Note    Specified product is defined in this glossary.

              ordinary resolution, for a QFC scheme or a class of units in a QFC
              scheme, means a resolution passed at a general meeting of the
              scheme or a separate meeting of unitholders of that class of units
              if—
              (a) notice indicating the intention to propose the resolution was
                  properly given; and




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     (b) the resolution passed by a simple majority of the votes validly
         cast (whether as a show of hands or on a poll) for or against the
         resolution at the meeting.
     Note    Class is defined in this glossary.

     OTC derivative means a derivative traded solely in transactions over
     the counter.
     Note    Derivative and over the counter are defined in this glossary.

     outsourcing has the meaning given by rule 8.5.1.
     over the counter, for a transaction, means
     (a) not effected by means of the facilities and services of an
         exchange; and
     (b) not governed by the rules of an exchange.
     own account transaction, for an authorised firm, means a
     transaction executed by the firm for its own benefit or the benefit of
     an associate.
     Note    Execute and associate are defined in this glossary.

     parent entity, for a legal person (A), means any of the following:
     (a) a legal person that holds a majority of the voting power in A;
     (b) a legal person that is a member of A (whether direct or
         indirect, or though legal or beneficial entitlement) and alone, or
         together with 1 or more legal persons in the same group, holds
         a majority of the voting power in A;
     (c) a parent entity of any legal person that is a parent entity of A.
     Note    Legal person and group are defined in this glossary.

     participant in a scheme has the meaning given by rule 1.2.2.




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   Glossary




              partnership agreement, for a CIP, means the CIP’s partnership
              agreement as amended from time to time.
              Note    CIP is defined in r 1.3.8 and this glossary.

              person means—
              (a) an individual (including an individual occupying an office
                  from time to time); or
              (b) a legal person.
              Note    Office and legal person are defined in this glossary.

              personal data means any information relating to an individual who
              can be identified, directly or indirectly, in particular by reference to
              an identification number or to 1 or more factors specific to the
              individual’s physical, physiological, mental, economic, cultural or
              social identity.
              PIIB means the Investment and Banking Business Rules 2005.
              price, of a unit in a QFC scheme, means the price of the unit
              calculated in accordance with these rules.
              Note    Unit is defined in r 1.2.4.

              PRIN means the Principles Rulebook.
              principal, in relation to an option, future or forward contract,
              means—
              (a) if the contract is an option on a future—the amount or value of
                  the property that must be delivered to satisfy settlement of the
                  future; or
              (b) in any other case—the amount or value of the property that
                  must be delivered to satisfy settlement of the contract.
              Note    Option, future, and property are defined in this glossary.




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     property means any estate or interest (whether present or future,
     vested or contingent, or tangible or intangible) in immovables or
     property of any other kind, and includes, for example—
     (a) money of any currency; and
     (b) bonds, securities, shares, and other negotiable or non-
         negotiable instruments of any kind; and
     (c) any right to interest, dividends, or other income, on or accruing
         from or generated by immovables or property of any other
         kind; and
     (d) any other things in action; and
     (e) any other charge, claim, demand, easement, encumbrance, lien,
         power, privilege, right, or title, recognised or protected by the
         law of any jurisdiction over, or in relation to, immovables or
         property of any other kind; and
     (f) any other documents evidencing title to, or to any interest in,
         immovables or property of any other kind.
     Note     Money, jurisdiction and document are defined in this glossary.

     property fund—a QFC scheme, or subscheme of a QFC umbrella
     scheme, is a property fund if the scheme or subscheme is dedicated
     to investments in immovables.
     Note 1   Subscheme and umbrella scheme are defined in r 1.2.11.
     Note 2   Dedicated and investment are defined in this glossary.

     property-related assets means any of the following:
     (a) shares, debt instruments or warrants issued by an entity if a
         substantial activity of the entity relates to investment in
         immovables;




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   Glossary




              (b) securities receipts that give rights in relation to an investment
                  mentioned in paragraph (a).
              Note    Share, debt instrument, warrant, entity, investment and securities
                      receipt are defined in this glossary.

              prospectus, of a scheme, means a document (whatever called)
              containing information about the scheme, and includes a revised or
              supplementary prospectus.
              Note    Document is defined in this glossary.

              providing credit services means the regulated activity described in
              the Financial Services Regulations, schedule 3, part 2, paragraph 6.
              Note    Regulated activity is defined in this glossary.

              providing custody facilities means the regulated activity described
              in the Financial Services Regulations, schedule 3, part 2,
              paragraph 8.
              Note    Regulated activity is defined in this glossary.

              providing scheme administration means providing 1 or more of the
              following services in relation to a scheme:
              (a) processing dealing instructions, including effecting issues,
                  redemptions and stock transfers, and arranging settlements;
              (b) portfolio accounting;
              (c) valuing assets and performing net asset value, and net asset
                  value per unit, calculations;
              (d) unit pricing;
              (e) dividend calculation and distribution;
              (f) keeping the register of unitholders and unitholder registration
                  details;



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     (g) performing any regulatory requirements;
            Examples of requirements
            anti-money laundering or combating terrorist financing requirements

     (h) undertaking         transaction       monitoring         and   reconciliation
         functions;
     (i) producing financial statements, otherwise than as the scheme’s
         auditor;
     (j) communicating with, and providing information to, the
         participants, the scheme, the operator, the independent entity,
         the Regulatory Authority and other persons in relation to the
         scheme.
     QFC means the Qatar Financial Centre.
     QFC collective investment company (or CIC) has the meaning
     given by rule 1.3.7.
     QFC collective investment partnership (or CIP) has the meaning
     given rule 1.3.8.
     QFC collective investment trust (or CIT) has the meaning given by
     rule 1.3.9.
     QFC Court means the Qatar Financial Centre Civil and Commercial
     Court.
     QFC Law means Law No. (7) of 2005 of the State.
     Note      The State is defined in this glossary.

     QFC licensed firm means an entity that has a licence granted by the
     QFC Authority.
     QFC qualified investor scheme means a QFC scheme that is a
     qualified investor scheme.
     Note      Qualified investor scheme is defined in r 1.3.2.



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              QFC retail scheme means a QFC scheme that is a retail scheme.
              Note    Retail scheme is defined in r 1.3.3.

              QFC scheme has the meaning given by rule 1.2.6.
              QFC UCITS type scheme means a QFC retail scheme that is a
              UCITS type scheme.
              Note    Retail scheme is defined in r 1.3.3. UCITS type scheme is defined in
                      r 1.3.5.

              QFC umbrella scheme means a QFC scheme that is an umbrella
              scheme.
              Note    Umbrella scheme is defined in r 1.2.11.

              qualified client scheme has the meaning given by rule 1.4.2 (What
              is a non-QFC qualified client scheme?).
              qualified investor has the meaning given by rule 1.2.12.
              qualified investor scheme has the meaning given by rule 1.3.2
              (What is a QFC qualified investor scheme?).
              readily realisable investment means any of the following:
              (a) a government or public security denominated in the currency
                  of the jurisdiction of its issuer;
              (b) any other security that is admitted to official listing on, or
                  regularly traded on or under the rules of, a regulated exchange;
              (c) a newly issued security that can reasonably be expected to fall
                  within paragraph (b) when trading in it starts.
              Note    Government or public security, jurisdiction, security and regulated
                      exchange are defined in this glossary.

              redemption, of a unit in a QFC scheme, means the redemption of an
              existing unit in the scheme by the operator on behalf of the scheme.



page 396              Collective Investment Schemes Rules 2010                         V2

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     redemption charge, for a QFC scheme, means an amount levied by
     the operator under these rules on the redemption of units.
     Note      Redemption is defined in this glossary.

     regulated activity means an activity that is a regulated activity under
     the Financial Services Regulations.
     regulated exchange means an exchange that is—
     (a) incorporated or otherwise established in a jurisdiction outside
         the QFC; and
     (b) regulated as an exchange by a regulatory or governmental
         entity in that jurisdiction.
     Note      Jurisdiction, QFC and entity are defined in this glossary.

     regulated financial institution means a person that is not an
     authorised firm but is authorised or licensed (however described) to
     conduct any financial service by a regulatory or governmental
     authority, body or agency in a jurisdiction other than the QFC.
     Note      Authorised firm and jurisdiction are defined in this glossary.

     Regulatory Authority means the Regulatory Authority of the QFC.
     Regulatory Tribunal means the QFC Regulatory Tribunal.
     related person—a person (A) is a related person for another person
     (B) if—
     (a) A and B are legal persons and members of the same group; or
            Note     Legal person and group are defined in this glossary.

     (b) A is a director or officer of B or of a member of the same
         group as B; or
            Note     Director is defined in this glossary.

     (c) A is an individual, B is a legal person and A is able to exercise
         significant influence over B; or

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   Glossary




              (d) A is a spouse or minor child of an individual (C) and C is a
                  related person for B under paragraph (b) or (c).
              relevant investment activities means all or any of the following
              regulated activities:
              (a) dealing in investments;
              (b) arranging deals in investments;
              (c) advising on investments.
              Note    Regulated activity and the regulated activities mentioned in this
                      definition are defined in this glossary.

              relevant requirement—a person breaches a relevant requirement in
              the circumstances described in the Financial Services Regulations,
              article 84.
              Note    Breach is defined in this glossary.

              remuneration means any form of remuneration, and includes
              benefits of any kind.
              repo agreement means an agreement—
              (a) between a seller and buyer for the sale of securities, under
                  which the seller agrees to repurchase the securities, or
                  equivalent securities, from the buyer on an agreed date and,
                  usually, for a stated price; or
              (b) between a buyer and seller for the purchase of securities, under
                  which the buyer agrees to resell the securities, or equivalent
                  securities, to the seller on an agreed date and, usually, for a
                  stated price.
              Note    Security is defined in this glossary.

              retail customer has the meaning given by rule 1.2.12.
              retail customer scheme has the meaning given by rule 1.4.1 (What
              is a non-QFC retail customer scheme?).

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     retail scheme has the meaning given by rule 1.3.3 (What is a QFC
     retail scheme?).
     scheme means a collective investment scheme.
     Note     Collective investment scheme (or scheme) is defined in r 1.2.1.

     scheme of arrangement means an arrangement relating to a QFC
     scheme (the transferor scheme), or to a subscheme of a QFC
     umbrella scheme (the transferor subscheme), under which—
     (a) either—
            (i) all or part of the property of the transferor scheme, or all
                or part of the property attributed to the transferor
                subscheme, is to become property of 1 or more schemes
                registered in the QFC (the transferee scheme or
                transferee schemes); or
            (ii) all or part of the property attributed to the transferor
                 subscheme is to become property attributed to 1 or more
                 other subschemes of the same umbrella scheme registered
                 in the QFC (the transferee subscheme or transferee
                 subschemes); and
     (b) holders of units in the transferor scheme or transferor
         subscheme are to receive, in exchange for their respective
         interests in the property being transferred or reattributed,
         either—
            (i) units in the transferee scheme, or 1 or more of the
                transferee schemes, to which the property is transferred;
                or
            (ii) units in the transferee subscheme, or 1 or more of the
                 transferee subschemes, to which the property is
                 reattributed.
     Note     Property is defined in this glossary.


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   Glossary




              scheme property, of a scheme, has the meaning given by rule 1.2.3.
              securities receipt means the specified product described in the
              Financial Services Regulations, schedule 3, part 3, paragraph 5.
              Note     Specified product is defined in this glossary.

              security means any of the following:
              (a) a share;
              (b) a debt instrument;
              (c) a warrant;
              (d) a securities receipt;
              (e) a unit in a collective investment scheme.
              Note     Share, debt instrument, warrant and securities receipt are defined in
                       this glossary.

              sell an investment means sell the investment in any way, and
              includes the following:
              (a) dispose of the investment for valuable consideration;
              (b) for an investment consisting of rights under a contract—
                     (i) surrender, assign or convert the rights for valuable
                         consideration;
                     (ii) assume the corresponding rights under the contract for
                          valuable consideration;
              (c) for an investment consisting of rights under an arrangement—
                  assume the corresponding liabilities under the arrangement for
                  valuable consideration;
              (d) for any other investment—issue or create the investment or
                  grant the rights or interests of which it consists.
              Note     Investment is defined in this glossary.


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     senior manager, of the operator or independent entity of a QFC
     scheme, means an individual employed by the operator or
     independent entity, or by a member of the operator’s or independent
     entity’s group, who has responsibility either alone or with others for
     the management or supervision of 1 or more elements of the
     operator’s or independent entity’s business relevant to its functions
     in relation to the scheme.
     Note    Group and function are defined in this glossary.

     series of transactions means a series of transactions executed to
     achieve a single investment decision or objective.
     Note    Execute is defined in this glossary.

     share means the specified product described in the Financial
     Services Regulations, schedule 3, part 3, paragraph 1.
     Note    Specified product is defined in this glossary.

     Shari’a Supervisory Board, of an Islamic fund, means the board
     constituted for the Islamic fund under rule 8.10.1.
     Note    Islamic fund is defined in r 1.3.11.

     smaller denomination           share         has   the   meaning   given      by
     rule 3.2.2 (2).
     special resolution, for a QFC scheme or a class of units in a QFC
     scheme, means a resolution passed at a general meeting of the
     scheme or a separate meeting of unitholders of that class of units
     if—
     (a) notice indicating the intention to propose the resolution as a
         special resolution was properly given; and
     (b) the resolution was passed by a majority of at least 75% of the
         votes validly cast (whether as a show of hands or on a poll) for
         or against the resolution at the meeting.
     Note    Class is defined in this glossary.


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   Glossary




              specified product means an investment or other type of product that
              is a specified product under the Financial Services Regulations.
              standing independent valuer, of a QFC qualified investor scheme,
              means the person who is appointed under these rules as the standing
              independent valuer of the scheme.
              Note      QFC qualified investor scheme is defined in r 1.3.2.

              stock lending arrangement means an arrangement between a person
              (the borrower) and another person (the lender) under which—
              (a) the lender transfers securities to the borrower otherwise than
                  by way of sale; and
              (b) a requirement is imposed on the borrower to transfer back to
                  the lender, otherwise than by way of sale, securities in the
                  same quantity, with the same rights, and of the same type and
                  nominal value, as the transferred securities (or, if agreed
                  between the borrower and lender, assets into which the
                  transferred securities have been transformed following a stock
                  split, consolidation, conversion, merger, takeover, redemption
                  or similar event).
                     Note     Security is defined in this glossary.

              subscheme, of an umbrella scheme, has the meaning given by
              rule 1.2.11 (2).
              subsidiary—a legal person (A) is a subsidiary of another legal
              person (B) if B is a parent entity of A.
              Note      Legal person and parent entity are defined in this glossary.

              the State means the State of Qatar.
              transferable security has the meaning given by rule 7.1.6.




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     trust instrument, for a CIT, means the CIT’s trust instrument as
     amended from time to time, and includes any instrument expressed
     to be supplemental to it (as amended from time to time).
     Note    CIT is defined in r 1.3.9 and this glossary. Instrument is defined in this
             glossary.

     UCITS type scheme has the meaning given by rule 1.3.5.
     umbrella scheme has the meaning given by rule 1.2.11 (1).
     unit in a scheme has the meaning given by rule 1.2.4.
     unitholder, of a unit in a scheme, has the meaning given by
     rule 1.2.5.
     Note    Unitholder has a special meaning in div 5.5.B (Unitholder meetings—
             QFC retail schemes) (see r 5.5.2).

     unitholder register, for a QFC scheme, means the register of
     unitholders kept under these rules for the scheme.
     unitisation means arrangements for a newly formed CIT under
     which—
     (a) all or part of the property of a corporation or scheme becomes
         the first property to be held on the trusts of the CIT; and
     (b) the holders of shares in the corporation, or units in the scheme,
         become the first unitholders in the CIT.
     Note    CIT is defined in r 1.3.9. Property and corporation are defined in this
             glossary.

     valuation point, for a QFC scheme, means a valuation point fixed
     by the operator in accordance with these rules and stated in the latest
     filed prospectus.
     Note    Latest filed prospectus is defined in this glossary.




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   Glossary




              warrant means the specified product described in the Financial
              Services Regulations, schedule 3, part 3, paragraph 4.
              Note   Specified product is defined in this glossary.

              writing means any form of writing, and includes, for example, any
              way of representing or reproducing words, numbers, symbols or
              anything else in legible form (for example, by printing or
              photocopying).
              year means calendar year.




page 404              Collective Investment Schemes Rules 2010              V2

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Endnotes

1    Abbreviation key

      a        =     after                  ins       =    inserted/added
      am       =     amended                om        =    omitted/repealed
      amdt     =     amendment              orig      =    original
      app      =     appendix               par       =   paragraph/subparagraph
      art      =     article                prev      =    previously
      att      =     attachment             pt        =    part
      b        =     before                 r         =    rule/subrule
      ch       =     chapter                renum     =    renumbered
      def      =     definition             reloc     =    relocated
      div      =     division               s         =    section
      g        =     guidance               sch       =    schedule
      glos     =     glossary               sdiv      =    subdivision
      hdg      =     heading                sub       =    substituted




2    Rules history

     Collective Investment Schemes Rules 2010

     made by

     Collective Investment Schemes Rules 2010 (QFCRA Rules 2010-5)
     Made 5 December 2010
     Commenced 1 January 2011
     Version No. 1

     Insurance Mediation Business (Consequential Amendments) Rules 2011
     (QFCRA Rules 2011-4 sch 1, pt 1.2)
     Made 20 June 2011
     Commenced 1 July 2011
     Version No. 2



V2                   Collective Investment Schemes Rules 2010                 page 405

                                  Effective: 1/7/11
    Endnotes




3      Amendment history

       Glossary
       def PIIB    sub Rules 2011-4




page 406          Collective Investment Schemes Rules 2010   V1

                              Effective: 1/1/11

				
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