Border Business Model Architecture - PDF

Document Sample
Border Business Model Architecture - PDF Powered By Docstoc
					                UCITS fund distribution channels and business models
                Fund sales trends in Europe
Cross-border    Analysis of UCITS cross-border distribution market


distribution
of UCITS

                Fund distribution models & players

                The CSD and TA models
                Players’ roles and responsibilities




                Challenges & opportunities

November 2008   Administrative and regulatory requirements
                Taxation issues
                Information referencing issue
                Operational workflow
                Distribution networks and trailer fee management




                Regulation references
About the authors


Arianna ARZENI                                     Nathalie COLLOT                                   Christian LAITAT
34 years old, is                                   34 years old,                                     44 years old,
Senior Market                                      joined CACEIS’                                    joined CACEIS’
Research                                           Product                                           Product
Manager at                                         Management                                        Development
CACEIS Investor                                    team in early                                     team in 2006.
Services since                                     2008. She started                                 He started
2006. Arianna                                      her career                                        working for KBL
joined the Crédit                                  working for                                       Luxembourg in
Agricole Group in 1998 and previously held roles   HSBC and JP Morgan Chase in Paris and London      the accounting department in 1989, joined EFA
in Communications and Marketing. Arianna           for 4 years before a 7-year period working as a   in 1996 working for 10 years as Senior Project
is a member of the ALFI Economic Research          consultant on numerous projects in the asset      Manager on numerous projects in the UCI
Committee.                                         management and securities services fields.        domain such as Euro integration, Y2K and the
                                                                                                     Savings Directive.
foreword


Since the introduction of the UCITS (Undertakings for Collective Investments in Transferable
Securities) Directive in 1985, UCITS funds have become widely used by asset management
companies looking to distribute fund products outside their national borders.
Although UCITS were developed originally to harmonise Europe’s fund structures and pro-
mote fund distribution between Member States, today they have also become a “gold stand-
ard” recognised by a host of countries worldwide.
The new business opportunities arising in regions outside the European Union, such as East-
ern Europe, Asia, Latin America and the Middle East, will enable European management
companies to continue their expansion in both financial and geographic terms.


As an experienced player in the domain, CACEIS has a thorough understanding of the rapidly
changing fund distribution environment, including sales and market opportunities, players’
roles and responsibilities, tax and regulatory issues, information and operational workflow
complexity, and management of complex third-party distribution networks. It is this experi-
ence, expertise and know-how, gained through supporting many clients over the years that
we share in this document.


The combination of a fund distribution environment that is continuously increasing in com-
plexity and a significant rise in the number of clients seeking support for their cross-border
distribution plans have led CACEIS to develop this comprehensive document which covers
the many different aspects of cross-border UCITS distribution. Herein, you will find a detailed
assessment of the current market environment, the industry players and the challenges and
opportunities faced, as well as copies of, or references to the principal legal texts regulating
the activity. This publication also gives details of our support services, explaining how CACEIS
can facilitate the administrative side of your operations and ensure your business complies
with the rules and regulations in place in each country of distribution.


We trust you will find this publication both relevant and informative.
executive summary


Cross-border distribution is undergoing a period of rapid growth, due to an increase in third-party
distribution and a clear shift towards open and guided architecture business models.
In this context, UCITS have become both a European standard and a respected global brand. The
number of UCITS launched continues to grow at a phenomenal pace across Europe, with Luxem-
bourg and Ireland out front. Furthermore, certain countries from three other key regions, namely
Asia, Latin America and the Middle East, have started to accept the distribution of UCITS funds
within their borders.


Within the European domestic markets, two main competitive fund distribution models coexist:
The Transfer Agent model and the Central Security Depository model. Each Member State has
developed the model best suited to its national financial industry requirements, however despite
functioning well at a domestic level, the fragmentation causes barriers to efficient order routing,
settlement and custody in a cross-border environment.


The characteristics of each country and the delays and costs involved make simultaneous fund
launches across several markets a difficult task.
Asset managers looking to market their funds beyond domestic borders have to face issues
concerning:
• Administrative and regulatory requirements, as registration and post-registration duties can be
  onerous and time-consuming in certain countries;
• Taxation, as they have to ensure compliance with all fiscal obligations in countries where they
  distribute their products;
• Access to reliable and updated information, as there is no pan-European fund database;
• Operational workflow, as the growing cross-border business and open architecture trend tends
  to increase operational complexity in an industry where manual processes and lack of stand-
  ardisation remain widespread;
• Distribution agreements and trailer fee management, as their distribution networks are increas-
  ingly complex.
However, major initiatives have emerged which aim to tackle these issues:
• Within the EU, regulations are constantly adapted to steadily knock down barriers and favour
  the development of cross-border distribution, with the UCITS IV Directive proposal being a
  prime example;
• Major tax discrimination against foreign UCITS has disappeared in the EU due to pressure from
  the European authorities;
• Under the guidance of the EFAMA, the development of the Fund Processing Passport is opening
  the way for the electronic communication of operational information on funds;
• Numerous steps have been taken over the past years by market place groups, such as SWIFT,
  ICSDs and other players including transfer agents, to increase the levels of automation and up-
  take of standards, which has in turn given rise to a broad range of automated fund platforms;
• Some service providers have started to position themselves as intermediaries between distribu-
  tors and promoters/management companies.


One of the major challenges to come is putting the theoretical model of full-STP processes for the
fund industry into practice. Industry players must continue working closely together in order to
develop and implement the necessary standards and best practices.
1. CONTExT ................................................................................................................................................................... 7
      1.1 UCITS fund distribution channels and business models............................................................. 7
          1.1.1 Evolution of fund distribution channels and current trends ......................................... 7
          1.1.2 A clear shift toward open and guided architecture ......................................................... 9
      1.2 Fund sales trends in Europe ................................................................................................................. 11
          1.2.1 Fund sales to the institutional sector .................................................................................. 11
          1.2.2 Fund sales to the retail sector ................................................................................................ 12
          1.2.3 Direct sales of funds to the retail sector, an analysis by distribution channel ....... 13
      1.3 Analysis of UCITS cross-border distribution market ................................................................. 15
          1.3.1 The leadership of Luxembourg and Irish hubs ............................................................... 16
          1.3.2 The emergence of cross-border distribution of domestic products ................... 17
          1.3.3 Top target markets for cross-border distribution in Europe ................................... 19
          1.3.4 Distribution perspectives outside Europe ........................................................................ 20

2. FUND DISTRIBUTION MODELS & PLAYERS ......................................................................................... 23
      2.1 The CSD and TA models ......................................................................................................................... 23
          2.1.1 The CSD model: The French example.................................................................................. 23
          2.1.2 The TA model: The Luxembourg example.......................................................................... 24
          2.1.3 Comparative analysis of both models .................................................................................. 25
      2.2 Players’ roles and responsibilities for the principal distribution markets ....................... 27
          2.2.1 Players shared by both models .............................................................................................. 27
          2.2.2 Players specific to the CSD model ........................................................................................ 28
          2.2.3 Players specific to the TA model............................................................................................ 29

3. CHALLENGES & OPPORTUNITIES .............................................................................................................. 31
      3.1 Administrative and regulatory requirements ............................................................................... 31
          3.1.1 Registration and post-registration requirements for foreign funds ..................... 31
          3.1.2 UCITS IV: The way forward for simplified registration
                within the European Union................................................................................................................. 34
      3.2 Taxation issues............................................................................................................................................ 37
          3.2.1 Taxation of funds and investors.............................................................................................. 37
          3.2.2 Tax representative appointment and reporting to local fiscal authorities ......... 38
      3.3 Information referencing issue .............................................................................................................. 39
          3.3.1 The lack of a pan-European fund database penalises cross-border distribution .. 39
          3.3.2 The Fund Processing Passport, an EFAMA initiative ................................................... 39
      3.4 Operational workflow ............................................................................................................................... 43
          3.4.1 The growth in cross-border business and open architecture tends
                to exacerbate operational complexity ................................................................................... 43
          3.4.2 Various initiatives have emerged to increase automation and standardisation... 44
                 3.4.2.1 Market place groups’ initiatives ............................................................................ 45
                 3.4.2.2 Electronic messaging initiatives ............................................................................ 46
                 3.4.2.3 Fund platforms .............................................................................................................. 47
      3.5 Distribution networks & agreements and trailer fee management .................................. 51
          3.5.1 Open architecture has resulted in ever more complex distribution networks ...... 51
          3.5.2 The lack of standardisation in distribution agreements creates inefficiencies ..... 52
          3.5.3 Trailer fee management has become a key issue ............................................................ 52
          3.5.4 Recent recommendations issued by EFAMA ..................................................................... 53

      BIBLIOGRAPHY .................................................................................................................................................... 55

      APPENDIx: REGULATION REFERENCES ........................................................................................................... 57
      • Regulation at the European Union level
      • Regulation at domestic levels




                                                                                                                                                                            Cross-border distribution of UCITS | page 5
INDEX OF TABLES AND GRAPHS


FIGURE          TITLE                                                                                            PAGE

Graph 1         Changes in European distribution channels over time (including funds of funds)                   7
Graph 2         Penetration of third-party products by distribution channel in Europe                            8
Graph 3         Key drivers contributing to the development of the open architecture business model              9
Graph 4         Investment funds in total financial assets of institutional sector                               11
Graph 5         Household investment fund ownership in Europe in 2006                                            12
Graph 6         Net increase in share of fund assets in households’ financial assets in the 2002-2006 period     12
Table 1         European assets by distribution channel                                                          13
                Funds of funds distribution channel - Market share evolution between 31/12/2005 and
Table 2                                                                                                          14
                31/12/2007
Graph 7         Number of true cross-border funds registered                                                     16
Graph 8a        Evolution of asset classes in the Luxembourg UCITS industry 1997-2007                            16
Graph 8b        Evolution of Irish registered collective investment schemes in the UCITS fund structure 1997-2007 17
Table 3         Overview of the overall openness of European fund markets to the cross-border activity           18
Graph 9         Top 25 target markets for cross-border fund distribution in Europe                               19
Table 4         Central and Eastern Europe figures                                                               20
Graph 10        Luxembourg domiciled funds breakdown by distribution regions (in number of funds)                20
Table 5         Top countries for registration of foreign funds by region outside Europe in 2007                 21
Graph 11        French CSD model                                                                                 23
Graph 12        Luxembourg TA model                                                                              24
Table 6         Major issues faced by asset managers to distribute their funds cross-border                      31
Table 7         Comparison of registration requirements in the top 5 target countries                            32
Table 8         Comparison of post-registration requirements in the top 5 target countries                       33
Table 9         Fiscal requirements for the top 5 target markets                                                 38
Graph 13        FPP initial principles                                                                           40
Table 10        FPP benefits for fund managers and fund distributors                                             40
Graph 14        Current FPP providers market landscape                                                           41
Graph 15        Operational challenges of third-party distribution                                               43
Table 11        Key drivers and benefits of automation                                                           44
Graph 16        Actors, processes and components at stake for streamlining fund processing                       45
Graph 17        Overview of commercial offerings and market initiatives                                          48
Graph 18        Illustration of a distribution network with 4 levels                                             51
A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008

                                                                                                                                                                context




                                                                                                                                                                                   1.1
          1. context



       1.1 UCITS fund distribution channels and business models


      1.1.1 evolution of fund distribution channels1 and current trends


              Up to a few years ago, the fund management industry had always been perceived as a fully
              integrated value chain, with the majority of players covering both the manufacturing side (fund
              management) and the sell side (fund distribution). In most major markets a handful of big names,
              large international fund houses and local companies, dominated the marketplace and shared
              the high revenues of this money-spinning market.


              However, already ten to fifteen years ago, market experts predicted that the days when distri-
              bution of investment funds in Europe was the preserve of banks and financial institutions may
              be drawing to an end, as investors would switch to buying fund products at “the supermarket,
              the petrol station or through the internet”2. Clearly, already back then the traditional distribution                  Open architecture:
              model was seen as outdated and in need of being updated. Some experts went as far as stating                           This business model allows
              that “It wouldn’t surprise me if Microsoft became the best partner for asset managers or Walt                          clients to choose from an
                                                                                                                                     extensive range of funds,
              Disney where you could invest through an ‘investortainment’ channel”2. It was the time when
                                                                                                                                     manufactured by competing
              the well-known expression “third-party funds” started to be replaced or accompanied by the                             asset management groups.
              newly coined “open architecture”.
                                                                                                                                     Guided open architecture
                                                                                                                                     or Guided architecture:
              Indeed, much has changed over the last decade or so, and the integrated value chain is less and
                                                                                                                                     This business model allows
              less common in the industry. Nonetheless, European fund supermarkets and investortainment-                             clients to choose from
              like ideas have not experienced the exponential growth that late nineties’ experts predicted.                          in-house funds as well as a
              Even today, fund supermarkets in particular and direct channels in general remain relatively                           complementary selection of
                                                                                                                                     external funds from a limited
              small in continental Europe and are not in a position to challenge the more established distribu-
                                                                                                                                     number of partners.
              tors. Graph 1 clearly shows the changes in the weighting of each distribution channel over the
              past decade and a half.


              Graph 1: Changes in European distribution channels over time (including funds of funds3)

                                                         100%
               weight of each distribution channel (%)




                                                         80%



                                                         60%    90

                                                                       80
                                                         40%                  75          Legend
                                                                                              Banks and insurance
                                                         20%                                  Funds of funds
                                                                                              Independent Financial Advisors (IFA)
                                                                                              Supermarket
                                                          0%                                  Direct
                                                                1995   2000   2005

              Source: FERI Fund Market Informational Ltd, data as reported by ZEW/OEE (2006) and Oxera calculations




              1Excluding funds distributed via stock exchanges (e.g. German, Luxembourg or Dutch markets)

              2Source: Reuters Limited, “Euro funds look beyond traditional distributors” by Andrew Priest, 2 July 1998

              3Note on the data used: the funds of funds channel is considered as a subset of the banking channel by Feri            Cross-border distribution of UCITS | page 7
                                                                                                                                    A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008

  context




                                              A few fund management houses still have their own workforce selling only in-house products
                                              and in some European markets this old-style integrated distribution model still represents the
                                              vast majority of total distribution. For example, the Economist claims that in Italy 92% of assets
                                              “are gathered directly by salesman tied to, or employed by, the fund management group”4.
                                              However, more mature markets, such as the United Kingdom show that distribution channels
                                              have indeed changed, and banks only distribute 14% of total fund assets to retail clients4.


                                              Naturally, the most common distribution channel has shifted from the integrated old model
                                              to the much-talked-about “open architecture”, which allows clients to choose from a whole
                                              range of funds, manufactured by competing asset management groups. Private banks and fund
                                              supermarkets offer a whole range of products thanks to the open architecture model. Over
                                              the recent years, even retail banks, at first reluctant to adopt an open-architecture distribution
                                              model, started to add third-party funds to their in-houses ranges. Graph 2 shows a picture of
                                              third-party distribution in Europe at the end of 2006.


                                              Graph 2: Penetration of third-party products by distribution channel in Europe


                                                                         Financial                                            79
                                                                         Advisors


                                                                      Direct/Other                              53
     “The European market, long
                                              Distribution channel




         a bastion for proprietary
     funds, is finally beginning to                                  Private Banks                   35                                         Fastest growing
                                                                                                                                                third-party penetration rate
    embrace open architecture in
              a meaningful way”.
                                                                      Retail Banks       10
              (The Asset Management
         Industry in 2010, McKinsey &
                                                                        Insurance        9
                   Company Inc., 2006)                                 Companies

                                                                                     0        20     40          60      80        100

                                                                                                   % of retail inflows

                                              Source: McKinsey & Company Inc., “The Asset Management Industry in 2010”, 2006



                                              However, following the recent financial crisis “fears are mounting that the open-architecture
                                              distribution model will disappear and become a victim of ongoing banking consolidation”5. In
                                              general, open architecture’s success depends on growing markets, when money pours into
                                              funds; On the contrary, in times when redemptions dominate the fund landscape, and confi-
                                              dence is lost, banks do not need to make the effort of offering more and more diversified ranges:
                                              They rather focus on selling at least in-house products. Furthermore, the recent consolidation
                                              in the European banking landscape may lead to fewer very big players which would set a natu-
                                              ral boundary to third-party fund providers6.


                                              The open architecture distribution model also presents some limits: How can a non-experi-
                                              enced retail investor surf the web and choose from the thousands of products that he/she can
                                              purchase at any on-line fund supermarket? Most investors still need guidance. Hence, the third
                                              step in the evolution of fund distribution, toward the so-called “guided architecture”. Guided ar-
                                              chitecture allows fund distributors to offer a pre-selected range of funds, targeting the choice
                                              given to the final investor.


                                              4Source: The Economist, “We make, you sell”, 1 March 2008

                                              5Source: Ignites Europe, FT,“Open-architecture threatened by banking collapse” by Baptiste Aboulian, 9 October 2008

page 8 | Cross-border distribution of UCITS   6Source: Lipper Feri, “Fund market monitor”, October 2008
A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008

                                                                                                                                                           context




                                                                                                                                                                              1.1
              Gradually, private banks shifted toward this new model and put in place distribution agree-
              ments with a few selected asset management houses which they trust. According to a survey
              conducted in 2007 by PricewaterhouseCoopers on 270 private banks worldwide, nearly three
              quarters stated that third-party products make up over 40% of their product range7.


      1.1.2 a clear shift toward open and guided architecture


              Open and guided architecture are clearly progressively gaining ground over the proprietary
              sales and most European asset managers expect an increase in the penetration rate of both
              models in the future.
              A certain number of key drivers are influencing third-party distribution and in turn affect the
              development of open and guided architecture models, as illustrated in the graph below:


              Graph 3: Key drivers contributing to the development of the open architecture
              business model

                                                                                            Better access to information,
                                                                                            which has enabled investors
                                                                                            to improve their understanding
                Regulatory evolutions (UCITS III,
                                                                                            and knowledge of fund
                IV…) help to remove barriers and
                                                                                            products
                favour cross-border distribution
                development
                                                                                            Investors increasingly looking
                                                                                            for the best products available
                                                                                            strong request for external
                                                                                            funds
                                                                            In
                                                           rs




                                                                             ve
                                                          to




                                                                                st
                                                          la




                                                                                 or
                                                      gu




                                                                                  s
                                                     Re
                                                     As
                                                     se




                                                                                  s
                                                      tM




                                                                                 or
                                                                              ut
                                                          an




                                                                            rib
                                                           ag




                Asset managers have used UCITS
                                                                           st
                                                               er




                                                                         Di




                III to increase the range of funds
                                                               s




                available to European investors,
                including funds                                                             Distributors are seeking
                of funds                                                                    opportunities for differentiation
                Development of new distribution
                strategies: third-party fund                                                Increased expertise in the
                distribution/ selection, fund of                                            selection of funds
                funds sale, multi-managers fund
                sale, white-labelling




              Source: CACEIS, 2008



              Open and guided architecture models allow retail investors to access a broader range of fi-
              nancial products.


              Furthermore, both models can potentially lead to an increase in fund performance, as fund
              managers can focus purely on their core business - managing assets, while being exposed
              to a potentially higher number of investors. However, distribution through a third-party sales
              force means, for a lot of fund manufacturers, loosing potential revenues (distribution and trailer
              fees), direct contact with their clients and possibly loss of their loyalty. Recent market turmoil
              has shown that this can lead to rapid losses for those who cannot beat the markets and whose
              client-base, gained through an external sales network, is not particularly attached to them.
              Also, in case of non-integrated distribution models, the recent crisis has created a need for
              extra reporting efforts for distributors and investors.


              7Source: PricewaterhouseCoopers, “Global Private Banking & Wealth Management Survey”, 2007
                                                                                                                                Cross-border distribution of UCITS | page 9
                                                                                                                           A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008

  context




                                               Notwithstanding this issue, certainly crucial in times of bear markets, both open and guided ar-
                                               chitecture represent a great opportunity for foreign asset managers to gain market share over
                                               local players in European and international markets. For this reason, cross-border third-party
                                               distribution of funds is in a strong development phase.


                                               In France, Spain, Switzerland and Italy, open architecture has developed so far mainly via mul-
                                               ti-management (funds of funds) through which banks or insurance companies manage fund
                                               wraps that include in-house products as well as a broad range of products from the competi-
                                               tion. This enables banks to better control the products they distribute (risk/performance level of
                                               the products, brand) while providing their customers with a broader range of products and with
                                               optimised asset allocation. Some industry players also consider that this model limits risks re-
                                               lated to a totally open architecture model such as fund supermarkets, namely the difficulty and
                                               cost of providing appropriate advice for a large range of products and the difficulty to determine
                                               responsibilities of asset managers and distributors toward the investor.


                                               In Germany the predominant model is guided architecture through which banks and other fi-
                                               nancial intermediaries distribute their own funds as well as selected external fund products
                                               from a limited number of partners; Guided architecture was initially the banks’ answer to the
                                               growing market share of Independent Financial Advisors (IFAs). They first opened their doors,
                                               slightly, to third-party products through the use of German funds of funds, which allowed them

            Both open and guided               to meet the growing demands for third-parties’ products within their channels. Then, under the
    architecture represent a great             pressure of growing demand from customers for a more extensive choice of funds, many banks
      opportunity for foreign asset            widened their distribution activities by using open architecture and opened up to third-party
         managers to gain market
                                               (non-German) products by establishing fund platforms. The non-German funds also became
       share over local players in
      European and international               more and more reluctant to accept fund orders directly from IFAs in light of the transfer agent
                          markets.             requirements imposed on them (many thousand individual investors instead of just one bank).
                                               These developments led to the creation of fund platforms catering for the needs of IFAs and
                                               fund managers alike8.




page 10 | Cross-border distribution of UCITS   8Source: Norton Rose, “Selling investment funds to German private investors - legal and regulatory issues”, July 2008
A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008

                                                                                                                                                                                                 CONTEXT




       1.2 Fund sales trends in Europe


                                           When analysing fund sales, one has to take into consideration the different fund investors. By
                                           definition, investors are the parties whose money is invested in funds and who benefit from the
                                           performance of such investments.




                                                                                                                                                                                                                    1.2
                                           An investor can either be retail – an individual who purchases small amounts of fund shares/
                                           units for him/herself – or institutional, i.e. an entity with large amounts to invest in funds, such as
                                           banks, mutual funds, insurance companies, pension funds, foundations and so forth. Institution-
                                           al investors account for the majority of overall volume in terms of assets. Retail and institutional
                                           investors differ of course by nature, but also in terms of the sales and marketing approach,
                                           reporting needs, and long term investment views.


                                           Moreover, in the fund distribution context, one must distinguish between public distribution and
                                           private placement. The first one is the sale of units/shares of funds to the retail investors, while
                                           the latter is the sale directly to an institutional investor of funds’ units/shares. Provided that the
                                           unit/shares of funds are bought for investment purposes rather than resale, private placement
                                           does not require the registration of foreign funds with local authorities.


                                           Hence, we will in the following chapters analyse the whole spectrum of fund sales by dealing
                                           separately with sales to the institutional sector and the private sector.


      1.2.1 Fund sales to the institutional sector


                                           According to statistics published by the ECB in 2007, the institutional sector displayed strong
                                           and steady demand for funds in previous years.


                                           In 2006, the “other financial intermediaries” sector9 totalled almost 64% of net purchases of
                                           funds by Euro area institutional sector, hence clearly reflecting the increase in flexibility to in-
                                           vest in other funds offered by UCITS III. Insurance corporations & pension funds also displayed
                                           strong and steady demand for funds, with investments into funds representing 21.5% of their
                                           financial wealth (totalling EUR 1,041 bn), increasing from 19.6% in 2002. Graph 4 presents the
                                           growth in penetration of investment funds in total financial assets of the institutional sector.


                                           Graph 4: Investment funds in total financial assets of institutional sector

                                                 Investment funds in financial assets                                     Investment funds in financial assets
                                                 of other financial intermediaries                                        of insurers & pension funds in the Euro area
                                           11%
                                          11%                                                                      22%
                                                                                                                  22%
        Penetration of investment funds
          in total financial assets (%)




                                           10%
                                          10%



                                          9%9%                                                                    15,5%
                                                                                                                 15,5 %



                                          8%8%



                                          7%7%                                                                     9 9%
                                                                                                                     %
                                                    2002
                                                      2002     2003
                                                                 2003        2004
                                                                               2004     2005
                                                                                         2005        2006
                                                                                                      2006                   2002
                                                                                                                              2002       2003
                                                                                                                                           2003      2004
                                                                                                                                                      2004   2005
                                                                                                                                                              2005           2006
                                                                                                                                                                             2006


                                           Source: EFAMA, 2007 & ECB, 2007




                                           9The “other financial intermediaries” include funds of funds and investment funds other than money market funds
                                                                                                                                                                     Cross-border distribution of UCITS | page 11
                                                                                                                                                                                                                                                         A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008

  context




                                               1.2.2 fund sales to the retail sector


                                                                                 Private households’ demand for investment funds remains steady. On average, European
                                                                                 households invested 11.5% of their financial wealth in funds in 2006, against 11.3% in 2002,
                                                                                 and 8.0% in 1995. However, the situation widely varies across Europe, as shown in graph 5.
                                                                                 Understanding the local fund distribution channels is critical before marketing funds in a
                                                                                 given country.


                                                                                     Graph 5: Household investment fund ownership in Europe in 2006

                                                                                                         30.0%
                                                                                                                   30%
                                                                                                                          26.1
                                                                                                           25.0%
                                                                                                                   25%
                                                                                 Share in total financial assets




                                                                                                                                        20.4
                                                   Share in total financial assets




                                                                                                           20%
                                                                                                         20.0%
                                                                                                                                                      17.3
                                                                                                                                                                      15.6
                                                                                                                                                                                13.7      13.5
                                                                                                                 15%
                                                                                                                15.0%
                                                                                                                                                                                                      12.6
                                                                                                                                                                                                                       11.8          11.6       11.5
                                                                                                                                                                                                                                                         10.5
                                                                                                                                                                                                                                                                          9.4                         9.1
                                                                                                              10%
                                                                                                             10.0%                                                                                                                                                                                                    8.2
                                                                                                                                                                                                                                                                                                                                 5.9      5.7
                                                                                                                                                                                                                                                                                                                                                    4.1
                                                                                                                     5%
                                                                                                                   5.0%




                                                                                                                     0%
                                                                                                                   0.0%                                                                                                                                                                                                                                                 Country
                                                                                                                                                                                                                                                                                                                                                                             Countries
                                                                                                                          SWEDEN


                                                                                                                                        FRANCE


                                                                                                                                                          BELGIUM


                                                                                                                                                                       POLAND


                                                                                                                                                                                FINLAND


                                                                                                                                                                                          SPAIN


                                                                                                                                                                                                      ITALY


                                                                                                                                                                                                                       AUSTRIA


                                                                                                                                                                                                                                      GERMANY

                                                                                                                                                                                                                                                EUROPE


                                                                                                                                                                                                                                                         CZECH REPUBLIC


                                                                                                                                                                                                                                                                          PORTUGAL


                                                                                                                                                                                                                                                                                                      DENMARK


                                                                                                                                                                                                                                                                                                                      HUNGARY


                                                                                                                                                                                                                                                                                                                                 GREECE


                                                                                                                                                                                                                                                                                                                                          NORWAY


                                                                                                                                                                                                                                                                                                                                                    UNITED KINGDOM
            Understanding the local                                                   Source: EFAMA, 2007

         fund distribution channels
        is critical before marketing                                                 Graph 6: Net increase in share of fund assets in households’ financial assets in the 2002-2006 period
            funds in a given country.                                                                                10

                                                                                                                               7.5
                                                                                                                     8
                                                                                                                     8


                                                                                                                                                 5.8
                                                                                                                     6
                                                                                                                     6
                                                                               Difference in shares 2002/2006




                                                                                                                     4
                                                                                                                     4

                                                                                                                                                                    2.5
                                                                                                                                                                                7.1          7.1
                                                                                                                     2
                                                                                                                     2                                                                                        1.5
                                                                                                                                                                                                                                 1.2                                                                                                                           GREECE
                                                                                                                                                                                                                                                0.6
                                                                                                                                                                                                                                                                                                                                            SPAIN




                                                                                                                                                                                                                                                                 0.2
                                                                                                                                                                                                                                                                                                                                ITALY




                                                                                                                                                                                                                                                                                       0.1
                                                                                                                     0
                                                                                                                     0
                                                                                                                                                                                                                                                                                                                  0                                                     Country
                                                                                                                                                                                                                                                                                     UNITED KINGDOM
                                                                                                                              FINLAND


                                                                                                                                                 SWEDEN


                                                                                                                                                                    BELGIUM


                                                                                                                                                                                AUSTRIA


                                                                                                                                                                                            DENMARK


                                                                                                                                                                                                              NORWAY


                                                                                                                                                                                                                                 PORTUGAL


                                                                                                                                                                                                                                                FRANCE


                                                                                                                                                                                                                                                               EUROPE




                                                                                                                                                                                                                                                                                                                GERMANY




                                                                                                                                                                                                                                                                                                                                -1.1       -1.2
                                                                                                                     -2
                                                                                                                     -2



                                                                                                                     -4
                                                                                                                     -4


                                                                                                                                                                                                                                                                                                                                                               -4.6
                                                                                                                     -6
                                                                                                                     -6



                                                                                      Source: EFAMA, 2007


                                                                                 As shown in graph 6, many countries, including those in the Nordic region have increased the
                                                                                 proportion of funds in their household financial wealth in recent years. Swedish households
                                                                                 hold 26.1% of their wealth in funds followed by France (20.4%) and Belgium (17.3%). As a refer-
                                                                                 ence for comparison, American households invest 18% of their wealth directly funds.


                                                                                 Direct fund investment ratio decreased in two Southern countries, Italy (12.6%) and Spain
                                                                                 (13.5%). These countries, however, shifted to life insurance type of products. For example,
                                                                                 Spain’s rate of ownership of funds in their total financial wealth becomes higher than the Swed-
                                                                                 ish once indirect ownership via insurance and pension products is taken into account.


                                                                                 In the UK, investment funds are held mainly indirectly and the direct investment rate is still
page 12 | Cross-border distribution of UCITS                                     quite low.
A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008

                                                                                                                                                               context




      1.2.3 direct sales of funds to the retail sector, an analysis by distribution channel


              The banking distribution channel occupies a dominant position in much of continental Europe,
              due to their extensive existing customer base and the broad range of funds they offer.
              Except in the UK where they account for 50% of fund distribution and their rising importance in




                                                                                                                                                                                  1.2
              Germany, Independent Financial Advisors (IFAs) have a low market share.
              As already mentioned, fund supermarkets and the direct channel are relatively insignificant
              in Europe and are not today in a position to challenge other fund distribution channels.
              The European fund distribution landscape today is very different from one country to an-
              other.
              As Lipper-Feri shows in their annual Data Digest 2008 (see table 1), the French market
              presents the most widespread use of different channels with banks, insurance companies,
              funds of funds and corporates all having a significant market share. The large market share
              of the institution/corporate channel in France (26% of all distribution) can be explained by
              the widespread company savings plans (“Plans d’Epargne Entreprise”) introduced in 1967,
              which are a French specificity.
              On the contrary, Spain, Italy and Germany still remain primarily linked to distribution via
              banks. The predominance distribution through private banks in Switzerland and IFAs in the
              United Kingdom comes as no surprise.

                                                                                                                                    The European fund
              Table 1: European assets by distribution channel10                                                                    distribution landscape today
                                                                                                                                    is very different from one
                  DISTRIBUTION CHANNEL               FRANCE       GERMANY        ITALY        SPAIN     SWITZERLAND          UK     country to another.


                Retail Bank                           23.9%         47.3 %      57.5%         63.4%           17%           5.7%

                Private Bank/Discretionary             12%          12.3 %       7%            6%             51%            6%

                Insurance                             19.5%         16.2 %      12.2%          3%             8%         15.3%

                IFA/Advised                            4%           11.4 %        9%          4.3%            5%             50%

                Supermarket                           0.4%          1.5%         0.5%         0.2%            3%            2.1%

                Direct                                0.5%          0.2%         0.2%          0%             2%            0.9%

                Funds of Funds                        13.5 %         6%          11%          12.1%           1%            7.8%

                Institution/Corporate                  26%           5%         2 .5%          11%            13%            12%

                Others                                0.2%          0.1%         0.1%          0%             0%            0.2%

                Total                                 100%          100%        100%          100%            100%       100%

                Source: Lipper Feri European Fund Market Data Digest 2008




              The funds of funds distribution channel has been increasing in most European countries in
              the past years, as asset managers have used UCITS III to develop the range of funds avail-
              able to investors, namely fund of funds (see table 2).




              10Note on the data used: Lipper Feri’s data displays the proportion of fund distribution controlled by each

              channel, with the retail banking channel split out further to show funds of funds sales and institutional or
              corporate sales separately. The category of insurance wrapper also includes sales through bancassurance.
              Therefore the figure for retail banks includes only funds offered by the bank itself as such.                        Cross-border distribution of UCITS | page 13
                                                                                                                       A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008

  context




                                               Table 2: Funds of funds distribution channel - Market share evolution between
                                               31/12/2005 and 31/12/2007


                                                                                    FRANCE          GERMANY       ITALY          SPAIN           UK


                                                Funds of funds                       +4,3 %            +0 %      +5,5 %          +3,4 %         +1 %

                                                 Source: Lipper Feri European Fund Market Data Digest 2008




                                               All this said, the year 2007 was definitively a bad year in Europe for the net sales in the industry
                                               and for UCITS, according to Lipper-Feri “the worst year on record, beating even 2002 for this
                                               dubious accolade”. The trend of outflows continued in Europe in the first half of 2008, with the
                                               exception of a few countries. Although fund inflow figures for the third quarter are still not avail-
                                               able at the time of publication, they are expected to be heavily impacted by the stock market
                                               downturn.


                                               However, as the next chapter will outline, UCITS sales outside of Europe are growing at a
                                               rate approaching 100% a year, and investment houses say that the growth shows no sign
                                               of letting up.11




                                               11Source: The Banker, “UCITS Break out of Europe to conquer the world”, 2 June 2008
page 14 | Cross-border distribution of UCITS
A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008

                                                                                                                                               context




       1.3 Analysis of UCITS cross-border distribution market


              The UCITS Directive was originally designed to allow each European investment fund to
              obtain a passport granting pan-European distribution.


              Over the past decades, UCITS have been increasingly recognised as a “brand” of excel-
              lence for funds. Hence, UCITS funds are today widely sold and highly valued worldwide;                The UCITS Directive texts are
              Often, they are no longer set up for European distribution alone. International UCITS dis-            available in the appendix.

              tribution today represents 40% of UCITS assets, with sales taking place in Asia and Latin
              America, and more recently the Middle East12. EFAMA, the European Fund and Asset Man-




                                                                                                                                                                  1.3
              agement Association, in strict cooperation with other local associations, such as ALFI (As-           UCITS (Undertakings for
              sociation of the Luxembourg Fund Industry), are actively promoting the UCITS brand outside            Collective Investment in
              of Europe. As an example, during 2007 alone, two events have been organised by EFAMA to               Transferable Securities)
                                                                                                                    are investment funds
              promote UCITS in Asia.
                                                                                                                    established and authorized
                                                                                                                    in conformity with the
              Still, the initial goal of a truly integrated pan-European fund distribution model is yet to come.    requirements of Directive
              Today, the move is clearly toward this initial direction, both from a business point of view,         85/611/EEC.

              with open and guided architecture models helping the international expansion of pan-Euro-
                                                                                                                    UCITS I (“The 1985 UCITS
              pean fund houses, and from a political point of view with the recent acceleration at EU level         Directive”) - Council Directive
              toward the approval of UCITS IV Directive.                                                            no 85/611/EEC of 20 Dec. 1985:
                                                                                                                    Principles for harmonisation.

              Talks on UCITS IV began in late 2006 with the publication of a white paper by the European
                                                                                                                    UCITS II: Never implemented
              Commission proposing changes to the current UCITS framework. In July 2008, the Com-                   due to lack of common
              mission adopted a UCITS IV proposal without any provision about a management company                  understanding.

              passport. In parallel, they called on CESR (The Committee of European Securities Regula-
                                                                                                                    UCITS III - Council
              tors) to help find a solution to the management company passport issue that could be suit-
                                                                                                                    Directives 2001/107/EC (“The
              able to all parties, by 1st November 200813. CESR’s advice to the European Commission on              Management Directive”) and
              the UCITS management company passport was strongly welcomed by EFAMA, who com-                        2001/108/EC (“The Product
                                                                                                                    Directive”) of 21 Jan. 2002
              mented: “CESR’s advice proves that supervisory cooperation, a pre-condition for a well-
                                                                                                                    amending the Council
              functioning single market, is perfectly possible. Although some provisions need further
                                                                                                                    Directive no 85/611/EEC:
              fine-tuning, CESR’s solution on how to implement the management company passport is                   Broadening of investment
              practical and comprehensive. We therefore call on the Commission to act upon CESR’s ad-               possibilities, management
                                                                                                                    company and simplified
              vice and enable its inclusion in the UCITS IV package14.” At the time of publication, a new
                                                                                                                    prospectus.
              UCITS IV proposal is expected by the end of 2008, which will then have to be reviewed by
              the European Parliament, whose term is due to end May 2009.                                           UCITS IV - Proposal to be
                                                                                                                    submitted to the European
                                                                                                                    Parliament and Council for
              Despite the common perception that the Western European fund markets are rapidly reach-
                                                                                                                    consideration in the first
              ing saturation, at least in terms of penetration of investment funds in the portfolios of Euro-
                                                                                                                    semester of 2009: Completing
              pean households, the activity of creation and registration of cross-border UCITS funds has            the Single Market and
              been all but slowing down over the last few years, as graph 7 indicates. Nonetheless, at              increasing efficiency.

              the outset of the recent period of financial instability many experts believed it unlikely that
              this trend would be profoundly impacted by stock market turmoil; However, the worsening
              situation has created some doubts with regards to the near future of the activity of cross-
              border fund creation.



              12Source:   ICFA, “Commission boosts UCITS IV prospects”, 16 July 2008
              13Source:   IPE, “UCITS IV kicked into touch”, July/August 2008
              14Source:   EFAMA, “CESR’advice on the management company passport: a very good basis for fine-
              tuning” press release, 31 October 2008                                                               Cross-border distribution of UCITS | page 15
                                                                                                                                                                              A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008

  context




                                                          Graph 7: Number of true cross-border funds registered

                                                                                                           UCITS I                            UCITS III




                                                     Number of funds registered
                                                                                           55,000
                                                                                                                                                         50,400
                                                                                           45,000                                                                           15% growth
                                                                                                                                                                            in last 12 months
                                                                                           35,000
                                                                                                                        24,900
                                                                                           25,000
                                                                                                                                                                            76% growth
                                                                                           15,000                                                                           in past 3 years
                                                                                                 1998          2000          2002      2004          2006          2008

                                                                                           Source: Lipper & PwC 2008




                                               1.3.1 the leadership of Luxembourg and irish hubs


                                                          Since the emergence of the cross-border distribution for fund-type investment products
                                                          decades ago, Luxembourg established itself as a hub for European cross-border distribu-
                                                          tion. In 1988, the Grand Duchy was the first European Member State to adapt its legislation
                                                          to the European Directive governing UCITS, thus propelling the country into its current lead-
                                                          ing position. The competitive advantage of being the first to offer the European passport for
                                                          cross-border distribution to investment funds, as well as the continuous adaptation of the
                                                          country’s legal and fiscal environment, gradually attracted fund promoters from all around
                                                          the world to Luxembourg.
                                                          Today, newcomers to the Grand Duchy know that they have access to highly qualified and
                                                          highly professional specialists who have many years of experience with UCITS and invest-
        Luxembourg and Ireland
     currently account for nearly                         ment funds.
     90% of all worldwide cross-
                                                          Graph 8a: Evolution of asset classes in the Luxembourg UCITS industry 1997-2007
                    border funds.

                                                                                  in       Mn

                                                             2 000 000
                                                                                                                                                                          $Mn 1 823 969 as at 31.12.07
                                                                                                               Others (including fund of funds)
                                                                                                               Money Market
                                                             1 750 000
                                                                                                               Bond
                                                             1 500 000                                         Balanced
                                                                                                               Equity
                                                             1 250 000


                                                             1 000 000


                                                                      750 000


                                                                      500 000


                                                                      250 000


                                                                                       0
                                                                                                1997    1998          1999    2000    2001        2002      2003     2004       2005   2006     2007


                                                            Source: EFAMA, 2007


                                                          The emergence of Dublin as the second largest European hub for investment funds be-
                                                          gan during the late eighties, with the launch of the IFSC (1987), in “part of the dilapidated
                                                          docklands district said to have been so run-down it was avoided by even the city’s rats.
                                                          Today, however, the area plays host to a cosmopolitan array of financial services players”,
                                                          as quoted from a recent article15. Dublin is today the home of choice for many UCITS funds,
                                                          Europe’s leading domicile for money market funds and the largest administration centre for
                                                          exchange traded funds in Europe.




page 16 | Cross-border distribution of UCITS            15Source: Financial Times Fund Management, “Dublin shrugs off downturn blues”, by Ian Fraser, July 20 2008
A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008

                                                                                                                                                                    context




              Graph 8b: Evolution of Irish registered collective investment schemes in the UCITS
              fund structure 1997-2007

                 in       Mn
               800 000

               700 000                                                               $Mn 646 392 as at 31.12.07
               600 000

               500 000

               400 000

               300 000
                                                                                                              The breakdown by
               200 000
                                                                                                              assets classes in Irish




                                                                                                                                                                                       1.3
               100 000
                                                                                                              UCITS industry is not
                      0                                                                                       available
                           1997   1998   1999   2000     2001   2002   2003   2004     2005   2006   2007


               Source: Irish Financial Regulator, 2008




              A few factors have boosted the fund servicing activities of Luxembourg and Ireland, such
              as their membership of the European Union and the Eurozone, the countries’ legal and fis-
              cal framework, and their strong attractiveness for well-educated young graduates. Lux-
              embourg also benefits from its central position in continental Europe and its multi-lingual
              workforce. Dublin boosts particularly its use of english to become the domicile of choice of
              Anglo-Saxon fund houses.

                                                                                                                                         We also witness more
              Moreover, both financial centres have specialised, or at least focused on different areas                                  and more international
              of expertise: Luxembourg is traditionally the fulcrum for long-only or plain vanilla UCITS as                              distribution of funds
                                                                                                                                         domiciled in domestic
              well as the stronghold of the German asset management industry. By opposite, Dublin has
                                                                                                                                         markets, such as the United
              been developing particularly on offshore products administered in Dublin and other hedge                                   Kingdom, France, Belgium
              funds in general. Today, these characteristics tend to blend significantly, with more and                                  and Germany.
              more hedge funds set up in Luxembourg and long-only UCITS set up in Dublin. With the
              introduction of the SIF (Specialised Investment Fund) regime (Law of the 13 February 2007),
              Luxembourg confirmed its pioneering role within the fund industry.


              Luxembourg and Ireland both are European “centres of excellence” for the set up of funds
              aimed at being sold worldwide. They currently account for nearly 90% of all worldwide
              cross-border funds (Luxembourg 75% and Ireland 14%).


      1.3.2 the emergence of cross-border distribution of domestic products


              As seen above, today the leadership of the Luxembourg and Irish hubs is still undoubted but we
              also witness more and more international distribution of funds domiciled in domestic markets,
              such as the United Kingdom, France, Belgium and Germany.


              Indeed, latest trends confirm that fund houses from all over the world wanting to set up prod-
              ucts designed for the international market are likely to set up UCITS domiciled in Luxembourg
              or Dublin. Table 3 shows this phenomenon and gives an overview of the overall openness of Eu-
              ropean fund markets to the cross-border activity by adding the number of international UCITS
              registered for sale in each country.




                                                                                                                                        Cross-border distribution of UCITS | page 17
                                                                                                                   A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008

  context




                                               Table 3: Overview of the overall openness of European fund markets to
                                               the cross-border activity


                                                                             # of true cross-border    # of foreign countries         # of true cross-
                                                                                   UCITS domiciled        where local UCITS      border foreign UCITS
                                                                                      in the country           are distributed     registered for sale
                                                Luxembourg                                   37,161                        55                     738
                                                Ireland                                       6,859                        39                     806
                                                United Kingdom                                1,214                        50                   2,533
                                                France                                          757                        15                   3,347
                                                Belgium                                         737                        14                   1,592
                                                Germany                                         385                        18                   4,923
                                                Denmark                                         226                         9                     831
                                                Switzerland                                     160                         9                   3,489
                                                Sweden                                           53                        10                   1,723
                                                Italy                                         none                       N.A.                   2,754
                                                Spain                                         none                       N.A.                   3,089

                                                 Source: EFAMA, 2007




                                               However, European fund houses aiming at distributing beyond borders are no longer necessar-
                                               ily moving toward one of the two hubs, and often decide to register their domestic UCITS in
                                               other countries for international distribution. Statistics16 clearly show this: There are today
                                               757 French domiciled funds being sold internationally in 15 European countries and cer-
                                               tain other countries on other continents; Similarly, in the much smaller Belgian fund market,
                                               there are 737 international UCITS, distributed in 14 countries worldwide.


                                               The United Kingdom represents the strongest centre among all European countries, exclud-
                                               ing Luxembourg and Ireland, in terms of funds registered for sale internationally: There are
                                               1,214 true international British UCITS, most of which are distributed within the European
                                               Union borders. However, more and more are distributed outside of Europe, especially to
                                               the Middle East – as an example, 40 new registrations of British UCITS were made in 2007
                                               in Bahrain. This trend is predicted to consolidate, as London is one of the major hubs link-
                                               ing European and Middle Eastern financial centres. In Asia, British UCITS are available for
                                               distribution to Chinese investors through the Chinese QDII (Qualified Domestic Institutional
                                               Investor) regime, which gives them access to one of the world’s largest pools of private
                                               capital.


                                               Generally speaking, this relatively new trend of setting up local UCITS to facilitate pan-Eu-
                                               ropean and international distribution is mirrored by the slow yet constant decline of national
                                               European funds.




                                               16Source: PricewaterhouseCoopers, 2008
page 18 | Cross-border distribution of UCITS
A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     context




      1.3.3 top target markets for cross-border distribution in europe


                                Graph 9 displays the top 25 target markets for cross-border distribution in Europe at the end
                                of 200716.

                                Graph 9: Top 25 target markets for cross-border fund distribution in Europe
             Number of cross-border funds




                                            5500
                                            5000

                                            4500
                                            4000
                                            3500
                                            3000




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        1.3
                                            2500
                                            2000
                                            1500
                                            1000
                                             500
                                               0
                                                                                                                                                         8 - UNITED KINGDOM




                                                                                                                                                                                                                                                                                     16 - CZECH REPUBLIC

                                                                                                                                                                                                                                                                                                           17 - LUXEMBOURG
                                                                                                                           6 - NETHERLANDS
                                                                                3 - SWITZERLAND




                                                                                                                                                                                                                                       13 - PORTUGAL




                                                                                                                                                                                                                                                                                                                                           19 - LIECHTENSTEIN




                                                                                                                                                                                                                                                                                                                                                                                                            23 - GUERNSEY
                                                                                                                                                                                                                                                       14 - DENMARK




                                                                                                                                                                                                                                                                                                                                                                              21 - SLOVAKIA
                                                   1 - GERMANY




                                                                                                                                                                                                          11 - BELGIUM




                                                                                                                                                                                                                                                                                                                                                                                                                            24 - ESTONIA
                                                                 2- - AUSTRIA




                                                                                                                                                                                            10 - SWEDEN



                                                                                                                                                                                                                         12 - NORWAY




                                                                                                                                                                                                                                                                      15 - IRELAND




                                                                                                                                                                                                                                                                                                                                                                                              22 - POLAND
                                                                                                                                                                              9 - FINLAND




                                                                                                                                                                                                                                                                                                                             18 - GREECE



                                                                                                                                                                                                                                                                                                                                                                20 - JERSEY
                                                                                                  4 - FRANCE




                                                                                                                                                                                                                                                                                                                                                                                                                                           25 - LATVIA
                                                                                                               5 - SPAIN



                                                                                                                                             7 - ITALY




                                            Source: PwC Global fund distribution 2008



                                In 2007 alone 4,527 new registrations of UCITS were made in European countries, with Germany
                                being the most active country with 561 new registrations of foreign funds (of a total of 4,923
                                foreign funds registered for sale in the country)16 ; Germany was also the European country
                                with the highest number of new registrations in 2006 (743). Indeed, Germany, together with the                                                                                                                                                                                                                                                                                                                            Asset management groups
                                                                                                                                                                                                                                                                                                                                                                                                                                                          are seeking new hunting
                                United Kingdom, is today perceived as one of the healthiest fund markets in Europe, with total
                                                                                                                                                                                                                                                                                                                                                                                                                                                          grounds in Central and
                                assets under management in both markets forecast to increase by at least 60% in the coming                                                                                                                                                                                                                                                                                                                                Eastern Europe, a region
                                years. At the close of 2007, these two markets alone accounted for 55% of the whole year’s net                                                                                                                                                                                                                                                                                                                            predicted to grow at a steady
                                sales according to Lipper Feri.                                                                                                                                                                                                                                                                                                                                                                                           average 10% annual growth
                                                                                                                                                                                                                                                                                                                                                                                                                                                          rate and just opening up to
                                                                                                                                                                                                                                                                                                                                                                                                                                                          the fund industry.
                                Among new Member States, Poland represents by far the most developed market in terms of
                                size, as displayed by table 4. Moreover, some fund houses or service providers already started
                                moving into Poland as an offshoring centre within the European Union border. In 2007 alone, the
                                Czech Republic was the most attractive destination for registrations of foreign funds, with 292
                                new registrations during the year.


                                In general, since the expansion of the European Union, a lot of attention has been given to the
                                distribution of UCITS vehicles in these markets, a region with high wealth growth rates and
                                where a new middle class is emerging. Indeed, asset management groups are seeking new
                                hunting grounds in Central and Eastern Europe, a region predicted to grow at a steady 10%
                                average annual growth rate, and just opening up to the fund industry: In 2000, 75% of household
                                savings were bank deposits compared with 50% in 2007; At that time, 10% of household savings
                                were invested in funds.




                                16Source: PricewaterhouseCoopers, 2008                                                                                                                                                                                                                                                                                                                                                                                   Cross-border distribution of UCITS | page 19
                                                                                                                            A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008

  context




                                                     Table 4: Central and Eastern Europe figures


                                                                                      Population             Local Fund          Fund Assets/         # of UCITS
                                                                                           (Mn)             Market Size            Capital (€)        distributed
                                                                                                                (€Mn)                             in the country
                                                      Bulgaria                                7.7                       -                  25                 56
                                                      Croatia                                 4.4                       -                 812                   -
                                                      Czech Republic                        10.2                  5,414                   750                802
                                                      Estonia                                 1.3                       -               1,013                295
                                                      Hungary                               10.1                  6,760                   960                104
                                                      Latvia                                  2.3                       -                  78                255
                                                      Lithunia                                3.4                       -                  70                218
                                                      Poland                                 38.2              25,953.3                   885                330
                                                      Romania                                21.6                       -                  11                   -
                                                      Russia                               142.0                        -                 349                   -

                                                      Slovakia                                5.4                 3,361                   561                392
                                                      Slovenia                                2.0                       -               1,312                 70

                                                       Sources: EFAMA 2007, PwC 2008, CACEIS 2008



                                                     So far, distribution of UCITS in the region has been slowed by general market immaturity, and
                                                     especially the lack of distribution channels in the area: Banking or asset management groups
                                                     which own the distribution channels are likely to be the first to benefit from Eastern expansion.

       UCITS distribution outside
                                               1.3.4 distribution perspectives outside europe
      the European Union is now
          focused predominately
       on three key international                    Further afield, worldwide distribution of UCITS continues to grow. The level of penetration in in-
             regions - Asia, Latin                   ternational investment markets means that UCITS are beyond doubt recognised as the world’s
         America and the rapidly
                                                     most internationally distributed investment fund product. A recent article published by The
         expanding Middle East.
                                                     Banker begins with these words “They [UCITS] are advertised on the sides of buses in Hong
                                                     Kong. They are widely promoted in the newspapers of Sao Paulo and Cape Town”17.
                                                     Their success is actually so marked that rumours spread about a SEC project on the creation of
                                                     an American equivalent of UCITS, in order to be able to market US-domiciled funds internation-
                                                     ally as freely as UCITS funds.


                                                     UCITS distribution outside the European Union is now focused predominately on three key in-
                                                     ternational regions - Asia, Latin America and the rapidly expanding Middle East. The following
                                                     pie-chart illustrates the weight of Luxembourg fund distribution in these regions at the end of
                                                     2007. Today’s forecasts indicate that these numbers are still growing fast.


                                                     Graph 10: Luxembourg domiciled funds breakdown by distribution regions
                                                     (in number of funds)




                                                                                                    Europe 85.2%
                                                                                                    Asia Pacific 9.5%
                                                                                                    Americas 3.0%
                                                                                                    Middle East 2.1%
                                                                                                    Africa 0.2%


                                                      Source: Lipper & PwC 2008



page 20 | Cross-border distribution of UCITS         17Source: The Banker, “UCITS Break out to conquer the world”, 2 June 2008
A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008

                                                                                                                                                     context




                 In 2008, EFAMA conducted a survey assessing the relative importance of Europe, Asia, Latin
                 America and the Middle East in the net sales and promotion of cross-border UCITS18. 82% of the
                 participants in the survey believed that the proportion of UCITS held by investors in Asia would
                 grow in the coming years; Additionally most fund managers agreed that UCITS would increas-
                 ingly source more assets in the Middle East and Latin America.


                 Table 5: Top countries for registration of foreign funds by region outside Europe in 2007


                   Region                        Top country for        New registrations          Total registrations
                                                 registration           of foreign funds           of foreign funds
                                                 of foreign funds       in the country             in the country




                                                                                                                                                                        1.3
                                                 in the region          in 2007                    as at 31/12/2007

                   Africa                        1. South Africa        19                         112
                   Americas                      1. Chile               774                        1,213
                   Asia Pacific                  1. Singapore           515                        1,824
                   Middle East                   1. Bahrain             46                         908

                   Source: PwC Global fund distribution, 2008



                 Distribution of UCITS funds in the Asia Pacific regions has been central and much talked about
                 over the years. A cross-border distribution study by Lipper dating back to 1995 already stated
                 that Hong Kong was the UCITS target of choice outside of the EU as it was a central point from
                 which to market funds to many different Asian countries, at the time not yet open to distribution
                 of foreign funds, or not at all open to the fund industry.19
                 More than twenty years later, the picture has not changed much. Although UCITS have to un-               In 2007, half of the
                                                                                                                          170 billion euros in net
                 dergo a full registration procedure, as the regulators want to know “what is behind”, they are
                                                                                                                          inflows on UCITS came from
                 widely sold in Hong Kong, which indeed still represents the hub for distribution to mainland             Asian investors according to
                 China and other, less developed Asian fund markets. In 2007 alone, 1,254 UCITS funds were                the figures of EFAMA.
                 registered in Hong Kong, up 190% from 1995. According to EFAMA, they represent 70% of fund
                 sales in the region.
                 The confidence of the local regulator in the UCITS structure is critical to its success. Taiwan
                 and Singapore are two examples that demonstrate the trust that local authorities have in the
                 EU’s UCITS supervision procedures: Regulators only demand a simple notification process for
                 the registration of UCITS in their local market. In 2007, Singapore was the top Asian market for
                 registrations of UCITS funds, with 515 new registrations in one year alone. 63 new UCITS were
                 introduced in Taiwan, a smaller market, over the same period.
                 Although the sales of UCITS in Asia are strong (in 2007, half of the 170 billion euros in net inflows
                 on UCITS came from Asian investors, according to the figures of EFAMA), there are still many
                 other national markets to target, among which the two big and booming Eastern economies:
                 China and India. Both markets are cautiously opening up to the international investment land-
                 scape and have huge potential in terms of fund distribution to the public sector, as they repre-
                 sent a combination of key winning factors: Healthy demographic patterns, a rapidly expanding
                 middle class, and a not so developed domestic market as yet.
                 Exchanges between EFAMA and local bodies are very dynamic, with among others a business
                 mission in April 2007 to Shenzhen (China). In order to further develop penetration of UCITS in the
                 region, it is clear that the UCITS brand must be kept at a top level so that, once markets open to
                 foreign products, UCITS will still be the frontrunner that it is today. As stated beforehand, UCITS
                 IV has been drafted to follow this path: “The project is excellent and it should not be changed”


                 18Source: EFAMA, “UCITS as a global brand - an industry survey by EFAMA”, July 2008

                 19Source: Lipper, “Cross-border marketing”, 1995                                                        Cross-border distribution of UCITS | page 21
                                                                                                                         A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008

  context




                                                stated a spokesperson of a major asset management group interviewed by the French news-
                                                paper l’AGEFI Hebdo in July 200820.


                                                Distribution in the American continent is also active, particularly in South America. In countries
                                                such as Chile and Peru, UCITS are considered the foreign investment of choice for local pen-
                                                sion funds. In 1981, the Chilean Social Security System was reformulated from a defined-benefit
                                                program to a defined-contribution one. Today, there are 5 pension funds in the Chilean market,
                                                which invest 32% of their assets in foreign investments (compared to 11% at the beginning of
                                                the 2000s); And 35 billion USD is invested in foreign funds by these local pension funds21, most of
                                                which are UCITS. Institutional investors are allowed to invest up to 45% abroad, but this propor-
                                                tion will be increased to 60% within the coming year22.
                                                Peru is one of the South American countries that followed Chile in reforming the pension fund
                                                system. Currently, Peruvians have the choice between investing into a public (State) or a pri-
                                                vate pension fund. These private pension funds experienced very positive inflows over the past
                                                years, with assets under management at the end of March 2008 reaching roughly 14.6 billion
              In countries such as
                                                EUR (or 65 billion Soles), and this trend is set to continue, as on average more than 60,000 new
        Chile and Peru, UCITS are
           considered the foreign               workers join these program each quarter23. Private pension funds in Peru are entitled to invest a
         investment of choice for               theoretical maximum of 20% of their assets abroad, although they only account for 9.2% of total
              local pension funds.              assets as at the end of June 200823, most of which are UCITS.
                                                Regular business missions and ongoing talks between industry representative bodies allow
                                                UCITS to continue being widely distributed in the region.
                                                UCITS have also recently arrived in Canada (2006): Today 55 of them are registered for sale in
                                                the country.


                                                As previously mentioned, UCITS are also well established and fast developing in the Middle
                                                East and Africa region, with the Middle East region – and its wealth – representing a target
                                                that is highly valued and closely watched these days. Bahrain is today the financial centre
                                                in the region where UCITS are best integrated into local market, with 908 UCITS funds sold
                                                there. Given the specificities of the Middle East region, most fund houses that responded to
                                                the 2008 EFAMA survey stated that they had launched or planned to launch specific prod-
                                                ucts to target the region.


                                                20Source:   l’AGEFI Hebdo, “La réforme des fonds européens touche au bout”, 24-30 July 2008
                                                21Source: ALFI

                                                22Source: International Business Times,“Chile: More pension funds can be invested abroad”, September 2008

                                                23Source: Superintendentia de Banca, Seguros y AFP, “Evolución del Sistema Privado de Pensiones“, Seg. trim. 2008




                   As open and guided architecture gain more and more ground over proprietary sales in major European markets, oppor-
                   tunities arise for foreign asset managers to win market share from local players. As a result, third-party distribution is in
                   a strong growth phase.
                   Moreover, the highly valued UCITS brand favours their international distribution both within Europe and globally. UCITS’
                   investor protection and the ability of these products to use certain derivative instruments give them a major advantage
                   over local and other international products. Despite recent market trends in Europe, UCITS sales in other continents
                   have not slowed down, and this trend is set to continue, particularly in Asia, Latin America and the Middle East.




page 22 | Cross-border distribution of UCITS
A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008
                                                                                                                               fund distriBution
                                                                                                                               modeLs & PLayers




          2. fund distriBution modeLs & PLayers



       2.1 The CSD and TA models

              In some European domestic fund markets such as Belgium and Italy, cross-border fund mar-
              kets such as Luxembourg and Ireland, and Asian domestic fund markets, orders and settlement
              are typically handled through bilateral arrangements between the distributors/aggregators and
              the fund-side institutions: Registrars and transfer agents (TA) which is known as the TA model.
              Whilst in other domestic fund markets such as France, Germany and Switzerland, the order
              and settlement infrastructure is provided almost totally by Central Security Depositaries (CSDs)
              which is known as the CSD model. CSDs’ offers however differ from one another in terms of
              specific aspects of fund transaction services from order execution through to settlement and
              custody of the fund’s units/shares.




                                                                                                                                                                  2.1
              However, it is important to note that in cross-border fund markets, the two models may
              coexist through the use of an International Central Security Depositary (ICSD) such as
              Clearstream or Euroclear.


              Due to the complexity of the subject, in the following section, this paper focuses its analysis on
              two fund distribution models, the French CSD model and the Luxembourg TA model.


      2.1.1 the csd model: the french example


              Graph 11 displays the generic model of players involved in France’s fund distribution industry.

              Graph 11: French CSD model


                        Investors




                                                                   Fund Management
                       Distributor
                                                                       Company




                        Financial                                 Centralising Agent
                      Intermediary
                                                                  Issuer account keeper
                  Distributor’s Custodian                        (gestionnaire du passif)
                      (CSD Member)                                  Fund’s Custodian
                                                                     (CSD Member)




                                                    CSD
                                            (Euroclear France)

              Source: CACEIS, 2008


              There are 2 main characteristics of fund order processing in France:
              • Funds must appoint a centralising agent to handle the receipt and execution of subscrip-
                tion and redemption orders in the name of and on behalf of the fund,
              • Fund’s shares/units in Euroclear France (the French CSD) are bearer securities, which
                means that the identity of the final beneficiary is unknown to the centralising agent. There
                is no register of shareholders in a fund as this is the case elsewhere in Europe. Instead,
                                                                                                                   Cross-border distribution of UCITS | page 23
                                                                                                                          A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008
  fund distriBution
  modeLs & PLayers




                                                      an issuer account, managed by the issuer account keeper also known as the “gestionnaire
                                                      du passif”, is held in Euroclear France and reflects the total number of shares in the market.
                                                      The French CSD model, as opposed to the TA model, does not allow distributors/investors to
                                                      be easily identified, which makes distributor activity monitoring and trailer fee management
                                                      processes more complex for the management companies.


                                                     Most orders are placed by a financial intermediary which must be a member of Euroclear Fran-
                                                     ce, and which represents the distributor/investor in France as a custodian. This can be the same
                                                     entity as the fund’s custodian. Once an order is executed and/or confirmed by the centralising
                                                     agent, both the centralising agent and the financial intermediary instruct Euroclear France to
                                                     clear and settle on their respective accounts held with Euroclear France through a DVP (delivery
                                                     versus payment) process, while the financial intermediary updates the custody accounts of the
                                                     entity for whom they have dealt.


                                                     Note that whilst this process is representative of the vast majority of fund order processing in
                                                     France, it is nevertheless possible to keep registers for a fund (i.e. no Euroclear France account).
                                                     However, with the exception of the settlement process, the overall principles remain the same.


                                               2.1.2 the ta model: the Luxembourg example


                                                     Graph 12 displays the generic model of players involved in Luxembourg’s fund distribution industry.


                                                    Graph 12: Luxembourg TA model


                                                                                            Investors




                                                            Fund                                          Custodian/
                                                                              Distributor                                          Bank
                                                         supermarket                                       Broker




                                                        Transfer Agent       Transfer Agent              Transfer Agent      Transfer Agent



                                                       Fund       Fund      Fund      Fund              Fund       Fund     Fund          Fund

                                                     Source: CACEIS, 2008




                                                     The majority of orders in Luxembourg are placed by appointed distributors or aggregators. The
                                                     process is nearly the same for pure institutional investors or private investors dealing directly, but
                                                     volumes are generally lower.


                                                     The transfer agent keeps the official register of the fund and is the only entity appointed by the fund
                                                     to receive and process the orders and issue confirmations. This model is well adapted to the spe-
                                                     cific needs of fund management companies regarding distributor activity monitoring and trailer fee
                                                     management as it allows distributors’ and investors’ positions to be easily identified.


                                                     It is to be noted that, to the contrary of the French CSD model, the distributor is not required to open
                                                     neither a security nor a cash account with the fund’s tranfer agent. Having received confirmation
page 24 | Cross-border distribution of UCITS
A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008
                                                                                                                                fund distriBution
                                                                                                                                modeLs & PLayers




               of the order from the TA, the client or client-side institution instructs the bank or custodian to
               credit the fund account (for retail investors, the cash payment is a prerequisite to the order
               processing). This account is generally maintained directly with the fund custodian, although
               in certain cases the TA may hold dedicated accounts at an intermediary bank. In either case,
               the TA reconciles the cash flows with the transactions they have executed. As opposed to the
               CSD model, cash settlement is made through the normal banking system, separately from the
               settlement of shares. There is no DVP process.


      2.1.3 comparative analysis of both models


               Historically, Luxembourg had no choice but to develop a cross-border model for fund distribu-
               tion as its domestic market was too small.


               On the contrary, France with its large domestic market for fund distribution, decided to take




                                                                                                                                                                   2.1
               the other approach and develop a domestic model. However, in an environment where cross-
               border fund distribution has become increasingly important, the current French CSD model is
               reaching its limits and must adapt in order to be able to offer the following three factors:
               • The inherent security of its model - DVP settlement,
               • The efficiency of a single automated routing platform, and
               • The tools and organisational structure necessary for handling fund distribution efficiently,
                such as the ability to mark orders and match them with distributors to simplify commission
                                                                                                                     In an environment
                calculation.
                                                                                                                     where cross-border fund
               The routing platform and the follow-up of stocks and flows are just the first of many steps           distribution has become
               that need to be taken in the development of the cross-border distribution of funds domiciled          increasingly important, the
               in France.                                                                                            current French CSD model is
                                                                                                                     reaching its limits.

               Although TA models, such as the one in place in Luxembourg, offer more flexibility and greater
               efficiency in fund distribution management, they also need to adapt in the following ways:
               • Standardise and automate process flows,
               • Provide greater levels of security in settlement procedures.


               The current wave of standardisation initiatives at a European level is a positive indication that
               both the TA and CSD models are moving in the same direction.




                                                                                                                    Cross-border distribution of UCITS | page 25
A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008
                                                                                                                               fund distriBution
                                                                                                                               modeLs & PLayers




       2.2 Players’ roles & responsibilities for the principal distribution markets


      2.2.1 Players shared by both models


              Investors
              Investors are the parties whose money is invested in funds and who stand to benefit from
              the positive performance of that investment. There are two types of investor - retail inves-
              tors and institutional investors.


              LocaL authorItIes
              Local authorities are the regulatory bodies which define the rules for fund distribution play-
              ers operating in the domestic market, for example the AMF in France, the BaFin in Germany,
              the CBFSAI in Ireland, the CNMV in Spain, the CONSOB in Italy, the CSSF in Luxembourg
              or the SFC in Hong Kong. In the framework of the European fund passport, they ensure that
              fund distribution complies with the rules in force in the country of distribution. Out of this
              framework, they ensure that the product complies with all the rules relating to the distribu-
              tion of foreign funds in the country. The local authorities play an important role in initial fund
              registration and post-registration processes.




                                                                                                                                                                  2.2
              Fund management company
              The fund management company is the financial institution that launches the fund, deter-
              mines the investment strategy, appoints the service providers, and makes all major deci-
              sions for and on behalf of the fund. It is responsible for the fund distribution and marketing.


              commIssIon caLcuLatIon agent
              The commission calculation agent is responsible for the calculation and payment of commis-
              sions to distributors. This role is generally held by the fund management company or can be
              held by an entity appointed for that purpose (e.g. transfer agent).


              Investment manager
              The investment manager executes the investment strategy, selects the securities of the
              portfolio in accordance with the fund objectives, as reflected in the fund prospectus. He
              or she places buy and sell orders for securities and other financial products in accord-
              ance with the fund’s net inflows and outflows resulting from subscription and redemption
              orders.


              dIstrIbutor
              The distributor promotes the sale of units/shares issued by funds of one or more fund manage-
              ment companies to his or her clients and acts as the clients’ agent in the order input/placement
              process. The distributor can provide fund information to potential investors and implement or-
              der transfer as well as flow of information between the fund and the investors. Distributors
              can be remunerated through entry fees and trailer fees. There are several different types of
              distributor, such as retail banks, private banks, insurance companies, independent financial
              advisors, fund supermarkets, funds of funds, corporates and institutions.




                                                                                                                   Cross-border distribution of UCITS | page 27
                                                                                                                   A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008
  fund distriBution
  modeLs & PLayers




                                                     aggregator
                                                     An aggregator is either a neutral infrastructure provider such as FundSettle, Vestima+ and
                                                     AllFunds, which receives orders from multiple distributors/intermediaries and transmits
                                                     them to the relevant transfer agent/registrar, or a distributor/intermediary that collects or-
                                                     ders from multiple clients and places them with the relevant transfer agent/registrar.


                                                     custodIan/deposItary banks
                                                     The custodian/depository bank safeguards the assets of the fund. The depository therefore has
                                                     a supervisory mission, which requires it to be able to monitor how the assets of the fund have
                                                     been invested and where there are invested and how they can be accessed.


                                                     Icsd (InternatIonaL centraL securIty deposItory)
                                                     An ICSD is an entity which holds securities and other assets in order that cross-border trans-
                                                     actions may be executed for beneficial owners and settled by way of entries on its own books
                                                     (e.g.: Clearstream, Euroclear Bank).


                                                     LocaL agent
                                                     Some countries of distribution such as Austria, Germany, Italy, Singapore and Switzerland
                                                     require the fund management company to appoint a local representative and/or local pay-
                                                     ing agent. Depending on the country, the role may simply involve transmission of information
                                                     to investors, or may cover more complex duties including centralising subscriptions and
                                                     redemptions, the payment of investment income, and even the payment of the supervisory
                                                     authority’s fees.


                                               2.2.2 Players specific to the csd model


                                                     FInancIaL IntermedIary (donneur d’ordres)
                                                     In France, most orders are placed by a financial intermediary, who is the custodian of the
                                                     entity (end investor or investment manager, distributor or aggregator) for whom the order
                                                     is being placed. The financial intermediary must be a Euroclear France member and is not
                                                     required to identify the distributor or investor when placing an order.


                                                     centraLIsIng agent
                                                     Funds distributed in France must appoint a centralising agent. The centralising agent acts
                                                     as a central hub for receipt of subscription and redemption orders sent by financial interme-
                                                     diaries, and controls that conditions mentioned in the fund prospectus relating to subscrip-
                                                     tions and redemptions are respected. The centralising agent is also in charge of informing
                                                     the fund management company, the fund administrator and the fund issuer account keeper
                                                     of the total amount and/or number of shares/units collected for each fund. The centralising
                                                     agent is therefore equivalent to the transfer agent in countries following the TA model, but
                                                     does not maintain a register.


                                                     Fund Issuer account keeper (gestIonnaIre du passIF)
                                                     The fund issuer account keeper is appointed by the fund management company and is often
                                                     performed by the same entity as the centralising agent in France.
                                                     The role consists of updating the fund account open in its books to reflect the daily unit/shares
                                                     subscriptions/redemptions and transfers, as well as reconciling positions with Euroclear
                                                     France. The entity is also in charge of subscriptions/redemptions settlement, public and share-
page 28 | Cross-border distribution of UCITS
A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008
                                                                                                                                  fund distriBution
                                                                                                                                  modeLs & PLayers




              holder information and process concerning corporate actions.
              For funds not registered with Euroclear France, the fund issuer account keeper maintains a
              nominative shareholder register.


              csd (centraL securIty deposItory)
              A CSD is an entity which holds securities and other assets in order that domestic transactions
              may be carried out for beneficial owners and settled by way of entries on its own books (e.g.
              Euroclear France).


      2.2.3 Players specific to the ta model


              transFer agent/regIstrar
              The traditional services offered by the transfer agent are maintaining the register, transaction
              processing, settlement and shareholder reporting:
              • Updating fund accounts to reflect the daily unit sales and redemptions, switches, transfers
                and changes of registrations,
              • Ensuring prompt settlement of orders and provision of tax information to the investor and its
                intermediaries,
              • Calculation and payment of commissions,




                                                                                                                                                                     2.2
              • Preparation and sending of order confirmations and the resulting cash account statements to
                the investor or its intermediary,                                                                      As the fund industry is
              • Responding to requests concerning securities account holdings and undertaking a control                shaping itself as a global
                function,                                                                                              distribution model, in
                                                                                                                       addition to the traditional
              • Executing payments.
                                                                                                                       services, the transfer agent
                                                                                                                       is required to provide other
              Nevertheless, as the fund industry is moving toward a global distribution model, in addition to          added-value services.
              the traditional services, the transfer agent is required to provide other added-value services
              such as maintaining investor holdings data across complex distribution networks and trailer fee
              calculation based on consolidated holdings.




                             Today, despite harmonisation initiatives, the cross-border funds landscape is suffering
                             from a high level of fragmentation at both trading and post-trading levels. In the
                             transaction value chain, fund processing by EU Member States has evolved in a manner
                             that best serves the needs of the domestic markets. As a result, there are significant
                             national differences in fund processing procedures across the EU, and two competitive
                             models have emerged: the CSD model and the TA model.
                             Some of these differences create barriers to efficient cross-border order routing,
                             settlement and custody to the extent that they generate additional risks and costs for
                             investors operating in more than one market. Furthermore, the diversity of national
                             regulations within Europe adds another layer of complexity to the process of cross-
                             border fund distribution.




                                                                                                                      Cross-border distribution of UCITS | page 29
A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008
                                                                                                                                        cHaLLenGes
                                                                                                                                    & oPPortunities




          3. cHaLLenGes & oPPortunities

              The 1985 UCITS Directive, also known as UCITS I, introduced the European fund passport con-
              cept, which allows a fund domiciled in one European jurisdiction to be marketed in all other EU
              jurisdictions, provided that the notification requirements mentioned in the Directive are fulfilled.
              However, the drive toward a UCITS single market in Europe is not yet over and while a signifi-
              cant journey has been completed, further work needs to be done to remove all the remaining
              barriers in a growing cross-border fund distribution environment.
              The following table sums up the major challenges faced by management companies to market
              their funds beyond borders:

              Table 6: Major issues faced by asset managers to distribute their funds cross-border


                                                       Country approval requirements
                Administrative and regulatory
                requirements                           Maintaining registration

                                                       Taxation of funds and investors
                Taxation issues
                                                       Various fiscal requirements

                                                       Difficulties to access information on a cross-border basis
                Information referencing issue
                                                       Difficulties to access updated and reliable information

                                                       Manual processes
                Operational workflow
                                                       Lack of standardisation

                                                       Lack of standardisation of distribution agreements
                Distribution agreements
                and trailer fee management             Increasing complexity of distribution networks




                                                                                                                                                                    3.1
              Source: CACEIS, 2008



       3.1 Administrative and regulatory requirements


      3.1.1 registration and post-registration requirements for foreign funds


              regIstratIon
              Although UCITS III allows more innovation such as investment in units of other funds and finan-
              cial derivatives, funds still require host country approval to be distributed cross-border accord-      Notice
              ing to Article 46 of the UCITS Directive. Today when an asset manager seeks to market funds to
                                                                                                                      Please refer to the “Prime
              investors in other countries, each fund or sub-fund must be registered for sale with the national
                                                                                                                      TA® - Registration and
              regulator of that country, except for private placement.                                                post-registration” insert for
              This process can be extremely time-consuming, costly and difficult, as asset managers have              information on how CACEIS
              to comply with a range of requirements such as transmission of numerous documents (original             can assist you in meeting
                                                                                                                      all the administrative and
              and/or self-certified) often translated to the local language, appointment of local agents and
                                                                                                                      regulatory requirements
              payment of fees, etc., differing from one country to another. In Italy for example, two parallel        faced when distributing
              registrations have to be carried out: One addressed to the CONSOB and the other to the Banca            internationally.
              d’Italia. The significant differences in time and cost of registration between countries make it
              difficult for management companies to launch funds simultaneously across different markets.
              As distribution spreads beyond Europe, the issue of fund registration is even more complex;
              The demand from Asia and Latin America remains extensively constrained by local regulations.
              Thus, Asian investors buying Luxembourg or Ireland domiciled funds are mainly located in Sin-
              gapore, Hong Kong and Taiwan while Latin American investors are mainly located in Chile and
              Peru; Today some countries still maintain their borders closed to foreign-domiciled funds.
                                                                                                                     Cross-border distribution of UCITS | page 31
                                                                                                                                       A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008
  cHaLLenGes
  & oPPortunities


                                                          Table 7 provides a comparison of the various requirements, lead times and fees as at July
                                                          2008 for the initial registration of a foreign fund in the top 5 target markets, namely Germany,
                                                          Austria, Switzerland, France and Spain (please refer to graph 9).

                                                                   Table 7: Comparison of registration requirements in the top 5 target countries


                                                                                          Translation       Timing
                                               Information requirement                   requirement       to obtain     Local agent
                                                                                                                                           Initial registration & annual fees
                                                  at first registration                     in local         initial     requirement
                                                                                           language         regist.

                              • Latest full & simplified prospectus
                              • UCITS Certificate
                              • Copy of constitutional documents
                              • Original confirmation of credit institution acting as                                   Paying Agent     • Initial reg.: EUR 1,500 for each
                                Information/Paying Agent                                                                                   sub-fund
                                                                                                          Max 2
              Germany         • Latest annual & semi-annual reports                           Yes                       Information      • Annual fee: EUR 500 for each
                                                                                                          months
                              • POA/mandate for submission of notification                                              Agent              sub-fund
                              • Proof of fees payment
                              • Notification letter and sales documents
                              • Additional information/Addendum for Shareholders
                                as internal part of the German full prospectus

                              • Latest full & simplified prospectus                                                     Paying Agent,
                              • UCITS Certificate                                                                       who will also
                              • Copy of constitutional documents                                                        automatically
                              • Original confirmation of credit institution acting as                                   act as an
                                                                                                                                         • Initial reg.: EUR 1,100 per structure
                                Paying Agent                                                                            Information
                                                                                                          Within 2-4                     • Launch of new sub-funds: EUR 220
              Austria         • Latest annual & semi-annual reports                           Yes                       Agent if no
                                                                                                          weeks                            per sub-fund
                              • POA/mandate for submission of notification                                              specific
                                                                                                                                         • Annual fee: EUR 600 per structure
                              • Proof of fees payment                                                                   Information
                              • Standard notification letter                                                            Agent is
                              • Additional information/Addendum for Shareholders                                        officially
                                as internal part of the Austrian full prospectus                                        appointed
                                                                                                                                         • Initial reg.: CHF 10,000 to 20,000 per
                                                                                                                                           structure depending on complexity
                                                                                                                                           of the file
                              • Latest Swiss version of full & simplified prospectus         Yes, all
                                                                                                                                         • Launch of new sub-funds: between
                                signed by custodian, Swiss representative &               documents
                                                                                                                                           CHF 3,000 - 20,000 per sub-fund
                                management company/fund                                      must be                    Local
                                                                                                                                           depending on complexity of the file
                              • UCITS Certificate                                          submitted                    representative
                                                                                                                                           (decision taken by SFBC)
                              • Certified copy of constitutional documents                  in one of     2 to 6
              Switzerland                                                                                                                • Annual fee: CHF 1,000 per structure
                              • Signed copy of Representative & Paying Agent              the official    months        Local Paying
                                                                                                                                           and CHF 500 per sub-fund +
                                Agreement                                                 languages                     Agent
                                                                                                                                           «Taxe de surveillance»: CHF 1,250
                              • Mandate to the Lawyers (if appointed)                       (French,
                                                                                                                                           for the funds without sub-funds,
                              • Latest original annual and semi-annual reports            German or
                                                                                                                                           CHF 1,250 for the first sub-fund of an
                              • Compliance with Swiss legal framework                        Italian)
                                                                                                                                           umbrella-fund and CHF 750 for each
                                                                                                                                           subsequent fund (total of annual
                                                                                                                                           fees = Max CHF 20,000)
                              • Latest full & simplified prospectus with visa stamp
                              • UCITS Certificate
                              • Copy of constitutional documents
                              • Latest annual & semi-annual reports
                                                                                                          Max 2
                              • Proof of fees payment                                                                   Centralising     Annual fee: EUR 1,000 for each
              France                                                                          Yes         months
                              • Additional information/Addendum for Shareholders                                        Agent            sub-fund
                                                                                                          (in theory)
                              • Details of UCITS (Annex III-A part A)
                              • Details of marketing arrangements (Annex III-A part B)
                              • Annex III-C
                              • Copy of Centralising Agent agreement

                              • Latest full & simplified prospectus with visa stamp
                                                                                          Yes, except
                              • UCITS Certificate
                                                                                         for the UCITS                  At least one
                              • Original constitutional documents (notarised)
                                                                                           certificate.                 of the fund
                              • Latest annual & semi-annual reports
                                                                                            A sworn                     distributors
                              • Memoria de comercializacion                                                                              0.14‰ on the volume estimated to
                                                                                         translation is                 in Spain or
                              • Appointment by the fund or the management                                                                be commercialised in Spain subject
                                                                                            required.     Max 2         the local
              Spain             company of a contact person of CNMV who would                                                            to minimum fees of EUR 1,691.69 on
                                                                                          Translations    months        subsidiary of
                                request access to CIFRADOC system                                                                        a minimum volume of assets EUR
                                                                                              should                    the promoter
                              • Appointment of a least one Spanish distributor                                                           12,083,500
                                                                                            bear the                    will act as
                              • Appointment of a contact person for the tax and
                                                                                          certification                 local agent/
                                statistical reporting
                                                                                          «traducción                   representative
                              • Official application letter to the CNMV
                                                                                             jurada»
                              • List of ISIN codes

               Source: CACEIS, 2008



page 32 | Cross-border distribution of UCITS
A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008
                                                                                                                                                               cHaLLenGes
                                                                                                                                                           & oPPortunities




               maIntaInIng regIstratIon
               Once registration has been obtained, another key issue is to maintain the registered status
               in the various countries of distribution. Asset managers have to cope with financial report-
               ing, statistical reporting and publication requirements, with specific formats differing from
               one country to another, and the same translation requirements as for registration. The post-
               registration duties can also be very cumbersome and time-consuming.


               Again, table 8 provides a comparison of the various post-registration duties for foreign funds
               in the top 5 target markets as at July 2008.


               Table 8: Comparison of post-registration requirements in the top 5 target countries



                                                                             Statistical
                                      Financial Reporting                                                           Publication Requirements
                                                                             Reporting




                                                                                                    • NAV: The law requires publication of NAV to be
                                                                                                      done according to the laws and regulations of the
                                                                                                      home country of the fund, but in German. The BaFin’s
                                                                                                      regulations (Merkblatt 2008) state that it is sufficient
                                                                                                      that the NAV publication toward German investors is
                                                                                                      made via electronic information media, e.g. website
                                                                                                      (therefore it is no longer mandatory to publish NAV in
                                                                                                      a German newspaper). Other appropriate publication
                              Annual & Semi-annual reports                                            media are: German newspaper, individual letter to
                              (1 copy of the original report + 1                                      German investors, Electronic Federal Gazette.
                              translation in German) must be       No statistical reporting
                Germany       submitted to the BaFin twice a       obligations imposed on foreign   • Shareholder information: The law states that all
                              year, with the inclusion of the      funds                              information and documentation that the EU Home State




                                                                                                                                                                                           3.1
                              German paying and information                                           requires to be published must be published in German.
                              agent                                                                   The manner in which such publications are to be
                                                                                                      done is according to the rules in force in the EU Home
                                                                                                      State. However, in their regulations (Merkblatt 2008)
                                                                                                      the BaFin states that notifications to shareholders are
                                                                                                      required to be published in an appropriate publication
                                                                                                      medium, explicitly stated as acceptable by the BaFin
                                                                                                      are the following: German newspaper, individual
                                                                                                      letter to German investors, Electronic Federal Gazette
                                                                                                      (publication in electronic information media is not
                                                                                                      acceptable).




                                                                                                    • NAV: Publication requirement identical to the
                              Annual & Semi-annual reports in                                         requirements in the home country of the fund.
                              German must be submitted twice       No statistical reporting
                Austria       a year to the FMA, with the name     obligations imposed on foreign   • Shareholder information: foreign investment fund
                              of the local representative/paying   funds                              companies which intend to cease the public distribution
                              agent (market practice)                                                 of a fund/sub-fund have to notify the FMA and publish
                                                                                                      the intention together with the legal consequences for
                                                                                                      the shareholders/unitholders




                              Annual & Semi-annual reports in
                              French, German or Italian – with     Statistical reporting            • NAV: The fund management company shall publish
                              additional requirements to those     obligations imposed on foreign     jointly the issue & redemption prices every time shares
                Switzerland
                              in force in the home country -       funds suspended since              are issued or repurchased in a financial or daily
                              must be submitted twice a year by    31/12/07                           newspaper, at least twice a month.
                              the local representative




                                                                                                                                            Cross-border distribution of UCITS | page 33
                                                                                                                                         A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008
  cHaLLenGes
  & oPPortunities




                                                                                                 Statistical
                                                      Financial Reporting                                                                 Publication Requirements
                                                                                                 Reporting



                                                                                      Information on NAV of the fund
                                               Annual & Semi-annual reports
                                                                                      at the end of the period, volume
                                               must be submitted to the AMF                                              • Shareholder information: foreign UCITS shall comply
                                                                                      of units sold to investors in
                                               twice a year (copy of the originals                                         with the same publication obligations in France, with the
                              France                                                  France and gross subscriptions
                                               + reports translated in French) with                                        same frequency and in the same number of publications
                                                                                      during the period must be
                                               no additional requirements to those                                         as prescribed by the law of the UCITS country of origin
                                                                                      transmitted to the AMF twice a
                                               in force in the home country
                                                                                      year by the centralising agent




                                               Annual & Semi-annual reports
                                               in Spanish (sworn translation)                                            • NAV: At least one of the fund distributors/the
                                               with the name of the local                                                  representative or the management company must
                                               representative agent (market                                                make available the NAVs via electronic means on the
                                               practice) must be made available                                            Stock Exchange Newsletters or the webpage of the
                                               for consultation by electronic         No statistical reporting             management company/fund representative
                              Spain
                                               means by at least one of the           required at fund level
                                               distributors.                                                             • Shareholder information: all events of which investors
                                               The information should be                                                   in the original country are notified have to be
                                               completed as a hard copy must                                               communicated to the investors in Spain
                                               also be available at the local                                              at the same time and in the same format.
                                               representative.




                                               Source: CACEIS, 2008




                                                          In all EU countries, updated prospectus and UCITS certificates must also be transmitted to
                                                          the local authorities to maintain registered status.


                                                3.1.2 ucits iv: the way forward for simplified registration within the european union


                                                          The European Commission has recognised that the barriers described above undermine the
                                                          credibility of the product passport and increase costs. Consequently several initiatives have
                                                          been taken in the past years:


                                                          CESr’S guIdeLInes
                                                          In June 2006, the CESR issued “Guidelines to simplify the notification procedure of UCITS”,
                                                          in order to facilitate cross-border fund distribution and reduce costs for investors and fund
                                                          management companies. The implementation of some of these guidelines by European
                                                          countries such as Italy and Germany has already resulted in shorter registration times for
                                                          foreign funds, especially due to the acceptance of self-certification for the required docu-
                                                          mentation (instead of originals) and certain national regulators’ commitment to streamlining
                                                          their review process. As a result, in Italy, the timing for initial registration has been reduced
                                                          recently from a maximum of two months to no more than thirty days, while in Germany, the
                                                          new version of the German Investment Act, combined with the BaFin amended instructions
                                                          for notification of public distribution of UCITS issued at the end of 2007, represent a simpli-
                                                          fication of the UCITS notification procedure even though implementation of the remaining
                                                          CESR guidelines (such as the proposal for electronic document filling) would be desirable
                                                          for management companies.




page 34 | Cross-border distribution of UCITS
A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008
                                                                                                                                     cHaLLenGes
                                                                                                                                 & oPPortunities




               ucIts Iv draFt dIrectIve
               The adoption of the UCITS IV Directive, which could come into force by mid 2011 if the pro-
               posal is adopted by the EU Council of Ministers and the European Parliament in the first semes-
               ter of 2009, should considerably streamline the notification process for cross-border fund sales
               in the European Union and reduce costs and marketing delays for asset managers.


               We draw your attention to the fact that UCITS IV does not impact the distribution itself but
               mainly the notification process.
               According to the UCITS IV Directive proposal, the new notification procedure would be
               reduced to a simple, electronic, regulator-to-regulator communication and the distribution
               of funds could start immediately after such communication:
               • The required fund registration documentation should be transmitted to the home state
                regulator (instead of the host state regulator today), who would verify its completeness
                and would transmit it to the host state regulator,
               • Electronic communication between regulators should be favoured,
               • A fund could be marketed in the host country as soon as the management company has
                been informed by the home state regulator that the file has been transmitted to the host state
                regulator, the host state regulator’s checks taking place ex-post on an on-going basis,
               • The prospectus and annual/semi-annual reports could be submitted in a “language com-
                mon in the sphere of finance”.

                                                                                                                   The adoption of the
                                                                                                                   UCITS IV Directive proposal
                                                                                                                   should considerably
                                                                                                                   streamline the notification




                                                                                                                                                                 3.1
                                                                                                                   process for cross-border
                                                                                                                   fund sales in the European
                                                                                                                   Union and reduce costs and
                                                                                                                   marketing delays for asset
                                                                                                                   managers.




                                                                                                                  Cross-border distribution of UCITS | page 35
A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008
                                                                                                                                       cHaLLenGes
                                                                                                                                   & oPPortunities




       3.2 Taxation issues


              Luxembourg and Irish tax regimes are viewed more favourably than many other jurisdic-
              tions across most fund types.
              However, taxation remains a major issue for cross-border fund distribution due to the ex-
              istence of multiple taxation regimes for investment funds and investors. As the European
              Commission stated in its Green Paper on ”the enhancement of the EU framework for invest-
              ment funds”, “tax constraints often generate additional administrative requirements and
              are powerful financial disincentives”24.
              Taxation of foreign funds, taxation of residents investing in funds domiciled abroad and vari-
              ous fiscal requirements depending on jurisdictions are significant factors asset managers
              must consider before marketing a fund cross-border, via public distribution or private place-
              ment. The main taxation issues are described hereafter.


      3.2.1 taxation of funds and investors


              Depending on the country of domiciliation, funds can be subject to taxation of income/capi-
              tal gains, withholding taxes on income received and/or other taxation (e.g. composition duty           Tax constraints often
              in Luxembourg).                                                                                        generate additional
                                                                                                                     administrative requirements
              With regard to unit-holders/investors, they may be subject to taxation on income/capital gains
                                                                                                                     and are powerful financial
              realised. Within a country, several tax regimes can apply depending on the status of the unit-         disincentives.
              holder/investor (resident or non-resident) and depending on the domiciliation of the fund (do-
              mestic or foreign fund) in which investments are made.


              While in Europe major tax discrimination measures against foreign funds and residents invest-
              ing in non-resident funds have progressively been abolished under pressure from the European
              Commission and the European Court of Justice (as an example, since January 2005 the PEA
              regime in France allows investors to hold foreign funds), outside Europe many countries still
              have tax regimes in place which favour domestic funds, such as South Korea where a tax




                                                                                                                                                                   3.2
              barrier, penalising foreign funds against local products and running until the end of 2009, was
              established in May 2007.
              Within the European Union, even though there is still a way to go before the net revenue of the
              various investments made by UCITS is equal everywhere, taxation of UCITS is today basically            Notice
              identical whether UCITS are marketed domestically or on a cross-border basis. However, you
                                                                                                                     Please refer to the “Prime
              should not ignore that a number of EU Member States have legislated for foreign UCITS to               TA® - Registration and
              provide tax reporting in order to benefit from the same taxation as domestic UCITS. Thus, in           post-registration” insert for
              countries such as Germany and Austria, foreign funds will have to obtain a specific tax status to      information on how CACEIS
                                                                                                                     can ensure you that all tax
              be attractive to local investors (“fully transparent” status in Germany, “white” or “extra-white”
                                                                                                                     obligations are satisfied when
              status in Austria). Hence the ability of the fund to calculate the relevant figures, such as the       distributing internationally.
              publication at each NAV date of the “Aktiengewinn” (equity gain), “Zwischengewinn” (interim
              profit) and “Immobiliengewinn” (real estate profit) in Germany for fully transparent funds, and
              deliver the relevant tax information to investors via financial data providers and financial news-
              papers is crucial to avoid huge taxation of investors. To get the preferential tax treatment, the
              tax information delivered may be certified to ensure that the determination of the published data
              is compliant with the local tax requirements. Again, the need to comply with these local rules
              imposes an additional cost and administrative burden on funds distributed in these countries.


              24Source:   European Commission, “Green paper on the enhancement of the EU framework for investment
              funds”, 12 July 2005                                                                                  Cross-border distribution of UCITS | page 37
                                                                                                                             A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008
  cHaLLenGes
  & oPPortunities




                                                     In terms of taxation, another constraint lies in the EU Savings Directive application, implement-
                                                     ed in July 2005. Indeed, UCITS (and a lot of other savings products) are covered by this Direc-
                                                     tive, which requires paying agents making cross-border interest payments to EU individuals
                                                     to obtain and verify certain information about those individuals and either to report informa-
                                                     tion about the interest payments to their domestic tax authorities (among jurisdictions com-
                                                     mitted to the exchange of information are Denmark, France, Germany, Italy, Netherlands and
                                                     Spain) or levy withholding taxes (among jurisdictions committed to withholding tax are Austria,
                                                     Belgium, Luxembourg and Switzerland). In this framework, a Taxable Income per Share (TIS),
                                                     corresponding to the taxable value of each share for EUSD purposes in the event of a sale or
                                                     redemption payment, and a Taxable Income at Distribution (TID), corresponding to the taxable
                                                     portion of each distribution for EU Savings Directive purposes, will have to be calculated and
                                                     published via financial data providers or local financial newspapers when foreign funds are
                                                     distributed to individuals in Austria, Belgium, Luxembourg or Switzerland.
                                                     The EU Savings Directive application proves particularly burdensome for UCITS as fund
                                                     management companies are responsible for accurate TIS and TID calculations for the vari-
                                                     ous jurisdictions.


                                               3.2.2 tax representative appointment and reporting to local fiscal authorities


                                                     Finally, in some countries foreign funds may have to face additional and onerous admin-
                                                     istrative requirements such as the mandatory appointment of a tax representative and/or
                                                     reporting to local fiscal authorities.
                                                     These requirements are listed below for the top 5 target markets as at July 2008:

                                                     Table 9: Fiscal requirements for the top 5 target markets


                                                         Country             Fiscal representative
                                                                                                            Local tax authority’s reporting requirements
                                                      of distribution            requirement

                                                                                                      For fully and partly transparent funds, publication of:
                                                                                                      - the annual Deemed Distributed Income with
                                                                                                      certification of Certified Public Accountant (CPA) or tax
                                                     Germany                No                        consultant within 4 months following the fiscal year end
                                                                                                      - the Dividend Distributed Income with certification of
                                                                                                      CPA or tax consultant within 4 months following the
                                                                                                      fiscal year end

                                                                            Yes unless “black         For white and extra-white funds, submission of the
                                                     Austria
                                                                            funds” status             annual Deemed Distribution Income

                                                                                                      Financial reporting submission to Banque Nationale
                                                                                                      Suisse
                                                     Switzerland            No                        The fund has to report details of the amount and
                                                                                                      description of income accumulated using equalisation,
                                                                                                      for inclusion in the annual accounts

                                                     France                 No                        No tax reporting required

                                                                            The local agent/
                                                                            representative or
                                                                            any other legal entity    Funds may choose to submit information on the number
                                                                            appointed by the fund     of shareholders from time to time. This is not a legal
                                                     Spain
                                                                            or the management         obligation but this may have fiscal implications for unit-
                                                                            company may submit        holders in case of switches between funds
                                                                            the fiscal reporting to
                                                                            the CNMV

page 38 | Cross-border distribution of UCITS         Source: CACEIS, 2008
A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008
                                                                                                                                      cHaLLenGes
                                                                                                                                  & oPPortunities




       3.3 Information referencing issue


      3.3.1 the lack of a pan-european fund database penalises cross-border distribution


              In the context of cross-border fund distribution, access to reliable and updated informa-
              tion is a key factor in the success of controlling operational risk relating to execution and
              settlement of subscription and redemption orders. Indeed, these funds have often different
              characteristics (dealing frequency, NAV frequency, pricing, settlement details, cut off times
              etc.) that require careful attention before placing an order.
              To date, unfortunately, it is very difficult to obtain in a relatively easy way operational infor-
              mation on the various products which can be the object of a cross-border public distribution
              as there is no pan-European fund database and the existing fund databases are deficient;
              Most of them give only access to fund prospectus consultation and not to the information
              necessary to place and process orders correctly.
              Hence, fund trade processing tends to be more complex when clients want to purchase
              third-party funds, especially when they are domiciled abroad.


      3.3.2 the fund Processing Passport, an efama initiative


              In light of this, the concept of a Fund Processing Passport (FPP) was developed by EFAMA’s
              Fund Processing Standardisation Group (FPSG) in 2007-2008 and was drawn up from the
                                                                                                                    The FPP aims at solving the
              viewpoint of all relevant professional players involved in the operational aspects of invest-
                                                                                                                    information problems faced
              ment funds distribution: Investor intermediaries, distributors, distribution platforms, fund          by banks, other distributors
              management companies and their service providers (transfer agents/registrars, fund ac-                and their services providers
              counting agents, trustees, custodians, portfolio managers).                                           when processing third-party
                                                                                                                    fund transactions.

              objectIve, content and InItIaL prIncIpLes


              The FPP is a short, single and fully harmonised document made of 105 standard fields which
              aims at solving the information problems faced by banks, other distributors and their serv-
              ices providers when processing third-party fund transactions, by providing them, at class
              level, with all the information required to initiate and process orders correctly, such as con-
              tact details of a local fund order desk in a given country, cut off time, currency, order forms
              required, etc.                                                                                                                                      3.3


              Each FPP is composed of a “core data” section describing the most common arrangements
              handled by the “main fund order desk” in the fund home market and of annexes describing
              the country-specific information concerning the dealing/settlement arrangements for other
              markets where the class of unit/share is also distributed.




                                                                                                                   Cross-border distribution of UCITS | page 39
                                                                                                                   A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008
  cHaLLenGes
  & oPPortunities




                                               The FPP initial principles defined by EFAMA are presented hereafter:


                                               Graph 13: FPP initial principles



                                                                                                         Fund manager
                                                4 INITIAL PrINCIPLES
                                                1 - Accountability
                                                Fund managers initiate the process, possibly
                                                with the help of a service provider,                                              FPP service provider
                                                and guarantee the FPP content accuracy
                                                2 - Flexibility
                                                No one size fits all solution
                                                3 - Centralisation                                 Single local golden copy FPP
                                                Ideally FPP should be collected in one single       repository operated by a
                                                and central access point at national and           « repository administrator »
                                                European level
                                                4 - Standardisation
                                                FPP content should be distributed through             Single European FPP
                                                automated standardised feed                            directory/database




                                                Source: EFAMA, 2007




                                               beneFIts For Fund managers and Fund dIstrIbutors


                                               Concurrently, the FPP helps fund managers servicing a wide-ranging client base or striving to
                                               distribute their funds more broadly, to address in a cost-effective way the numerous informa-
                                               tion requests they typically face from investors and fund distributors interested in their funds.
                                               The FPP benefits for fund managers and fund distributors can be summed up as follows:


                                               Table 10: FPP benefits for fund managers and fund distributors



                                                         FPP benefits for fund managers                     FPP benefits for fund distributors



                                                • Allows fund managers to deliver higher quality   • Reduces redundant checks
                                                  service                                          • Reduces processing transactions delays
                                                • Speeds up the order processing                   • Reduces errors in executing orders
                                                • Drives down processing costs                     • Ultimately reduces cost
                                                • Provides a ready-made solution for addressing
                                                  distributors’ queries about funds
                                                • Opens the way to electronic communications
                                                  of operational information about funds
                                                • Facilitates order placement, thereby
                                                  satisfying customer needs and
                                                  enhancing their loyalty


                                                Source: EFAMA, 2007




page 40 | Cross-border distribution of UCITS
A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008
                                                                                                                                             cHaLLenGes
                                                                                                                                         & oPPortunities




              Fpp ImpLementatIon


              Since mid-2008 and the release by EFAMA of the final version 2.0, the FPP is already a stand-
              ard. The goal is to ensure that it becomes an operational reality in 2009. For this, three main
              challenges should be tackled:
              • Easy access to FPP data on a pan-European basis is a pre-condition for its success,
              • The different roles and responsibilities throughout the FPP lifecycle should be clarified to
                ensure its accuracy,
              • Last but not least, management companies will have to undertake on a voluntary basis to
                fill in FPP for all their funds, to publish them online and update them. This will be without
                doubt a huge task.


              EFAMA is committed to take all the action that would be deemed necessary to lever-
                                                                                                                           Notice
              age the existing local initiatives and ensure the successful implementation of the FPP
              throughout Europe.                                                                                           CACEIS has been committed
                                                                                                                           to the FPP initiative since
                                                                                                                           the beginning and actively
              As shown by the map below, the current FPP market landscape in Europe varies from one
                                                                                                                           participates in EFAMA’s working
              country to another. Luxembourg players have been early FPP adopters and two data provid-                     group, relaying its work to
              ers, CCLux and Kneip, already publish FPP online, while in France, the AFG will soon give                    the Luxembourg and French
              industry players access to a dedicated FPP website for French domiciled funds.                               community.
                                                                                                                           In this framework, CACEIS in
                                                                                                                           Paris is mandated by some
                                                                                                                           management companies to
              Graph 14: Current FPP providers market landscape                                                             collect and manage FPP data
                                                                                                                           for their investment funds, while
                                                                                                                           they keep the responsibility of
                     Denmark: FundConnect                                              Germany: WM-daten provides          validating and publishing the
                      provides FPP services                                            FPP service
                                                                                                                           FPP Golden copies.
                                     Ireland:
                      looking for road ahead                                           France: AFG’s FPP website to
                                                                                       be open to the public in the
                          UK: IMA working                                              coming months
                          with Fundconnect

                           Belgium: BEAMA                                              Switzerland: ongoing discussion
                      looking for road ahead                                           on preferred approach

                Luxembourg: two FPP service
                  providers - CC Lux & KNEIP                                           Italy: Assogestioni collects all
                                                                                       Italian FPPs


                                                                                                                                                                         3.3
                Source: EFAMA, 2008




              Besides, SWIFT currently shows interest developing and implementing a central FPP data-
              base linked to domestic FPP platforms by mid-2009.
              SWIFT is also working on the translation of the FPP content into ISO 20022-based messages,
              which will enable the electronic communication of FPP and will contribute in that way to
              greater efficiency in the circulation of key information relating to fund processing. These
              messages should be available on the SWIFT network by January 2009.




                                                                                                                          Cross-border distribution of UCITS | page 41
A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008
                                                                                                                                                                   cHaLLenGes
                                                                                                                                                               & oPPortunities




       3.4 Operational workflow


      3.4.1 the growth in cross-border business and open architecture tends to exacerbate
              operational complexity


              As a custodian and/or administrator of UCITS product, the challenge was previously more
              limited to supporting managers resident in various countries but in broadly similar time zones.
              As products have become increasingly distributed on a global basis, a more sophisticated
              approach is required to service both managers and distributors, as well as investors, stretch-
              ing from the start of the Asian day to the end of the American day.
              Language differences also need to be considered for both reporting, data aggregation and
              client servicing aspects, including integration with existing IT infrastructure.
              Beyond the worldwide commercial success of UCITS - which emerges as a global and top-
              quality brand in the universe of savings products - the fund industry is suffering from opera-
              tional inefficiencies (manual processes, lack of standardisation, etc.) and risk exposure in its
              trading, settlement and custody processes. Signing agreements is one thing but processing
              successfully operations is another.


              Unlike other asset classes such as stocks and bonds which rely on electronic tools, the fund
              industry still widely uses faxes and telephone calls to communicate. As a result, transfer
              agents in Luxembourg and Ireland have to input a lot of transactions manually, which gener-                                        Unlike other asset classes
              ates costs, risks, lowers service levels and makes the market less efficient.                                                      such as stocks and bonds
                                                                                                                                                 which rely on electronic
                                                                                                                                                 tools, the fund industry
              Moreover, due to the structure of the industry today, there are multiple relationships be-
                                                                                                                                                 still widely uses faxes
              tween distributors and their transfer agencies, each relationship being technically different                                      and telephone calls to
              and expensive to manage and maintain.                                                                                              communicate.
              The graph below illustrates these numerous relationships:

              Graph 15: Operational challenges of third-party distribution

                                  FRONT-END SERVICES                                                        BACK-END SERVICES


                                                                                         TRANSFER AGENT/           FUND
                                                         BROKER                        CENTRALISING AGENT
                                                                                                                                 FUND CUSTODY
                                                                                                                ACCOUNTING



                  Institutional                                                          TRANSFER AGENT/           FUND
                                                        CUSTODIAN                                                                FUND CUSTODY
                   Investors                                                           CENTRALISING AGENT       ACCOUNTING



                                                                                         TRANSFER AGENT/           FUND
                                                  IFA/CONSOLIDATOR                                                               FUND CUSTODY
                                                                                       CENTRALISING AGENT       ACCOUNTING



                    Private                                                              TRANSFER AGENT/           FUND
                                                       SUPERMARKET                                                               FUND CUSTODY
                   Investors                                                           CENTRALISING AGENT       ACCOUNTING



                                                                                         TRANSFER AGENT/           FUND
                                                       BANK BRANCH                                                               FUND CUSTODY
                                                                                       CENTRALISING AGENT       ACCOUNTING
                                                                                                                                                                                               3.4




                                    AUTOMATE PROCESS                 MANUAL PROCESS                           AUTOMATE PROCESS




              Source: CACEIS, 2008                                       Risks
                                                                      Service levels
                                                                     Operating costs



              In 2007, Deloitte conducted a study on cross-border fund distribution in Europe25, which found
              that the overall level of straight-through processing (STP) in the industry was as low as 47 per-
              cent and that manual processing for one non-STP transaction took, on average, 10 minutes.
              In Asia STP levels are much lower, with less than 10 percent of STP rate today. This can be
              explained by the fact that in some Asian countries it is cheaper and easier to hire more man-


              25Source: Deloitte, “Cross-border fund distribution in Europe”, September 2007
                                                                                                                                                Cross-border distribution of UCITS | page 43
                                                                                                                            A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008
  cHaLLenGes
  & oPPortunities




                                                     ual labour than to invest in technology development and implementation. As trade volumes
                                                     from Asia have exploded, the processing and operational challenges also mount.


                                                     Manual processes and lack of standardisation in communication processes are obviously
                                                     expensive for industry players and investors. The Deloitte study mentioned above looked at
                                                     the number of errors and found that 0.11% of transactions led to an error, resulting in finan-
                                                     cial compensation averaging about EUR 1,000. According to the report, if the fund industry
                                                     would go 100% STP, it would save up to EUR 307 million each year - on a total of EUR 1 billion
                                                     of total processing costs - representing 30% of savings, for cross-border fund distribution in
                                                     the Luxembourg and Irish industries.


                                                     In the first quarter 2008, within the framework of a market consultation on SWIFT Alliance
                                                     LITE specifications for funds (see § 3.4.2.1), SWIFT also calculated estimated costs of non
                                                     automated fund processes in Europe and in Asia, making the distinction between manual
                                                     processing with and without fax server: SWIFT conclusions were that when no fax server
                                                     is used, the manual cost is double in Europe as in Asia. SWIFT also outlined that fax server
                                                     is not a cheap solution; As an example, for a distributor with 10 orders a day, they estimated
                                                     the annual cost of order processing with fax server in Europe at a total cost of EUR 76,000.00
                                                     (with direct cost estimated at EUR 19,000.00)26.


                                               3.4.2 various initiatives have emerged to increase automation and standardisation


                                                     In the past years, various initiatives have been taken by market place groups, SWIFT,
                                                     ICSDs and other players such as transfer agents to automate processes so that the fund
          Manual processes and                       industry can cope with the massive increase in dealing volumes and operational risks
       lack of standardisation of
                                                     reduction requirements.
      communication processes
     are obviously expensive for                     The key drivers and benefits of automation can be summed up as follows:
                 industry players
                   and investors.                    Table 11: Key drivers and benefits of automation



                                                                           Key drivers                                             Benefits




                                                                                                       • Guaranteed delivery (e.g. missing fax/page)
                                                      • Improve risk control                           • Reduce human errors (e.g. mistyping, blurred fax)
                                                      • Improve customer service and satisfaction      • Audit trail
                                                      • Improve scalability and processing speed       • More flexible dealing window (cut-off times extension)
                                                      • Improve corporate image                        • Detailed reporting allowing efficient reconciliation
                                                      • Improve corporate IT infrastructure            • 24/7 system availability
                                                      • Reduce manual labour & improve                 • Reduce administration time & error handling time
                                                        cost efficiency                                • Reduce manual faxing & administration cost/risk
                                                                                                       • Allow labour flexibility & improve efficiency




                                                     Source: SWIFT, 2008




                                                      26Source: SWIFT, “Funds automation for low volume users - Lite”, February 2008
page 44 | Cross-border distribution of UCITS
A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008
                                                                                                                                  cHaLLenGes
                                                                                                                              & oPPortunities




              The rationalisation of fund processing involves numerous actors, processes and compo-
              nents, as illustrated by graph 16:


              Graph 16: Actors, processes and components at stake for streamlining fund processing
                 ACTORS




                              Management              Other
                                                                   Distributors       Transfer agents
                              companies           fund promoters
                 PROCESSES




                                                                                        Settlement
                               Account
                                                     Trading            Routing             &
                               opening
                                                                                         custody
                 COMPONENTS




                                 Pricing               Personnel      Technology           Risk




              Source: CACEIS, 2008



  3.4.2.1     market place groups’ initiatives


              Among the market place groups actively working for more automation and standardisation
              in the fund industry in Europe and Asia, we can quote the following initiatives:


              • For several years, standardisation and automation of fund processing have been at the
                top of EFAMA’s agenda; The Fund Processing Standardisation Group (FPSG) established
                in 2003 to identify obstacles to efficiency in back-office procedures and to outline pos-
                sible actions for removing them is still very active, as previously seen in the “Information
                referencing issue” chapter with the Fund Processing Passport. EFAMA disseminates its            Notice
                recommendations at national levels through domestic associations.
                                                                                                                CACEIS supports the
                                                                                                                efforts of the fund industry
              • The TA Forum Steering Committee (TASC), an ALFI subcommittee, liaises with the Luxem-           to move toward greater
                bourg TA & Distribution Forum, a neutral discussion platform and sounding board, bringing       standardisation, harmonisation
                together industry participants to share experiences and discuss issues related to fund          and automation and actively
                                                                                                                participates in various market
                distribution operations. It aims at building a bridge between fund distributors and Lux-
                                                                                                                place groups in Luxembourg
                embourg’s operational community, focusing on fund administration services, particularly         and France:
                                                                                                                                                              3.4




                the transfer agent as a key partner to support and enhance the global fund distribution of      > FPSG (EFAMA),
                Luxembourg domiciled funds. Its main objective is to enhance the ease of doing business         > TASC (ALFI),
                                                                                                                > EUROFI Group,
                with Luxembourg domiciled products from a global cross-border distribution perspective.
                                                                                                                > AFTI’s Investment Fund
                                                                                                                  Stocks and Flows Group,
              • A EUrOFI working group of fund industry representatives has made complementary propos-          > AFG’s FPP Portal Group,
                als to accelerate the automation and standardisation of cross-border fund order execution,      > Euroclear France UCITS
                                                                                                                  order routing platform Group.
                settlement and commissions tracking at an EU level: Setting up automated notification and
                authorisation processes, optimising processes to access and maintain key prospectus and
                processing data, standardising settlement deadlines, implementing industry-wide incen-
                tives to encourage small and medium sized distributors to adopt automated order input so-
                                                                                                               Cross-border distribution of UCITS | page 45
                                                                                                                     A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008
  cHaLLenGes
  & oPPortunities




                                                        lutions, developing commonly agreed distributor codification at the right level of granularity,
                                                        encouraging further standardisation of legal terms and formats of distributor agreements.
                                                        Evolutions in some existing practices of CSDs and in the risk monitoring and position keep-
                                                        ing processes of some fund agents were also proposed to facilitate the handling of an
                                                        increasing number of third-party cross-border orders with increasing amounts.


                                                       • In France, the French Association of Asset Managers (AFG) and the French Association of
                                                        Custodians (AFTI) also worked on this issue in 2008:
                                                        > AFG made some recommendations on four mains points to enhance the investment funds
                                                          circulation:
                                                          . Bearer order marking due to the French market specificity,
                                                          . Agreements between distributors and fund promoters,
                                                          . Fund Processing Passport,
                                                          . Euroclear France UCITS order routing platform.
                                                        > AFTI worked on a charter of good conduct for centralising funds and placing orders, the
                                                          objective of which was to combine the rules allowing the various operators of the invest-
                                                          ment fund chain to secure the operation of the market.


                                                       • Efforts are also being made by the Asian Fund Automation Consortium (AFAC), a group of
                                                        global fund managers in Asia created in September 2006 seeking to increase automation
                                                        with distributors by defining a common STP strategy for each country.


                                               3.4.2.2 electronic messaging initiatives


                                                       SWIFT has been extending its electronic messaging offer to the fund industry since 2002,
                                                       with 2 main objectives:
                                                       1. To improve data quality, as getting reliable data is an essential prerequisite before improv-
                                                         ing workflow automation. SWIFT has taken part in France’s BIC1 code implementation,
                                                         allowing centralising agents to accurately identify distributors.
                                                       2. To improve workflow automation, through the ISO 20022 and Alliance LITE initiatives pre-
                                                         sented hereafter.


                                                       ISO 20022 standard
                                                       In 2002, SWIFT launched its first practical solution based on ISO 15022, followed in 2004 by
                               Notice                  the SWIFTNet Funds solution ISO 20022, which covers domestic and cross-border distribu-
                                                       tion. The objective was to provide the investment fund industry with a set of messages
      CACEIS has been an active
                                                       specifically designed to address their needs.
  participant in the SWIFT “Early
       adopter” group of the new
   SWIFT XML format ISO 20022.                         The adoption of the SWIFTNet Funds ISO 20022 messaging solution enables the investment
                                                       fund industry to move toward a common standard based on modern and flexible XML tech-
                                                       nology as recommended by EFAMA in 2005.


                                                       Today firms are encouraged by SWIFT and EFAMA to adopt ISO 20022 as their electronic
                                                       messaging standard and where other domestic message standards still tend to be used, to
                                                       implement solutions to facilitate the necessary interoperability between those standards
                                                       and ISO 20022.



page 46 | Cross-border distribution of UCITS
A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008
                                                                                                                                   cHaLLenGes
                                                                                                                               & oPPortunities




              Indeed, using ISO 20022 single open market standard for all fund processes means enhanced
              quality, regulatory compliance and insensitivity to volumes, which facilites business growth.
              It also means minimised operational risks and costs and higher competitiveness.
              Of course the return on investment for industry automation depends on the number of
              players and the speed at which they implement ISO 20022. Today more than 200 firms are
              registered to use the SWIFT Funds solution, with a very well balanced mix of fund manag-
              ers, fund administrators, distributors and investors’ intermediaries, including international
              market infrastructures.


              SWIFT XML ISO 20022 standard is also increasingly adopted by larger players in Asia,
              which will drive standardisation among the smaller players, facilitating interoperability
              and interfacing.


              SWIFT is also looking, via the SWIFT’s hedge funds HARmonisation Project (SHARP), to
              extend its influence into the hedge fund sector with the introduction of a new set of mes-
                                                                                                                 Notice
              sages based on up-and-coming ISO 20022 standards for automating communications in the
              transaction chain between custodian banks, administrators and transfer agents.                     CACEIS actively participates
                                                                                                                 to the SWIFT SHARP working
                                                                                                                 group and ranks among the
              sWIFt aLLIance LIte                                                                                pilots of the SWIFT Alliance
              So far, low volume fund players were reluctant to implement the SWIFT Funds solution               LITE project.
              due to the initial and recurring SWIFT infrastructure costs, implementation complexity and
              project resources requirements. Fax servers were their favourite communication tool in
              spite of high costs and risks generated. Aware of that, SWIFT has decided to launch its Alli-
              ance LITE solution, in close collaboration with transfer agents and clearing houses, in order
              to make automation attractive to small players.
              SWIFT Alliance LITE targets institutions that exchange less than 200 messages per day and
              that need quick and easy connectivity to SWIFT. This is an internet-based service that pro-
              vides direct, secure and low cost access to SWIFT since users can access Alliance LITE
              using a standard internet connection with a SWIFT-issued hardware security token.
              SWIFT Alliance LITE should be operational by the first quarter of 2009 for distributors, trans-
              fer agents, asset managers and custodians.


    3.4.2.3 fund platforms
                                                                                                                 In the past years, the
              In the past years, the quest for automation drove numerous players to implement automated          quest for automation
                                                                                                                 drove numerous players
              fund platforms providing front-end and/or back-end services, often organised by geographi-
                                                                                                                 to implement automated
              cal areas such as AllFunds Bank, Prime TA®, MFEX, FundSettle, Vestima+, etc. It is not pos-        fund platforms providing
              sible to quote and review in detail all of them but we wish to highlight their existence and       front-end and/or back-end
                                                                                                                                                               3.4




              current importance on the fund market.                                                             services.


              Besides, some service providers such as Fund Channel and Axeltis started to position them-
              selves as “intermediaries” between distributors and management companies. They now
              offer a panel of services allowing the open architecture players to develop their activities in
              a simplified operational and legal context, while taking advantage of the commercial agree-
              ments negotiated by these service providers.




                                                                                                                Cross-border distribution of UCITS | page 47
                                                                                                                                       A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008
  cHaLLenGes
  & oPPortunities




                                                 The chart below provides a non-exhaustive overview of these commercial and market initiatives.


                                                 Graph 17: Overview of commercial offerings and market initiatives

                                                  Front-end services                                         Back-end services

                                                    Negociation and
                                                                                  Trailer fee
                                                    management of                                            Order routing and
                                                                                  management/                                               Settlement
                                                    distribution                                             confirmation
                                                                                  payment
                                                    agreements

                                                                                             COMMERCIAL OFFERINGS


                                                         FUND CHANNEL (Crédit Agricole Group)


                                                                   AXELTIS (Natixis Group)




                                                                                                                                                                    Proprietary Systems
                                                                            ALLFUNDS BANK (Grupo Santander and Intesa Sanpaolo Group)



                                                                                                      MFEX



                                                                                                         PRIME TA®


                                                                                                MARKET INITIATIVES


                                                                                                          SWIFT NetFunds (SWIFT)




                                                                                                                                                                   Multi-markets
                                                                                                                                                                    initiatives
                                                                                                                        FUNDSETTLE (Euroclear Bank)


                                                                                                              VESTIMA+ (Clearstream)        CFF (Clearstream)


                                                                                                          EUROCLEAR France Order                  ESES
                                                                                                             Routing Platform




                                                                                                                                                                     initiatives
                                                                                                                                                                     Domestic
                                                                                                                     EMXCo                Euroclear UK & Ireland



                                                 Source: CACEIS, 2008




                                                 Fund Channel 27
                                                 Fund Channel offers players in the open architecture market, namely multi-managers, private
                                                 banks and insurance companies, a platform to expand their fund distribution business with the
                                                 benefit of simplified operational and legal procedures.
                                                 Fund Channel handles the negotiation of distribution agreements with fund management com-
                                                 panies as well as the calculation, daily accruing, collection and payment of distribution fees to
                                                 fund distributors. The company provides a modular service solution that allows it to adapt to its
                                                 clients’ needs. Fund Channel has proven expertise in all areas of fund distribution and uses a
                                                 high-performance proprietary information system.
                                                 Established in May 2005, Fund Channel is a Professional of the Financial Sector and subsidiary
                                                 of the Crédit Agricole Group.


                                                 Axeltis28
                                                 Axeltis, a subsidiary of the Natixis Group formed in 2002, is a European third-party fund distribu-
                                                 tion platform based in London.
                                                 Axeltis offers the following services to fund providers, multi-managers and third-party fund dis-
                                                 tributors: Negotiation and centralisation of distribution agreements, negotiation of trailer fees
                                                 payable by fund providers, monitoring of legal and regulatory requirements regarding counter-



                                               27Source: Fund Channel, “Open architecture services and solutions", 2008

                                               28Source: Axeltis, Axeltis at a glance (www.axeltis.com), 2008
page 48 | Cross-border distribution of UCITS
A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008
                                                                                                                                     cHaLLenGes
                                                                                                                                 & oPPortunities




              parts, calculation and reconciliation of positions, invoicing and payment of trailer fees.
              At the end of 2007, Axeltis counted 85 distributors, 120 asset managers as counterparts and
              over 7,400 funds.


              AllFunds Bank29
              Since its inception in 2000 and backed by the financial strength of Spain’s Grupo Santander
              and Italy’s Intesa Sanpaolo Group, AllFunds has successfully launched operations in Spain,
              Italy, Portugal, Latin America and the UK and has achieved a leading position in the distri-
              bution of third-party funds in these markets. This platform is dedicated to distributors and
              currently represent over 10,500 funds from more than 200 asset management houses.


              MFEX30
              MFEX is an independent mutual funds wholesaler offering financial institutions and fund com-
              panies a platform enabling them to get online information on funds, tracking, computation and
              payment of trailer fee as well as online execution and settlement of funds. 250 fund companies
              from 14 countries have decided to distribute their mutual funds through MFEX platform.


              Prime TA®
              Operational since 2002 and dedicated to management companies, Prime TA® is CACEIS’ hub               Notice
              platform, based on full transfer agency services and capable of capturing transactions re-
                                                                                                                   Please refer to the “Prime
              ceived from distributors using various means of communication, routing transactions to the
                                                                                                                   TA® - Order gateway &
              official transfer agent of the target fund and performing the settlement as the case may be. This    Mirroring services” insert for
              central platform acts as a single access point between distributors and transfer agents for both     information on how CACEIS
              order processing and settlement, thereby streamlining the entire transaction process. CACEIS         can help you streamline
                                                                                                                   the entire transaction
              offers two distinct services: The “routing service” designed for distributors who settle through
                                                                                                                   process when distributing
              clearing platforms and the “nominee service” for those who do not use any clearing platform.         internationally.
              In 2007, more than 84,200 transactions were processed. CACEIS Prime TA® has direct contacts
              with around 1,000 distributors.


              FundSettle (Euroclear Bank)31
              Launched in 2000, FundSettle is Euroclear Bank’s dedicated platform for automated offshore,
              cross-border and domestic fund transaction processing. It is a fully integrated fund-transaction
              platform where order routing, settlement and custody processing are centralised in a single
              location. FundSettle has proven itself with major funds players around the world and has at-
              tracted nearly 300 fund distributors, linking up to 500 transfer agents. According to Euroclear
              Bank, fund distributors using FundSettle to process cross-border investments are now achiev-
              ing 100 percent STP and delivering back-office processing savings of up to 60 percent.
              The average number of FundSettle transactions grew 24% in 2007 compared with 2006. Fund-
                                                                                                                                                                 3.4




              Settle now covers more than 36,000 offshore and domestic funds from 21 markets, including
              clients’ in-house funds, having added more than 3,000 funds in 2007.




              29Source: AllFunds Bank, What we offer & who we are (www.allfundsbank.com), 2008

              30Source: MFEX, About MFEX & our business (www.mfex.se), 2008

              31Source: Euroclear Bank, Services/FundSettle (www.euroclear.com), 2008
                                                                                                                  Cross-border distribution of UCITS | page 49
                                                                                                                       A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008
  cHaLLenGes
  & oPPortunities




                                               Vestima + and CFF (Clearstream) 32
                                               Euroclear’s main competitor, Clearstream, has taken a more segregated approach, offering
                                               separate systems to deal with order routing and settlement.
                                               The Vestima+ system, launched in 2005, is an automated order-routing service that offers a
                                               single point of access to order issuers for in-house domestic, third-party, cross-border and
                                               offshore funds. It allows access to more than 37,000 funds and handles the whole pre-trade
                                               process from order through to execution. This platform delivers STP rates close to 100%. Today
                                               over 180 distributors around the world use Vestima+. In 2007, Clearstream launched the Central
                                               Facility for Funds (CFF) as a settlement service to complement Vestima+. CFF offers Delivery
                                               Versus Payment (DVP) settlement services for the simultaneous exchange of cash and securi-
                                               ties between fund distributors and transfer agents, operating as a central platform. Today CFF
                                               counts 21 members located in Luxembourg, Ireland and Belgium and offers access to more
                                               than 15,000 units/shares of fund classes.


                                               Euroclear France UCITS order routing platform 33
                                               Given the fact that 80% of operational losses registered by custodians’ back-offices in France
                                               were due to manual processing of investment funds transactions which could no longer cope
                                               with increasing volumes, the main French market players decided to build an STP solution, the
                                               Euroclear France UCITS order routing platform, launched in 2006.
                                               This market solution enables users to automate and standardise order execution and set-
                                               tlement for all Euroclear France eligible domestic and foreign funds. According to Euroclear
                                               France, users have benefited from a 50 to 80% decrease in costs, compared with the manual
                                               order processing used before.
                                               The Euroclear France platform also offers an order marking solution, based on bilateral refer-
                                               ences given by asset managers and/or BIC1 codes allocated by SWIFT, as recommended by
                                               AFTI and AFG French professional associations to tackle the issue of identifying distributors/
                                               final investors in a bearer securities context (French market specificity).
                                               Mid-2008, this platform counted 45 order issuers participants & centralising agents and proc-
                                               essed around 13,000 orders a month on nearly 3,400 funds. Its success will depend on an in-
                                               crease in volumes in the coming months.


                                               EMXCo 34
                                               EMXCo was established in 1999 to automate the European fund industry. In 2000, they launched
                                               the EMX message system, and electronic messaging solutions for automating the purchase,
                                               sale, valuation and settlement of mutual funds in the UK, by connecting fund providers with UK
                                               intermediaries and fund supermarkets.
                                               In January 2007, EMXCo became part of the Euroclear Group which also owns the UK CSD,
                                               enabling the Brussels-based ICSD to combine mutual fund order routing with settlement serv-
                                               ices to provide a centralised fund-processing infrastructure in the UK.
                                               EMXCo was responsible for routing around 1,9 million messages and over EUR5,2 billion of
                                               orders in June 2008.




                                               32   Source: Clearstream, Investment fund services product information (www.clearstream.com), 2008
                                               33Source:   Euroclear France OPCVM une offre intégrée du routage d’ordres au R/L, 2008
page 50 | Cross-border distribution of UCITS   34Source:   EMXCo, About us (www.emxco.com), 2008
A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008
                                                                                                                                                                                                cHaLLenGes
                                                                                                                                                                                            & oPPortunities




       3.5 Distribution networks & agreements and trailer fee management


              In the context of cross-border distribution, trailer fee management is an inescapable as-
              pect. The difficulty of this process originates from two sources: The increasing complexity
              of distribution networks and the lack of standardisation of the related distribution agree-
              ments (and consequently the possible absence of mandatory information to identify distri-
              butors or calculate fees).


              As a reminder, distribution agreements are established between a management company
              and its partners in the field of distribution, the distributors, who will then have the objective                                                               Notice
              to sell the management company products.
                                                                                                                                                                              Please refer to the “Prime
              Then, the greater the distributors’ activity is, the greater their incomes or trailer fees                                                                      TA® - Distribution networks,
              are. This type of commission is generally paid monthly or quarterly by the management                                                                           holdings and trailer fee
              company to the distributors.                                                                                                                                    management” insert for
                                                                                                                                                                              information on how CACEIS
                                                                                                                                                                              can help you manage
              The Markets in Financial Instruments Directive (MiFID) implemented on 1st November 2007                                                                         complex distribution
              affected fund distribution by introducing new transparency requirements on trailer fees in                                                                      networks efficiently, to get a
              order to enhance final investors’ protection; If trailer fees are planned, this must be dis-                                                                    consolidated view of holdings
                                                                                                                                                                              and to handle global trailer fee
              closed to final investors.
                                                                                                                                                                              calculation & payment when
                                                                                                                                                                              distributing internationally.
      3.5.1 open architecture has resulted in ever more complex distribution networks
                                                                                                                                                                              You can also refer to
                                                                                                                                                                              the “Prime TA® - Data
              The multiplication of distribution channels means that management companies have to deal
                                                                                                                                                                              transmission & Reporting
              with ever more complex distribution networks, which makes the distributors’ identification,                                                                     services” insert for information
              the monitoring of their activity by country and trailer fee management much more difficult                                                                      on CACEIS’ flexible data
              than before.                                                                                                                                                    transmission and reporting
                                                                                                                                                                              solutions for all our cross-
                                                                                                                                                                              border distribution support
              In practice, the distribution network definition and set-up can take a considerable amount of                                                                   services.
              time. Moreover, we should keep in mind that a distribution network is constantly changing (e.g.
              new distributors, modification relating to existing distributors, removal of a node/branch).

              Graph 18: Illustration of a distribution network with 4 levels



              Intermediary                                          P                                                                    Example of a distribution
              Level 1                                                                                                                    network.
                                                                                                                                         In this distribution network, the
                                                                                                                                         sequence P, I1, I3 and I6
              Intermediary                          I1                                  I2
              Level 2
                                                                                                                                         represents a branch of the
                                                                                                                                         network whereas P, I1, I3
                                                                                                                                         represent nodes of the branch.
              Intermediary                I3                        I4                                               I5                  The combination of nodes and
              Level 3                                                                                                                    branches allows the transfer
                                                                                                                                         agent to set up any type of
                                                                                                                                         distribution network and to
              Intermediary       I6       I7   I8              I9            I10                      I11                  I12           define specific rate per level.
              Level 4

                                                                                                                                               Institutional investor
              Investor           1        2    3               4             5               6               7             8
              Account                                                                                                                          Retail investor

                                                    Intermediary                                                P
                                                                                                                                                                                                                            3.5




                                                    Level 1


                                                                                                 I1                            I2                      Network must
                                                    Intermediary
                                                    Level 2                                                                                            reflect
               Commissions                                                                                                                             consolidation
               parametrised                                                                                                                            nodes for clearing
                                                    Intermediary                   I3
               at intermediary
                                                                                                                I4              I5       I6            houses such as
                                                    Level 3
               level                                                                                                                                   Euroclear and
                                                                                                                                                       Clearstream
                                                    Intermediary        I7         I8        I9             I10      I11       I12       I13
                                                    Level 4

                                  INVESTORS
                                                    Investor            1          2         3              4        5     6         7   8
                                                    Account


              Source: CACEIS, 2008                                                                                                                                           Cross-border distribution of UCITS | page 51
                                                                                                                  A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008
  cHaLLenGes
  & oPPortunities




                                               3.5.2 the lack of standardisation in distribution agreements creates inefficiencies


                                                     With regard to the distribution agreements, the main constraint is their administrative and
                                                     legal management (content definition, commission rates negotiation, maintenance, dissem-
                                                     ination). Indeed, it is important to note that a well drafted distribution agreement (in terms
                                                     of exactness, comprehensiveness and clarity) will not only facilitate the relation between
                                                     the stakeholders but also the whole transactional process, in particular the remuneration
                                                     process. As such, adapted content will be beneficial for the management company, dis-
                                                     tributors, the centralising agent, the commission calculation agent, the transfer agent and
                                                     the distributor’s correspondent bank.
                                                     In addition to the points usually mentioned in all types of financial agreements, the following
                                                     notions should ideally be integrated into any distribution agreement:
                                                     • Payment and invoicing,
                                                     • Transaction and/or centralisation process,
                                                     • Duties and responsibilities of the parties involved,
                                                     • Agreement duration and effectiveness,
                                                     • Revision modalities, termination and suspension,
                                                     • Election of domicile,
                                                     • And finally applicable law and competent jurisdiction.


       A well drafted distribution             3.5.3 trailer fee management has become a key issue
         agreement will not only
            facilitate the relation
       between the stakeholders                      Difficulties resulting from trailer fee management are numerous. The following points of
               but also the whole                    concern can be mentioned:
          transactional process,
                  in particular the
                                                     Holdings calculation methods
          remuneration process.
                                                     Determining the basis of calculation (e.g. holdings by distributor by country) is a prerequi-
                                                     site before calculating trailer fees.
                                                     This calculation can be made as follows:
                                                     • Daily average holdings over a defined period or end of period holdings,
                                                     • On the basis of trade date or settlement date.


                                                     Trailer fee calculation methods
                                                     Once the holdings are determined, various calculation methods can be applied for trailer
                                                     fees, including elements such as:
                                                     • Calculation rate: Real rate or rate based on a percentage of the management fee,
                                                     • Calculation basis: Presence or absence of ranges with thresholds,
                                                     • Calculation frequency: Monthly, quarterly or yearly.


                                                     Process management
                                                     Beyond the holdings and trailer fee calculation methods, you should not ignore the com-
                                                     plexity of the process management, depending on the various requirements of the manage-
                                                     ment company such as:
                                                     • The calculation frequency,
                                                     • The deadline required for reporting delivery,
                                                     • The obligation to carry out reconciliations with many players, namely ICSDs and custodi-
                                                      ans, in order to obtain accurate positions before calculating trailer fees,


page 52 | Cross-border distribution of UCITS
A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008
                                                                                                                                     cHaLLenGes
                                                                                                                                 & oPPortunities




              • The demand for transmitting an estimated calculation of trailer fees to centralising agents,
                transfer agents, clearers or even account keepers (bank statements), etc.,
              • The payment of trailer fees to distributors to finalise the whole process.


              It is worthwhile mentioning that the points expressed above become more difficult to man-
              age when there is increasing complexity in the distribution network the management company
              wishes to set up, namely:
              • The number of distributors,
              • The number of levels of distribution,
              • The frequency, extent and dissemination of the distribution network modifications, as trailer
                fee calculation should take any update during the calculation period into account.


              reporting
              Finally, it is a real challenge for management companies to obtain a quality report in terms of
              comprehensiveness, clarity and accuracy, as these reports constitute the core basis on which
              intermediaries are remunerated. Hence they are a prerequisite to remunerate intermediaries
              in an efficient way.
              From a commercial point of view, quality reports can be used as dashboards, enabling manage-
              ment companies to adapt and optimise their distribution networks according to the perform-
              ance of the various distributors.


      3.5.4 recent recommendations issued by efama


              In September 2008, the EFAMA’s Fund Processing Standardisation Group (FPSG) issued rec-
              ommendations regarding distribution agreements and the tracking of distributor commissions,
              drawing on initiatives already underway in certain countries such as France35.
              In particular, the FPSG recommends:
              • That distribution agreements adopt a common framework, contain certain standard informa-
                tion and describe a clear process to ensure that the correct and complete commission en-
                titlement information with respect to holdings, transactions and transfers is available to the
                commission calculation agent,
              • To identify distributors by way of a BIC code plus an extension where required or by an ad-
                ditional reference agreed by the contracting parties if necessary,
              • That orders carry the relevant distributor’s reference throughout the process chain in order to
                facilitate the correct allocation and payment of renumeration.
              As a next step, the FPSG will undertake further work to define a standard for the minimum
              information necessary to identify the individual distributors to whom trail commission is
              payable and calculate the amount they are entitled to, as well as how this might be annexed
              to distribution agreements.
                                                                                                                                                                 3.5




              35Source: EFAMA, “Standardisation of fund processing in Europe”, September 2008                     Cross-border distribution of UCITS | page 53
                                                                                                                 A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008
  cHaLLenGes
  & oPPortunities




                                               Major initiatives have emerged to overcome the numerous difficulties faced in a cross-
                                               border fund distribution environment. These initiatives have already resulted in a broader
                                               harmonisation of fund regulation at the EU level, the suppression of tax discrimination
                                               against foreign funds at an EU level, simplified access to fund information and last but not
                                               least, higher levels of STP in the fund industry.
                                               Despite the fact that the theoretical full-STP model is widely-known in the industry, the
                                               principal obstacle to uptake lies in the difficulty and cost of implementation. Asset managers
                                               must do all they can to persuade distributors to automate processes. However, progress is
                                               likely to be slow, especially in Asia.
                                               In the future, industry players will have to continue working closely together to develop and
                                               implement the right industry standards and best practices.




page 54 | Cross-border distribution of UCITS
A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008

                                                                                                                                           BiBLioGraPHy




               AFG
               . Recommendations for Distribution Agreements, September 2007
               . Point sur l'industrialisation de la circulation des OPCVM, February 2008

               ALLFUNDS BANK, What we offer & Who we are (www.allfundsbank.com), 2008

               AXELTIS, Axeltis at a glance (www.axeltis.com), 2008

               CESr, CESR’s guidelines to simplify the notification procedure of UCITS, June 2006

               5TH CLEArSTrEAM FUND SUMMIT, Panel discussion:
               . How are asset managers facing the realities of global distribution?, June 2008
               . STP in cross-border distribution: Dream or reality?, June 2008

               CLEArSTrEAM, Investment fund services Product information (www.clearstream.com), 2008

               DATAMONITOr
               . Mutual Fund Distribution in Europe 2006, May 2006
               . UCITS III: Barriers and opportunities in European asset management, July 2006
               . The future of European investment distribution, August 2007

               DELOITTE, Cross-border fund distribution in Europe, September 2007

               EFAMA
               . Automating fund distribution: The business case for ISO 20022, July 2006
               . The Fund Processing Passport: A new tool for enhancing efficiency in the European investment
                fund, June 2007
               . EFAMA fact book – Trends in European investment funds, 2007
               . UCITS as a Global Brand – an industry survey by EFAMA, July 2008
               . Trends in the European investment fund industry in the second quarter of 2008, September 2008
               . Standardisation of funds processing in Europe, September 2008
               . Press release - CESR's advice on the management company passport: A very good basis for fine-
                 tuning, 31 October 2008

               EMXCo, About us (www.emxco.com), 2008

               EUrOCLEAr BANK
               . Achieving STP in fund transaction processing, December 2004
               . Services/FundSettle (www.euroclear.com), 2008

               EUrOCLEAr FrANCE
               . OPCVM une offre intégrée du routage d’ordres au R/L, 2008
               . Rapport d’activité plate-forme de routage d’ordres OPCVM Euroclear France, June 2008

               EUrOFI, Press release: Optimising cross-border distribution and processing of investment funds in the
               EU, December 2007

               EUrOPEAN COMMISSION
               . Green paper on the enhancement of the EU framework for investment funds, 12 July 2005
               . Financial services: Commission proposes improved EU framework for investment funds, 16 July 2008

               FINANCIAL TIMES fund management, Dublin shrugs off downturn blues, by Ian Fraser, 20 July 2008

               FUND CHANNEL, Open architecture services and solutions, 2008

               ICFA, Commission boosts UCITS IV prospects, 16 July 2008

               INTErNATIONAL BUSINESS TIMES, Chile: More pension funds can be invested abroad, September 2008

               INVESTOr SErVICES JOUrNAL, ISJ Panel debate – Tales from transfer agency, Volume 5 no. 27, 2008

               IGNITES EUrOPE, FT, Open architecture threatened by banking collapse, by Baptiste Aboulian, 9
               October 2008

               IPE, UCITS IV kicked into touch, July/August 2008


                                                                                                                       Cross-border distribution of UCITS | page 55
                                                                                                                 A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2008

                   BiBLioGraPHy




                                               IrISH FUNDS INDUSTrY ASSOCIATION, Industry statistics (www.irishfunds.ie), 2008

                                               KPMG
                                               . State of the investment management industry in Europe, July 2007
                                               . Funds and fund management 2008 KPMG survey, May 2008

                                               L’AGEFI HEBDO
                                               . Asian investors favour European UCITS, 16 June-2 July 2008
                                               . La réforme des fonds européens touche au but, 24-30 July 2008

                                               LIPPEr FErI
                                               . Cross-border marketing, 1995
                                               . European Fund Market Data Digest 2006, 2006
                                               . European Fund Market Data Digest 2008, March 2008
                                               . Fund Market monitor, October 2008

                                               MCKINSEY, The Asset Management industry in 2010, 2006

                                               MFEX, About MFEX & Our business (www.mfex.se), 2008

                                               MONDAQ Business Briefing, Investment Funds "hot topics" roundtable: burning issues affecting
                                               investment Funds in Ireland, May 2008

                                               NOrTON rOSE, Selling investment funds to German private investors - legal and regulatory issues,
                                               July 2008

                                               PArIS EUrOPLACE FINANCIAL FOrUM, Open architecture business models: New challenges of
                                               distribution, July 2007

                                               PrICEWATErHOUSECOOPErS & EFAMA, Tax discrimination against foreign funds: Light at the end of
                                               the tunnel, December 2005

                                               PrICEWATErHOUSECOOPErS
                                               . EU Savings Directive Health Check, 2006 (www.pwc.com)
                                               . Global distribution of UCITS – Trends, challenges and strategies, April 2007 (www.pwc.com)
                                               . Global Private Banking & Wealth Management Survey, 2007
                                               . Global fund distribution 2008, July 2008

                                               rBC DEXIA INVESTOr SErVICES, The future of the fund distribution market, January 2008

                                               rEUTErS LIMITED, Euro funds look beyond traditional distributors by Andrew Priest, 2 July 1998

                                               SUPErINTENDENTIA DE BANCA, Seguros y AFP, Evolución del Sistema Privado de Pensiones,
                                               Segundo Trimestre de 2008

                                               SWIFT
                                               . Fund distribution costs: The Billion EUR question, SIBOS 2007
                                               . Funds automation for low volume users – Lite, February 2008
                                               . Innovations dans le monde des fonds, May 2008

                                               THE BANKEr, UCITS break out of Europe to conquer the world, 2 June 2008

                                               THE ECONOMIST, We make, you sell, 1 March 2008

                                               THE TrADE NEWS, Euroclear buys UK mutual fund order routing network EMXCO, 11 December 2006




page 56 | Cross-border distribution of UCITS
                                                         appendices




                                                                      1
REgUlation REfEREncEs




                                                                      2
Regulation at the European Union level

Main legal texts relating to cross-border distribution
of UCITS

appEndix 1
UCITS Directive, consolidated text
produced by the CONSLEG system
of the Office for Official Publications
of the European Communities
CONSLEG: 1985L0611 — 13/02/2002



Regulation at domestic level

appEndix 2

References to the main legal texts relating to cross-
border distribution of UCITS for Germany, Austria,
Switzerland, France, Spain, Luxembourg, Ireland,
The Netherlands, Belgium and Hong Kong.
                                            APPENDIX 1




                                                         1
UCITS I & UCITS III


Consolidated direCtive 85/611/eeC
on the coordination of laws, regulations
and administrative provisions relating to
undertakings for collective investment
in transferable securities (UCITS)


Source: http://ec.europa.eu
►        This document is meant purely as a documentation tool and the institutions do not assume any liability for its contents




                                                                                                                                                     1
B
                                                              COUNCIL DIRECTIVE
                                                               of 20 December 1985
                    on the coordination of laws, regulations and administrative provisions relating to undertakings for
                                          collective investment in transferable securities (UCITS)
                                                                  (85/611/eeC)
                                                         (oJ l 375, 31.12.1985, p. 3)




         amended by:
                                                                                                official Journal
                                                                                          no           page           date


 M1     Council directive 88/220/eeC of 22 March 1988                                   l 100          31           19.4.1988


 M2     ►M2 european Parliament and Council directive 95/26/eC of 29 June 1995          l 168          71           8.7.1995


 M3     M3 directive 2000/64/eC of the european Parliament and of the Council           l 290          27           17.11.2000
         of 7 november 2000


 M4     directive 2001/107/eC of the european Parliament and of the Council             l 41           20           13.2.2002
         of 21 January 2002


 M5     directive 2001/108/eC of the european Parliament and of the Council             l 41           35           13.2.2002
         of 21 January 2002


 M6     directive 2004/39/eC of the european Parliament and of the Council              l 145            1          30.4.2004
         of 21 april 2004


 M7     directive 2005/1/eC of the european Parliament and of the Council of            l 79             9          24.3.2005
         9 March 2005



 C1     Corrected by:
         Corrigendum, oJ l 45, 16.2.2005, p. 18 (2004/39/eC)




page 3                                                                                           | Cross-border distribution of UCITS | Appendices
B
                                                       COUNCIL DIRECTIVE of 20 December 1985

                                   on the coordination of laws, regulations and administrative provisions relating to




                                                                                                                                                          1
                                        undertakings for collective investment in transferable securities (UCITS)

                                                                      (85/611/EEC)



         THE COUNCIL OF THE EUROPEAN COMMUNITIES,

         Having regard to the treaty establishing the european economic Community, and in particular article 57 (2) thereof,

         Having regard to the proposal from the Commission (1),

         Having regard to the opinion of the european Parliament (2),

         Having regard to the opinion of the economic and social Committee (3),

         Whereas the laws of the Member states relating to collective investment undertakings differ appreciably from one state
         to another, particularly as regards the obligations and controls which are imposed on those undertakings; Whereas those
         differences distort the conditions of competition between those undertakings and do not ensure equivalent protection for
         unit-holders;

         Whereas national laws governing collective investment undertakings should be coordinated with a view to approximating the
         conditions of competition between those undertakings at Community level, while at the same time ensuring more effective and
         more uniform protection for unit-holders; Whereas such coordination will make it easier for a collective investment undertak-
         ing situated in one Member state to market its units in other Member states;

         Whereas the attainment of these objectives will facilitate the removal of the restrictions on the free circulation of the units
         of collective investment undertakings in the Community, and such coordination will help to bring about a european capital
         market;

         Whereas, having regard to these objectives, it is desirable that common basic rules be established for the authorization, super-
         vision, structure and activities of collective investment undertakings situated in the Member states and the information they
         must publish;

         Whereas the application of these common rules is a sufficient guarantee to permit collective investment undertakings situated
         in Member states, subject to the applicable provisions relating to capital movements, to market their units in other Member
         states without those Member states’ being able to subject those undertakings or their units to any provision whatsoever
         other than provisions which, in those states, do not fall within the field covered by this directive; Whereas, nevertheless, if a
         collective investment undertaking situated in one Member state markets its units in a different Member state it must take all
         necessary steps to ensure that unit-holders in that other Member state can exercise their financial rights there with ease and
         are provided with the necessary information,

         Whereas the coordination of the laws of the Member states should be confined initially to collective investment undertak-
         ings other than of the closed-ended type which promote the sale of their units to the public in the Community and the sole
         object of which is investment in transferable securities (which are essentially transferable securities of ficially listed on stock
         exchanges or similar regulated markets); Whereas regulation of the collective investment undertakings not covered by the
         directive poses a variety of problems which must be dealt with by means of other provisions, and such undertakings will ac-
         cordingly be the subject of coordination at a later stage; Whereas pending such coordination any Member state may, inter
         alia, prescribe those categories of undertakings for collective investment in transferable securities (UCits) excluded from this
         directive’s scope on account of their investment and borrowing policies and lay down those specific rules to which such UCits
         are subject in carrying on their business within its territory;


         (1) OJ No C 171, 26. 7. 1976, p. 1.
         (2) OJ No C 57, 7. 3. 1977, p. 31.
         (3) OJ No C 75, 26. 3. 1977, p. 10.

page 5                                                                                                | Cross-border distribution of UCITS | Appendices
B
           Whereas the free marketing of the units issued by UCits authorized to invest up to 100% of their assets in transferable
           securities issued by the same body (state, local authority, etc.) may not have the direct or indirect effect of disturbing the
           functioning of the capital market or the financing of the Member states or of creating economic situations similar to those
           which article 68 (3) of the treaty seeks to prevent;

           Whereas account should be taken of the special situations of the Hellenic republic’s and Portuguese republic’s financial
           markets by allowing those countries and additional period in which to implement this directive,

           Has adoPted tHis direCtive:

                                                                          section i

                                                               General provisions and scope

                                                                          Article 1

           1. the Member states shall apply this directive to undertakings for collective investment in transferable securities (hereinafter
             referred to as UCits) situated within their territories.

           2. For the purposes of this directive, and subject to article 2, UCits shall be undertakings:
 M5
           — the sole object of which is the collective investment in transferable securities and/or in other liquid financial assets referred
               to in article 19(1) of capital raised from the public and which operates on the principle of risk-spreading and
B
           — the units of which are, at the request of holders, re-purchased or redeemed, directly or indirectly, out of those undertakings’
               assets. action taken by a UCits to ensure that the stock exchange value of its units does not significantly vary from their net
               asset value shall be regarded as equivalent to such re-purchase or redemption.

           3. such undertakings may be constituted according to law, either under the law of contract (as common funds managed by
             management companies) or trust law (as unit trusts) or under statute (as investment companies).

              For the purposes of this directive ‘common funds’ shall also include unit trusts.

           4. investment companies the assets of which are invested through the intermediary of subsidiary companies mainly otherwise
             than in transferable securities shall not, however, be subject to this directive.

           5. the Member states shall prohibit UCits which are subject to this directive from transforming themselves into collective
             investment undertakings which are not covered by this directive.

           6. subject to the provisions governing capital movements and to articles 44, 45 and 52 (2) no Member state may apply any other
             provisions whatsoever in the field covered by this directive to UCits situated in another Member state or to the units issued
             by such UCits, where they market their units within its territory.

           7. Without prejudice to paragraph 6, a Member state may apply to UCits situated within its territory requirements which are
             stricter than or additional to those laid down in article 4 et seq. of this directive, provided that they are of general application
             and do not conflict with the provisions of this directive.
 M5

           8. For the purposes of this directive, ‘transferable securities’ shall mean:

              — shares in companies and other securities equivalent to shares in companies (‘shares’),

              — Bonds and other forms of securitised debt (‘debt securities’),

              — any other negotiable securities which carry the right to acquire any such transferable securities by subscription or
                 exchange,

           excluding the techniques and instruments referred to in article 21.

           9. For the purposes of this directive ‘money market instruments’ shall mean instruments normally dealt in on the money market
             which are liquid, and have a value which can be accurately determined at any time.


appendice 1 | 1985L0611 — EN — 13.04.2005 — 006.001 - page 6
 M4
                                                                               Article 1a

           For the purposes of this directive:




                                                                                                                                                                       1
           1. ‘depositary’ shall mean any institution entrusted with the duties mentioned in articles 7 and 14 and subject to the other provi-
              sions laid down in sections iiia and iva;

           2. ‘Management company’ shall mean any company, the regular business of which is the management of UCits in the form
              of unit trusts/common funds and/or of investment companies (collective portfolio management of UCits); this includes the
              functions mentioned in annex ii;

           3. a ‘management company’s home Member state’ shall mean the Member state, in which the management company’s reg-
              istered office is situated;

           4. a ‘management company’s host Member state’ shall mean the Member state, other than the home Member state, within the
              territory of which a management company has a branch or provides services;

           5. a ‘UCits home Member state’ shall mean:

              (a) With regard to a UCits constituted as unit trust/common fund, the Member state in which the management company’s
                  registered office is situated,

              (b) With regard to a UCits constituted as investment company, the Member state in which the investment company’s regis-
                  tered office is situated;

           6. a ‘UCits host Member state’ shall mean the Member state, other than the UCits home Member state, in which the units of
              the common fund/unit trust or of the investment company are marketed;

           7. ‘Branch’ shall mean a place of business which is a part of the management company, which has no legal personality and
              which provides the services for which the management company has been authorised; all the places of business set up in
              the same Member state by a management company with headquarters in another Member state shall be regarded as a
              single branch;

           8. ‘Competent authorities’ shall mean the authorities which each Member state designates under article 49 of this directive;

           9. ‘Close links’ shall mean a situation as defined in article 2(1) of directive 95/26/eC (1);

           10. ‘Qualifying holdings’ shall mean any direct or indirect holding in a management company which represents 10 % or more of
               the capital or of the voting rights or which makes it possible to exercise a significant influence over the management of the
               management company in which that holding subsists.

               For the purpose of this definition, the voting rights referred to in article 7 of directive 88/627/eeC (1) shall be taken into
               account;

           11. ‘isd’ shall mean Council directive 93/22/eeC of 10 May 1993 on investment services in the securities field (2);

           12. ‘Parent undertaking’ shall mean a parent undertaking as defined in articles 1 and 2 of directive 83/349/eeC (3);

           13. ‘subsidiary’ shall mean a subsidiary undertaking as defined in articles 1 and 2 of directive 83/349/eeC; any subsidiary of a
               subsidiary undertaking shall also be regarded as a subsidiary of the parent undertaking which is the ultimate parent
               of those undertakings;

           14. ‘initial capital’ shall mean capital as defined in items 1 and 2 of article 34(2) of directive 2000/12/eC (4);

           15. ‘own funds’ shall mean own funds as defined in title v, Chapter 2, section 1 of directive 2000/12/eC; this definition may,
               however, be amended in the circumstances described in annex v of directive 93/6/eeC (5).


(1) OJ L 168, 18.7.1995, p. 7.
(2) OJ L 141, 11.6.1993, p. 27. Directive as last amended by Directive 2000/64/ EC (OJ L 290, 17.11.2000, p. 27).
(3) OJ L 193, 18.7.1983, p. 1. Directive as last amended by the 1994 Act of Accession.
(4) OJ L 126, 26.5.2000, p. 1. Directive as amended by Directive 2000/28/EC of the European Parliament and of the Council (OJ L 275, 27.10.2000, p. 37).
(5) OJ L 141, 11.6.1993, p. 1. Directive as last amended by Directive 98/33/EC of the European Parliament and of the Council (OJ L 204, 21.7.1998, p. 29).

page 7                                                                                                             | Cross-border distribution of UCITS | Appendices
B                                                                       Article 2

           1. the following shall not be UCits subject to this directive:

              — UCits of the closed-ended type;

              — UCits which raise capital without promoting the sale of their units to the public within the Community or any part of it;

              — UCits the units of which, under the fund rules or the investment company’s instruments of incorporation, may be sold only
                 to the public in non-member countries;

              — Categories of UCits prescribed by the regulations of the Member states in which such UCits are situated, for which the
                 rules laid down in section v and article 36 are inappropriate in view of their investment and borrowing policies.

           2. Five years after the implementation of this directive the Commission shall submit to the Council a report on the imple-
             mentation of paragraph 1 and, in particular, of its fourth indent. ifnecessary, it shall propose suitable measures to extend
             the scope.



                                                                         Article 3

           For the purposes of this directive, a UCits shall be deemed to be situated in the Member state in which the investment com-
           pany or the management company of the unit trust has its registered office; the Member states must require that the head
           office be situated in the same Member state as the registered office.



                                                                       seCtion ii

                                                                Authorization of UCITS

                                                                         Article 4

           1. no UCits shall carry on activities as such unless it has been authorized by the competent authorities of the Member state
             in which it is situated, hereinafter referred to as ‘the competent authorities’.

              such authorization shall be valid for all Member states.

           2. a unit trust shall be authorized only if the competent authorities have approved the management company, the fund rules and
             the choice of depositary. an investment company shall be authorized only if the competent authorities have approved both
             its instruments of incorporation and the choice of depositary.
 M4
           3. the competent authorities may not authorise a UCits if the management company or the investment company do not comply
             with the preconditions laid down in this directive, in sections iii and iv respectively.

              Moreover the competent authorities may not authorise a UCits if the directors of the depositary are not of sufficiently
              good repute or are not sufficiently experienced also in relation to the type of UCits to be managed. to that end, the
              names of the directors of the depositary and of every person succeeding them in office must be communicated forthwith
              to the competent authorities.

              directors shall mean those persons who, under the law or the instruments of incorporation, represent the depositary, or who
              effectively determine the policy of the depositary.

           3a. the competent authorities shall not grant authorisation if the UCits is legally prevented (e.g. through a provision in the fund
               rules or instruments of incorporation) from marketing its units or shares in its home Member state.
B
           4. neither the management company nor the depositary may be replaced, nor may the fund rules or the investment company’s
             instruments of incorporation be amended, without the approval of the competent authorities.




appendice 1 | 1985L0611 — EN — 13.04.2005 — 006.001 - page 8
 M4
                                                                   seCtion iii




                                                                                                                                                        1
                                                Obligations regarding management companies

                                                                      title a

                                                       Conditions for taking up business

                                                                     Article 5

         1. access to the business of management companies is subject to prior of ficial authorisation to be granted by the home Mem-
           ber state’s competent authorities. authorisation granted under this directive to a management company shall be valid for
           all Member states.

         2. no management company may engage in activities other than the management of UCits authorised according to this direc-
           tive except the additional management of other collective investment undertakings which are not covered by this directive
           and for which the management company is subject to prudential supervision but which cannot be marketed in other Member
           states under this directive.

           the activity of management of unit trusts/common funds and of investment companies includes, for the purpose of this
           directive, the functions mentioned in annex ii which are not exhaustive.

         3. By way of derogation from paragraph 2, Member states may authorise management companies to provide, in addition to the
           management of unit trusts/common funds and of investment companies, the following services:

           (a) Management of portfolios of investments, including those owned by pension funds, in accordance with mandates given
              by investors on a discretionary, client-by-client basis, where such portfolios include one or more of the instruments listed
              in section B of the annex to the isd,

           (b) as non-core services:

              — investment advice concerning one or more of the instruments listed in section B of the annex to the isd,

              — safekeeping and administration in relation to units of collective investment undertakings.

           Management companies may in no case be authorised under this directive to provide only the services mentioned in this
           paragraph or to provide non-core services without being authorised for the service referred to in point (a).
 M6
         4. articles 2(2), 12, 13 and 19 of  C1 directive 2004/39/eC of the european Parliament and of the Council of 21 april 2004 on
           markets in financial instruments (C1 Jo l 145 of 30.4.2004, p. 1), shall apply to the provision of the services referred to in
           paragraph 3 of this article by management companies.



 M4                                                                Article 5a

         1. Without prejudice to other conditions of general application laid down by national law, the competent authorities shall not
           grant authorisation to a management company unless:

           (a) the management company has an initial capital of at least eUr 125 000:

             — When the value of the portfolios of the management company, exceeds eUr 250 000 000, the management company
                 shall be required to provide an additional amount of own funds. this additional amount of own funds shall be equal to
                 0,02 % of the amount by which the value of the portfolios of the management company exceeds eUr 250 000 000. the
                 required total of the initial capital and the additional amount shall not, however, exceed eUr 10 000 000.

             — For the purpose of this paragraph, the following portfolios shall be deemed to be the portfolios of the management
                 company:

                 (i) Unit trusts/common funds managed by the management company including portfolios for which it has delegated the
                   management function but excluding portfolios that it is managing under delegation;

page 9                                                                                              | Cross-border distribution of UCITS | Appendices
 M4
                    (ii) investment companies for which the management company is the designated management company;

                    (iii) other collective investment undertakings managed by the management company including portfolios for which it
                        has delegated the management function but excluding portfolios that it is managing under delegation.

                 — irrespective of the amount of these requirements, the own funds of the management company shall never be less than
                    the amount prescribed in annex iv of directive 93/6/eeC.

                 — Member states may authorise management companies not to provide up to 50 % of the additional amount of own
                    funds referred to in the first indent if they benefit from a guarantee of the same amount given by a credit institution or
                    an insurance undertaking. the credit institution or insurance undertaking must have its registered office in a Member
                    state, or in a non-Member state provided that it is subject to prudential rules considered by the competent authorities
                    as equivalent to those laid down in Community law.

                 — no later than 13 February 2005, the Commission shall present a report to the european Parliament and the Council on
                    the application of this capital requirement, accompanied where appropriate by proposals for its revision;

              (b) the persons who effectively conduct the business of a management company are of sufficiently good repute and
                 are sufficiently experienced also in relation to the type of UCits managed by the management company. to that end,
                 the names of these persons and of every person succeeding them in office must be communicated forthwith to the
                 competent authorities. the conduct of a management company’s business must be decided by at least two persons
                 meeting such conditions;

              (c) the application for authorisation is accompanied by a programme of activity setting out, inter alia, the organisational
                 structure of he management company;

              (d) Both its head office and its registered office are located in the same Member state.

           2. Moreover where close links exist between the management company and other natural or legal persons, the competent
             authorities shall grant authorisation only if those do not prevent the effective exercise of their supervisory functions.

              the competent authorities shall also refuse authorisation if the laws, regulations or administrative provisions of a non-mem-
              ber country governing one or more natural or legal persons with which the management company has close links, or difficul-
              ties involved in their enforcement, prevent the effective exercise of their supervisory functions.

              the competent authorities shall require management companies to provide them with the information they require to moni-
              tor compliance with the conditions referred to in this paragraph on a continuous basis.

           3. an applicant shall be informed, within six months of the submission of a complete application, whether or not authorisation
             has been granted. reasons shall be given whenever an authorisation is refused.

           4. a management company may start business as soon as authorisation has been granted.

           5. the competent authorities may withdraw the authorisation issued to a management company subject to this directive only
             where that company:

              (a) does not make use of the authorisation within 12 months, expressly renounces the authorisation or has ceased the
                 activity covered by this directive more than six months previously unless the Member state concerned has provided for
                 authorisation to lapse in such cases;

              (b) Has obtained the authorisation by making false statements or by any other irregular means;

              (c) no longer fulfils the conditions under which authorisation was granted;

              (d) no longer complies with directive 93/6/eeC ifits authorisation also covers the discretionary portfolio management service
                 referred to in article 5(3)(a) of this directive;

              (e) Has seriously and/or systematically infringed the provisions adopted pursuant to this directive; or

              (f) Falls within any of the cases where national law provides for withdrawal.
appendice 1 | 1985L0611 — EN — 13.04.2005 — 006.001 - page 10
 M4
                                                                      Article 5b




                                                                                                                                                          1
          1. the competent authorities shall not grant authorisation to take up the business of management companies until they have
            been informed of the identities of the shareholders or members, whether direct or indirect, natural or legal persons, that have
            qualifying holdings and of the amounts of those holdings.

            the competent authorities shall refuse authorisation if, taking into account the need to ensure the sound and prudent
            management of a management company, they are not satisfied as to the suitability of the aforementioned shareholders
            or members.

          2. in the case of branches of management companies that have registered offices outside the european Union and are starting
            or carrying on business, the Member states shall not apply provisions that result in treatment more favourable than that ac-
            corded to branches of management companies that have registered offices in Member states.

          3. the competent authorities of the other Member state involved shall be consulted beforehand on the authorisation of any
            management company which is:

            (a) a subsidiary of another management company, an investment firm, a credit institution or an insurance undertaking au-
               thorised in another Member state,

            (b) a subsidiary of the parent undertaking of another management company, an investment firm, a credit institution or an
               insurance undertaking authorised in another Member state, or

            (c) Controlled by the same natural or legal persons as control another management company, an investment firm, a credit
               institution or an insurance undertaking authorised in another Member state.



                                                                        title B

                                                           Relations with third countries

                                                                      Article 5c

          1. relations with third countries shall be regulated in accordance with the relevant rules laid down in article 7 of the isd.

            For the purpose of this directive, the expressions ‘firm/investment firm’ and ‘investment firms’ contained in article 7 of the
            isd shall be construed respectively as ‘management company’ and ‘management companies’; the expression ‘providing
            investment services’ in article 7(2) of the isd shall be construed as ‘providing services’.

          2. the Member states shall also inform the Commission of any general difficulties which UCits encounter in marketing their
            units in any third country.



                                                                        title C

                                                                Operating conditions

                                                                      Article 5d

          1. the competent authorities of the management company’s home Member state shall require that the management company
            which they have authorised complies at all times with the conditions laid down in article 5 and article 5a(1) and (2) of this
            directive. the own funds of a management company may not fall below the level specified in article 5a(1)(a). if they do, how-
            ever, the competent authorities may, where the circumstances justify it, allow such firms a limited period in which to rectify
            their situations or cease their activities.

          2. the prudential supervision of a management company shall be the responsibility of the competent authorities of the home
            Member state, whether the management company establishes a branch or provides services in another Member state or
            not, without prejudice to those provisions of this directive which give responsibility to the authorities of the host country.

page 11                                                                                               | Cross-border distribution of UCITS | Appendices
 M4
                                                                        Article 5e

           1. Qualifying holdings in management companies shall be subject to the same rules as those laid down in article 9 of the isd.

           2. For the purpose of this directive, the expressions ‘firm/investment firm’ and ‘investment firms’ contained in article 9 of the
             isd shall be construed respectively as ‘management company’ and ‘management companies’.



                                                                         Article 5f

           1. each home Member state shall draw up prudential rules which management companies, with regard to the activity of man-
             agement of UCits authorised according to this directive, shall observe at all times.

              in particular, the competent authorities of the home Member state having regard also to the nature of the UCits managed
              by a management company, shall require that each such company:

              (a) Has sound administrative and accounting procedures, control and safeguard arrangements for electronic data process-
                  ing and adequate internal control mechanisms including, in particular, rules for personal transactions by its employees
                  or for the holding or management of investments in financial instruments in order to invest own funds and ensuring, inter
                  alia, that each transaction involving the fund may be reconstructed according to its origin, the parties to it, its nature,
                  and the time and place at which it was effected and that the assets of the unit trusts/common funds or of the investment
                  companies managed by the management company are invested according to the fund rules or the instruments of incor-
                  poration and the legal provisions in force;

              (b) is structured and organised in such a way as to minimise the risk of UCits’ or clients’ interests being prejudiced by con-
                  flicts of interest between the company and its clients, between one of its clients and another, between one of its clients
                  and a UCits or between two UCits. nevertheless, where a branch is set up, the organisational arrangements may not
                  conflict with the rules of conduct laid down by the host Member state to cover conflicts of interest.

           2. each management company the authorisation of which also covers the discretionary portfolio management service men-
             tioned in article 5(3)(a):

              — shall not be permitted to invest all or a part of the investor’s portfolio in units of unit trusts/common funds or of investment
                  companies it manages, unless it receives prior general approval from the client,

              — shall be subject with regard to the services referred to in article 5(3) to the provisions laid down in directive 97/9/eC of the
                  european Parliament and of the Council of 3 March 1997 on investorcompensation schemes (1).



                                                                        Article 5g

           1. if Member states permit management companies to delegate to third parties for the purpose of a more efficient conduct of
             the companies’ business to carry out on their behalfone or more of their own functions the following preconditions have to
             be complied with:

              (a) the competent authority must be informed in an appropriate manner;

              (b) the mandate shall not prevent the effectiveness of supervision over the management company, and in particular it
                  must not prevent the management company from acting, or the UCits from being managed, in the best interests of
                  its investors;

              (c) When the delegation concerns the investment management, the mandate may only be given to undertakings which are
                  authorised or registered for the purpose of asset management and subject to prudential supervision; the delegation must
                  be in accordance with investment-allocation criteria periodically laid down by the management companies;



           (1) OJ L 84, 26.3.1997, p. 22..

appendice 1 | 1985L0611 — EN — 13.04.2005 — 006.001 - page 12
 M4
            (d) Where the mandate concerns the investment management and is given to a third-country undertaking, cooperation




                                                                                                                                                          1
               between the supervisory authorities concerned must be ensured;

            (e) a mandate with regard to the core function of investment management shall not be given to the depositary or to any other
               undertaking whose interests may conflict with those of the management company or the unit-holders;

            (f) Measures shall exist which enable the persons who conduct the business of the management company to monitor ef-
               fectively at any time the activity of the undertaking to which the mandate is given;

            (g) the mandate shall not prevent the persons who conduct the business of the management company to give at any time
               further instructions to the undertaking to which functions are delegated and to withdraw the mandate with immediate
               effect when this is in the interest of investors;

            (h) Having regard to the nature of the functions to be delegated, the undertaking to which functions will be delegated must
               be qualified and capable of undertaking the functions in question, and

            (i) the UCits’ prospectuses list the functions which the management company has been permitted to delegate.

          2. in no case shall the management company’s and the depositary’s liability be affected by the fact that the management com-
            pany delegated any functions to third parties, nor shall the management company delegate its functions to the extent that it
            becomes a letter box entity.



                                                                       Article 5h

          each Member state shall draw up rules of conduct which management companies authorised in that Member state shall
          observe at all times. such rules must implement at least the principles set out in the following indents. these principles shall
          ensure that a management company:

          (a) acts honestly and fairly in conducting its business activities in the best interests of the UCits it manages and the integrity
             of the market;

          (b) acts with due skill, care and diligence, in the best interests of the UCits it manages and the integrity of the market;

          (c) Has and employs effectively the resources and procedures that are necessary for the proper performance of its busi-
             ness activities;

          (d) tries to avoid conflicts of interests and, when they cannot be avoided, ensures that the UCits it manages are fairly treated,
             and

          (e) Complies with all regulatory requirements applicable to the conduct of its business activities so as to promote the best
             interests of its investors and the integrity of the market.



                                                                            title d

                                           The right of establishment and the freedom to provide services

                                                                           Article 6

          1. Member states shall ensure that a management company, authorised in accordance with this directive by the competent
            authorities of another Member state, may carry on within their territories the activity for which it has been authorised, either
            by the establishment of a branch or under the freedom to provide services.

          2. Member states may not make the establishment of a branch or the provision of the services subject to any authorisation
            requirement, to any requirement to provide endowment capital or to any other measure having equivalent effect.




page 13                                                                                               | Cross-border distribution of UCITS | Appendices
 M4
                                                                        Article 6a

           1. in addition to meeting the conditions imposed in articles 5 and 5a, any management company wishing to establish a branch
             within the territory of another Member state shall notify the competent authorities of its home Member state.

           2. Member states shall require every management company wishing to establish a branch within the territory of another Mem-
             ber state to provide the following information and documents, when effecting the notification provided for in paragraph 1:

              (a) the Member state within the territory of which the management company plans to establish a branch;

              (b) a programme of operations setting out the activities and services according to article 5(2) and (3) envisaged and the
                 organisational structure of the branch;

              (c) the address in the host Member state from which documents may be obtained;

              (d) the names of those responsible for the management of the branch.

           3. Unless the competent authorities of the home Member state have reason to doubt the adequacy of the administrative struc-
             ture or the financial situation of a management company, taking into account the activities envisaged, they shall, within three
             months of receiving all the information referred to in paragraph 2, communicate that information to the competent authorities
             of the host Member state and shall inform the management company accordingly. they shall also communicate details of
             any compensation scheme intended to protect investors.

              Where the competent authorities of the home Member state refuse to communicate the information referred to in paragraph
              2 to the competent authorities of the host Member state, they shall give reasons for their refusal to the management com-
              pany concerned within two months of receiving all the information. that refusal or failure to reply shall be subject to the right
              to apply to the courts in the home Member state.

           4. Before the branch of a management company starts business, the competent authorities of the host Member state shall,
             within two months of receiving the information referred to in paragraph 2, prepare for the supervision of the management
             company and, ifnecessary, indicate the conditions, including the rules mentioned in articles 44 and 45 in force in the host
             Member state and the rules of conduct to be respected in the case of provision of the portfolio management service men-
             tioned in article 5(3) and of investment advisory services and custody, under which, in the interest of the general good, that
             business must be carried on in the host Member state.

           5. on receipt of a communication from the competent authorities of the host Member state or on the expiry of the period pro-
             vided for in paragraph 4 without receipt of any communication from those authorities, the branch may be established and
             start business. From that moment the management company may also begin distributing the units of the unit trusts/common
             funds and of the investment companies subject to this directive which it manages, unless the competent authorities of the
             host Member state establish, in a reasoned decision taken before the expiry of that period of two months — to be commu-
             nicated to the competent authorities of the home Member state – that the arrangements made for the marketing of the units
             do not comply with the provisions referred to in article 44(1) and article 45.

           6. in the event of change of any particulars communicated in accordance with paragraphs 2(b), (c) or (d), a management com-
             pany shall give written notice of that change to the competent authorities of the home and host Member states at least one
             month before implementing the change so that the competent authorities of the home Member state may take a decision on
             the change under paragraph 3 and the competent authorities of the host Member state may do so under paragraph 4.

           7. in the event of a change in the particulars communicated in accordance with the first subparagraph of paragraph 3, the
             authorities of the home Member state shall inform the authorities of the host Member state accordingly.




appendice 1 | 1985L0611 — EN — 13.04.2005 — 006.001 - page 14
 M4
                                                                      Article 6b




                                                                                                                                                          1
          1. any management company wishing to carry on business within the territory of another Member state for the first time un-
            der the freedom to provide services shall communicate the following information to the competent authorities of its home
            Member state:

            (a) the Member state within the territory of which the management company intends to operate;

            (b) a programme of operations stating the activities and services referred to in article 5(2) and (3) envisaged.

          2. the competent authorities of the home Member state shall, within one month of receiving the information referred to in
            paragraph 1, forward it to the competent authorities of the host Member state.

            they shall also communicate details of any applicable compensation scheme intended to protect investors.

          3. the management company may then start business in the host Member state notwithstanding the provisions of article 46.

            When appropriate, the competent authorities of the host Member state shall, on receipt of the information referred to in
            paragraph 1, indicate to the management company the conditions, including the rules of conduct to be respected in the case
            of provision of the portfolio management service mentioned in article 5(3) and of investment advisory services and custody,
            with which, in the interest of the general good, the management company must comply in the host Member state.

          4.should the content of the information communicated in accordance with paragraph 1(b) be amended, the management com-
           pany shall give notice of the amendment in writing to the competent authorities of the home Member state and of the host
           Member state before implementing the change, so that the competent authorities of the host Member state may, ifneces-
           sary, inform the company of any change or addition to be made to the information communicated under paragraph 3.

          5. a management company shall also be subject to the notification procedure laid down in this article in cases where it en-
            trusts a third party with the marketing of the units in a host Member state.



                                                                      Article 6c

          1. Host Member states may, for statistical purposes, require all management companies with branches within their ter-
            ritories to report periodically on their activities in those host Member states to the competent authorities of those host
            Member states.

          2. in discharging their responsibilities under this directive, host Member states may require branches of management compa-
            nies to provide the same particulars as national management companies for that purpose.

            Host Member states may require management companies, carrying on business within their territories under the free-
            dom to provide services, to provide the information necessary for the monitoring of their compliance with the standards
            set by the host Member state that apply to them, although those requirements may not be more stringent than those
            which the same Member state imposes on established management companies for the monitoring of their compliance
            with the same standards.

          3. Where the competent authorities of a host Member state ascertain that a management company that has a branch or
            provides services within its territory is in breach of the legal or regulatory provisions adopted in that state pursuant to those
            provisions of this directive which confer powers on the host Member state’s competent authorities, those authorities shall
            require the management company concerned to put an end to its irregular situation.

          4. if the management company concerned fails to take the necessary steps, the competent authorities of the host Member
            state shall inform the competent authorities of the home Member state accordingly. the latter shall, at the earliest opportu-
            nity, take all appropriate measures to ensure that the management company concerned puts an end to its irregular situation.
            the nature of those measures shall be communicated to the competent authorities of the host Member state.




page 15                                                                                               | Cross-border distribution of UCITS | Appendices
 M4
           5. if, despite the measures taken by the home Member state or because such measures prove inadequate or are not avail-
             able in the Member state in question, the management company persists in breaching the legal or regulatory provisions
             referred to in paragraph 2 in force in the host Member state, the latter may, after informing the competent authorities
             of the home Member state, take appropriate measures to prevent or to penalise further irregularities and, insof ar as
             necessary, to prevent that management company from initiating any further transaction within its territory. the Member
             states shall ensure that within their territories it is possible to serve the legal documents necessary for those measures
             on management companies.

           6. the foregoing provisions shall not affect the powers of host Member states to take appropriate measures to prevent or to
             penalise irregularities committed within their territories which are contrary to legal or regulatory provisions adopted in the
             interest of the general good. this shall include the possibility of preventing of fending management companies from initiating
             any further transactions within their territories.

           7. any measure adopted pursuant to paragraphs 4, 5 or 6 involving penalties or restrictions on the activities of a management
             company must be properly justified and communicated to the management company concerned. every such measure shall
             be subject to the right to apply to the courts in the Member state which adopted it.

           8. Before following the procedure laid down in paragraphs 3, 4 or 5 the competent authorities of the host Member state may, in
             emergencies, take any precautionary measures necessary to protect the interests of investors and others for whom services
             are provided. the Commission and the competent authorities of the other Member states concerned must be informed of
             such measures at the earliest opportunity.

              after consulting the competent authorities of the Member states concerned, the Commission may decide that the Member
              state in question must amend or abolish those measures.

           9. in the event of the withdrawal of authorisation, the competent authorities of the host Member state shall be informed and
             shall take appropriate measures to prevent the management company concerned from initiating any further transactions
             within its territory and to safeguard investors’ interests.  M7 every two years the Commission shall issue a report on such
             cases.  ►

           10. the Member states shall inform the Commission of the number and type of cases in which there have been refusals pursu-
               ant to article 6a or measures have been taken in accordance with paragraph 5. ►.  M7 every two years the Commission
               shall issue a report on such cases.  ► ►



                                                                           seCtion iiia

                                                                Obligations regarding the depositary
B
                                                                             Article 7

           1. a unit trust’s assets must be entrusted to a depositary for safekeeping.

           2. a depositary’s liability as referred to in article 9 shall not be affected by the fact that it has entrusted to a third party all or
             some of the assets in its safe-keeping.

           3. a depositary must, moreover:

              (a) ensure that the sale, issue, re-purchase, redemption and cancellation of units effected on behalf of a unit trust or by a
                 management company are carried out in accordance with the law and the fund rules;

              (b) ensure that the value of units is calculated in accordance with the law and the fund rules;

              (c) Carry out the instructions of the management company, unless they conflict with the law or the fund rules;

              (d) ensure that in transactions involving a unit trust’s assets any consideration is remitted to it within the usual time limits;

              (e) ensure that a unit trust’s income is applied in accordance with the law and the fund rules.

appendice 1 | 1985L0611 — EN — 13.04.2005 — 006.001 - page 16
B
                                                                        Article 8




                                                                                                                                                            1
          1. a depositary must either have its registered office in the same Member state as that of the management company or be
            established in that Member state if its registered office is in another Member state.

          2. a depositary must be an institution which is subject to public control. it must also furnish sufficient financial and prof essional
            guarantees to be able effectively to pursue its business as depositary and meet the commitments inherent in that function.

          3. the Member states shall determine which of the categories of institutions referred to in paragraph 2 shall be eligible to
            be depositaries.



                                                                        Article 9

          a depositary shall, in accordance with the national law of the state in which the management company’s registered office is
          situated, be liable to the management company and the unit-holders for any loss suffered by them as a result of its unjustifiable
          failure to perform its obligations or its improper performance of them. liability to unit-holders may be invoked either directly
          or indirectly through the management company, depending on the legal nature of the relationship between the depositary, the
          management company and the unit-holders.



                                                                       Article 10

          1. no single company shall act as both management company and depositary.

          2. in the context of their respective roles the management company and the depositary must act independently and solely in
            the interest of the unit-holders.



                                                                       Article 11

          the law or the fund rules shall lay down the conditions for the replacement of the management company and the depositary
          and rules to ensure the protection of unit-holders in the event of such replacement.

 M4
                                                                      seCtion iv

                                                    Obligations regarding investment companies

                                                                         title a

                                                          Conditions for taking up business

                                                                       Article 12

          access to the business of investment companies shall be subject to prior of ficial authorisation to be granted by the home
          Member states competent authorities.

          the Member states shall determine the legal form which an investment company must take.

B
                                                                       Article 13

          no investment company may engage in activities other than those referred to in article 1 (2).




page 17                                                                                                 | Cross-border distribution of UCITS | Appendices
 M4
                                                                        Article 13a

           1. Without prejudice to other conditions of general application laid down by national law, the competent authorities shall not
             grant authorisation to an investment company that has not designated a management company unless the investment com-
             pany has a sufficient initial capital of at least eUr 300 000.

              in addition, when an investment company has not designated a management company authorised pursuant to this
              directive:

              — the authorisation shall not be granted unless the application for authorisation is accompanied by a programme of activity
                 setting out, inter alia, the organisational structure of the investment company;

              — the directors of the investment company shall be of sufficiently good repute and be sufficiently experienced also in
                 relation to the type of business carried out by the investment company. to that end, the names of the directors and of
                 every person succeeding them in office must be communicated forthwith to the competent authorities. the conduct of
                 an investment company’s business must be decided by at least two persons meeting such conditions. directors shall
                 mean those persons who, under the law or the instruments of incorporation, represent the investment company, or who
                 effectively determine the policy of the company;

              — Moreover, where close links exist between the investment company and other natural or legal persons, the competent
                 authorities shall grant authorisation only if those do not prevent the effective exercise of their supervisory functions.

              the competent authorities shall also refuse authorisation if the laws, regulations or administrative provisions of a non-mem-
              ber country governing one or more natural or legal persons with which the investment company has close links, or difficul-
              ties involved in their enforcement, prevent the effective exercise of their supervisory functions.

              the competent authorities shall require investment companies to provide them with the information they require.

           2. an applicant shall be informed, within six months of the submission of a complete application, whether or not authorisation
             has been granted. reasons shall be given whenever an authorisation is refused.

           3. an investment company may start business as soon as authorisation has been granted.

           4. the competent authorities may withdraw the authorisation issued to an investment company subject to this directive only
             where that company:

              (a) does not make use of the authorisation within 12 months, expressly renounces the authorisation or has ceased the
                 activity covered by this directive more than 6 months previously unless the Member state concerned has provided for
                 authorisation to lapse in such cases;

              (b) Has obtained the authorisation by making false statements or by any other irregular means;

              (c) no longer fulfils the conditions under which authorisation was granted;

              (d) Has seriously and/or systematically infringed the provisions adopted pursuant to this directive; or

              (e) Falls within any of the cases where national law provides for withdrawal.



                                                                          title B

                                                                  Operating conditions

                                                                        Article 13b

           articles 5g and 5h shall apply to investment companies that have not designated a management company authorised pursuant
           to this directive. For the purpose of this article ‘management company’ shall be construed as ‘investment company’.

           investment companies may only manage assets of their own portfolio and may not, under any circumstances, receive any
           mandate to manage assets on behalfof a third party.

appendice 1 | 1985L0611 — EN — 13.04.2005 — 006.001 - page 18
 M4
                                                                        Article 13c




                                                                                                                                                             1
          each home Member state shall draw up prudential rules which shall be observed at all times by investment companies that
          have not designated a management company authorised pursuant to this directive.

          in particular, the competent authorities of the home Member state, having regard also to the nature of the investment company,
          shall require that the company has sound administrative and accounting procedures, control and safeguard arrangements for
          electronic data processing and adequate internal control mechanisms including, in particular, rules for personal transactions
          by its employees or for the holding or management of investments in financial instruments in order to invest its initial capital
          and ensuring, inter alia, that each transaction involving the company may be reconstructed according to its origin, the parties
          to it, its nature, and the time and place at which it was effected and that the assets of the investment company are invested
          according to the instruments of incorporation and the legal provisions in force.



                                                                      seCtion iva

                                                         Obligations regarding the depositary
B
                                                                         Article 14

          1. an investment company’s assets must be entrusted to a depositary for safe-keeping.

          2. a depositary’s liability as referred to in article 16 shall not be affected by the fact that it has entrusted to a third party all or
            some of the assets in its safe-keeping.

          3. a depositary must, moreover:

            (a) ensure that the sale, issue, re-purchase, redemption and cancellation of untis effected by or on behalf of a company are
               carried out in accordance with the law and with the company’s instruments of incorporation;

            (b) ensure that in transactions involving a company’s assets any consideration is remitted to it within the usual time limits;

            (c) ensure that a company’s income is applied in accordance with the law and its instruments of incorporation.

          4. a Member state may decide that investment companies situated within its territory which market their units exclusively
            through one or more stock exchanges on which their units are admitted to of ficial listing shall not be required to have de-
            positaries within the meaning of this directive.

            articles 34, 37 and 38 shall not apply to such companies. However, the rules for the valuation of such companies’ assets must
            be stated in law or in their instruments of incorporation.

          5. a Member state may decide that investment companies situated within its territory which market at least 80 % of their-units
            through one or more stock exchanges designated in their instruments of incorporation shall not be required to have deposi-
            taries within the meaning of this directive provided that their units are admitted to of ficial listing on the stock exchanges of
            those Member states within the territories of which the units are marketed, and that any transactions which such a company
            may effect outwith stock exchanges are effected at stock exchange prices only. a company’s instruments of incorporation
            must specify the stock exchange in the country of marketing the prices on which shall determine the prices at which that
            company will effect any transactions outwith stock exchanges in that country.

            a Member state shall avail itselfof the option provided for in the preceding subparagraph only ifit considers that unit-holders
            have protection equivalent to that of unit-holders in UCits which have depositaries within the meaning of this directive.

            in particular, such companies and the companies referred to in paragraph 4, must:

            (a) in the absence of provision in law, state in their instruments of incorporation the methods of calculation of the net asset
               values of their units;

            (b) intervene on the market to prevent the stock exchange values of their units from deviating by more than 5 % from their net
               asset values;
page 19                                                                                                  | Cross-border distribution of UCITS | Appendices
B
              (c) establish the net asset values of their units, communicate them to the competent authorities at least twice a week and
                 publish them twice a month.

              at least twice a month, an independent auditor must ensure that the calculation of the value of units is effected in ac-
              cordance with the law and the company’s instruments of incorporation. on such occasions, the auditor must make sure
              that the company’s assets are invested in accordance with the rules laid down by law and the company’s instruments of
              incorporation.

           6. the Member states shall inform the Commission of the identities of the companies benefiting from the derogations provided
             for in paragraphs 4 and 5.

              the Commission shall report to the Contact Committee on the application of paragraphs 4 and 5 within five years of the
              implementation of this directive. after obtaining the Contact Committee’s opinion, the Commission shall, ifneed be, propose
              appropriate measures.



                                                                        Article 15

           1. a depositary must either have its registered office in the same Member state as that of the investment company or be estab-
             lished in that Member state if its registered office is in another Member state.

           2. a depositary must be an institution which is subject to public control. it must also furnish sufficient financial and prof essional
             guarantees to be able effectively to pursue its business as depositary and meet the commitments inherent in that function.

           3. the Member states shall determine which of the categories of institutions referred to in paragraph 2 shall be eligible to
             be depositaries.



                                                                        Article 16

           a depositary shall, in accordance with the national law of the state in which the investment company’s registered office is
           situated, be liable to the investment company and the unit-holders for any loss suffered by them as a result of its unjustifiable
           failure to perform its obligations, or its improper performance of them.



                                                                        Article 17

           1. no single company shall act as both investment company and depositary.

           2. in carrying out its role as depositary, the depositary must act solely in the interests of the unit-holders.



                                                                        Article 18

           the law or the investment company’s instruments of incorporation shall lay down the conditions for the replacement of the
           depositary and rules to ensure the protection of unit-holders in the event of such replacement.




appendice 1 | 1985L0611 — EN — 13.04.2005 — 006.001 - page 20
B
                                                                     seCtion v




                                                                                                                                                         1
                                             Obligations concerning the investment policies of UCITS

                                                                     Article 19

          1. the investments of a unit trust or of an investment company must consist solely of:
 M5
            (a) transferable securities and money market instruments admitted to or dealt in on a regulated market within the meaning
               of article 1(13) of the isd and/or;
B
            (b) transferable securities  M5 and money market instruments dealt in on another regulated market in a Member state
               which operates regularly and is recognized and open to the public and/or;

            (c) transferable securities  M5 and money market instruments admitted to of ficial listing on a stock exchange in a
               non-member state or dealt in on another regulated market in a non-member state which operates regularly and is recog-
               nized and open to the public provided that the choice of stock exchange or market has been approved by the competent
               authorities or is provided for in law or the fund rules or the investment company’s instruments of incorporation and/or;

            (d) recently issued transferable securities, provided that:

               — the terms of issue include an undertaking that application will be made for admission to of ficial listing on a stock
                   exchange or to another regulated market which operates regularly and is recognized and open to the public, provided
                   that the choice of stock exchange or market has been approved by the competent authorities or is provided for in law
                   or the fund rules or the investment company’s instruments of incorporation;

               — such admission is secured within a year of issue  M5 and/ or; ►
 M5
            (e) Units of UCits authorised according to this directive and/or other collective investment undertakings within the meaning
               of the first and second indent of article 1(2), should they be situated in a Member state or not, provided that:

               — such other collective investment undertakings are authorised under laws which provide that they are subject to
                   supervision considered by the UCits’ competent authorities to be equivalent to that laid down in Community law, and
                   that cooperation between authorities is sufficiently ensured;

               — the level of protection for unit-holders in the other collective investment undertakings is equivalent to that provided
                   for unitholders in a UCits, and in particular that the rules on assets segregation, borrowing, lending, and uncovered
                   sales of transferable securities and money market instruments are equivalent to the requirements of this directive;

               — the business of the other collective investment undertakings is reported in half-yearly and annual reports to enable
                   an assessment to be made of the assets and liabilities, income and operations over the reporting period;

               — no more than 10 % of the UCits’ or the other collective investment undertakings’ assets, whose acquisition is con-
                   templated, can, according to their fund rules or instruments of incorporation, be invested in aggregate in units of other
                   UCits or other collective investment undertakings and/or;

            (f) deposits with credit institutions which are repayable on demand or have the right to be withdrawn, and maturing in no
              more than 12 months, provided that the credit institution has its registered office in a Member state or, if the registered
              office of the credit institution is situated in a non-Member state, provided that it is subject to prudential rules considered
              by the UCits’ competent authorities as equivalent to those laid down in Community law and/or;

            (g) Financial derivative instruments, including equivalent cash-settled instruments, dealt in on a regulated market referred
               to in subparagraphs (a), (b) and (c); and/or financial derivative instruments dealt in over-the-counter (‘otC derivatives’),
               provided that:

               — the underlying consists of instruments covered by this paragraph, financial indices, interest rates, foreign exchange
                  rates or currencies, in which the UCits may invest according to its investment objectives as stated in the UCits’ fund
                  rules or instruments of incorporation;


page 21                                                                                              | Cross-border distribution of UCITS | Appendices
 M5
                 — the counterparties to otC derivative transactions are institutions subject to prudential supervision, and belonging to
                     the categories approved by the UCits’ competent authorities and;

                 — the otC derivatives are subject to reliable and verifiable valuation on a daily basis and can be sold, liquidated or
                     closed by an of fsetting transaction at any time at their fair value at the UCits’ initiative, and/or;

              (h) Money market instruments other than those dealt in on a regulated market, which fall under article 1(9), if the issue
                 or issuer of such instruments is itselfregulated for the purpose of protecting investors and savings, and provided that
                 they are:

                 — issued or guaranteed by a central, regional or local authority or central bank of a Member state, the european Central
                     Bank, the european Union or the european investment Bank, a non-Member state or, in the case of a Federal state, by
                     one of the members making up the federation, or by a public international body to which one or more Member states
                     belong or;

                 — issued by an undertaking any securities of which are dealt in on regulated markets referred to in subparagraphs (a),
                     (b) or (c), or;

                 — issued or guaranteed by an establishment subject to prudential supervision, in accordance with criteria defined by
                     Community law, or by an establishment which is subject to and complies with prudential rules considered by the com-
                     petent authorities to be at least as stringent as those laid down by Community law or;

                 — issued by other bodies belonging to the categories approved by the UCits’ competent authorities provided that invest-
                    ments in such instruments are subject to investor protection equivalent to that laid down in the first, the second or the
                    third indent and provided that the issuer is a company whose capital and reserves amount to at least eUr 10 million
                    and which presents and publishes its annual accounts in accordance with directive 78/ 660/eeC (1), is an entity which,
                    within a group of companies which includes one or several listed companies, is dedicated to the financing of the group
                    or is an entity which is dedicated to the financing of securitisation vehicles which benefit from a banking liquidity line.
B
           2. However:

              (a) a UCits may invest no more than 10 % of its assets in transferable securities  M5 and money market instruments  ►
                 other than those referred to in paragraph 1;

              (c) an investment company may acquire movable and immovable property which is essential for the direct pursuit
                 of its business;

              (d) a UCits may not acquire either precious metals or certificates representing them.

           3. Unit trusts and companies may hold ancillary liquid assets.




           (1) Fourth Council Directive 78/660/EEC of 25 July 1978 based on Article 54(3)(g) of the Treaty on the annual accounts of certain types of
               companies (OJ L 222, 14.8.1978, p. 11). Directive as last amended by Directive 1999/60/ EC (OJ L 162, 26.6.1999, p. 65).

appendice 1 | 1985L0611 — EN — 13.04.2005 — 006.001 - page 22
 M5
                                                                       Article 21




                                                                                                                                                           1
          1. the management or investment company must employ a riskmanagement process which enables it to monitor and measure
            at any time the risk of the positions and their contribution to the overall risk profile of the portfolio; it must employ a process
            for accurate and independent assessment of the value of otC derivative instruments. it must communicate to the competent
            authorities regularly and in accordance with the detailed rules they shall define, the types of derivative instruments, the
            underlying risks, the quantitative limits and the methods which are chosen in order to estimate the risks associated with
            transactions in derivative instruments regarding each managed UCits.

          2. the Member states may authorise UCits to employ techniques and instruments relating to transferable securities and
            money market instruments under the conditions and within the limits which they lay down provided that such techniques and
            instruments are used for the purpose of efficient portfolio management. When these operations concern the use of deriva-
            tive instruments, these conditions and limits shall conform to the provisions laid down in this directive.

            Under no circumstances shall these operations cause the UCits to diverge from its investment objectives as laid down in
            the UCits’ fund rules, instruments of incorporation or prospectus.

          3. a UCits shall ensure that its global exposure relating to derivative instruments does not exceed the total net value of
            its portfolio.

            the exposure is calculated taking into account the current value of the underlying assets, the counterparty risk, future mar-
            ket movements and the time available to liquidate the positions. this shall also apply to the following subparagraphs.

            a UCits may invest, as a part of its investment policy and within the limit laid down in article 22(5), in financial derivative in-
            struments provided that the exposure to the underlying assets does not exceed in aggregate the investment limits laid down
            in article 22. the Member states may allow that, when a UCits invests in index-based financial derivative instruments, these
            investments do not have to be combined to the limits laid down in article 22.

            When a transferable security or money market instrument embeds a derivative, the latter must be taken into account when
            complying with the requirements of this article.

          4. the Member states shall send the Commission full information and any subsequent changes in their regulation concerning
            the methods used to calculate the risk exposures mentioned in paragraph 3, including the risk exposure to a counterparty
            in otC derivative transactions, no later than 13 February 2004. the Commission shall forward that information to the other
            Member states.  M7 such information shall be the subject of exchanges of views within the european securities Com-
            mittee. 

                                                                       Article 22

          1. a UCits may invest no more than 5 % of its assets in transferable securities or money market instruments issued by the same
            body. a UCits may not invest more than 20 % of its assets in deposits made with the same body.

            the risk exposure to a counterparty of the UCits in an otC derivative transaction may not exceed:

            — 10 % of its assets when the counterpart is a credit institution referred to in article 19(1)(f), or

            — 5 % of its assets, in other cases.

          2. Member states may raise the 5 % limit laid down in the first sentence of paragraph 1 to a maximum of 10 %. However, the
            total value of the transferable securities and the money market instruments held by the UCits in the issuing bodies in each
            of which it invests more than 5 % of its assets must not then exceed 40 % of the value of its assets. this limitation does not
            apply to deposits and otC derivative transactions made with financial institutions subject to prudential supervision.

            notwithstanding the individual limits laid down in paragraph 1, a UCits may not combine:

            — investments in transferable securities or money market instruments issued by,




page 23                                                                                                | Cross-border distribution of UCITS | Appendices
 M5
              — deposits made with, and/or

              — exposures arising from otC derivative transactions undertaken with a single body in excess of 20 % of its assets.

           3. the Member states may raise the 5 % limit laid down in the first sentence of paragraph 1 to a maximum of 35 % if the trans-
             ferable securities or money market instruments are issued or guaranteed by a Member state, by its local authorities, by a
             non-member state or by public international bodies to which one or more Member states belong.

           4. Member states may raise the 5 % limit laid down in the first sentence of paragraph 1 to a maximum of 25 % in the case of cer-
             tain bonds when these are issued by a credit institution which has its registered office in a Member state and is subject by
             law to special public supervision designed to protect bond-holders. in particular, sums deriving from the issue of these bonds
             must be invested in conformity with the law in assets which, during the whole period of validity of the bonds, are capable of
             covering claims attaching to the bonds and which, in the event of failure of the issuer, would be used on a priority basis for
             the reimbursement of the principal and payment of the accrued interest.

              When a UCits invests more than 5 % of its assets in the bonds referred to in the first subparagraph and issued by one issuer,
              the total value of these investments may not exceed 80 % of the value of the assets of the UCits.

              the Member states shall send the Commission a list of the aforementioned categories of bonds together with the categories
              of issuers authorised, in accordance with the laws and supervisory arrangements mentioned in the first subparagraph, to
              issue bonds complying with the criteria set out above. a notice specifying the status of the guarantees of fered shall be at-
              tached to these lists. the Commission shall immediately forward that information to the other Member states together with
              any comments which it considers appropriate, and shall make the information available to the public.  M7 such commu-
              nication shall be the subject of exchanges of views within the european securities Committee. 

           5. the transferable securities and money market instruments referred to in paragraphs 3 and 4 shall not be taken into account
             for the purpose of applying the limit of 40 % referred to in paragraph 2.

              the limits provided for in paragraphs 1, 2, 3 and 4 may not be combined, and thus investments in transferable securities or
              money market instruments issued by the same body or in deposits or derivative instruments made with this body carried out
              in accordance with paragraphs 1, 2, 3 and 4 shall under no circumstances exceed in total 35 % of the assets of the UCits.

              Companies which are included in the same group for the purposes of consolidated accounts, as defined in accordance with
              directive 83/349/ eeC (1) or in accordance with recognised international accounting rules, are regarded as a single body for
              the purpose of calculating the limits contained in this article.

              Member states may allow cumulative investment in transferable securities and money market instruments within the same
              group up to a limit of 20 %.



                                                                            Article 22a

           1. Without prejudice to the limits laid down in article 25, the Member states may raise the limits laid down in article 22 to a
             maximum of 20 % for investment in shares and/or debt securities issued by the same body when, according to the fund rules
             or instruments of incorporation, the aim of the UCits’ investment policy is to replicate the composition of a certain stock or
             debt securities index which is recognised by the competent authorities, on the following basis:

              — its composition is sufficiently diversified,




           (1) Seventh Council Directive 83/349/EEC of 13 June 1983 based on the Article 54(3)(g) of the Treaty on consolidated accounts (OJ L 193,
           18.7.1983, p. 1). Directive as last amended by the 1994 Act of Accession.


appendice 1 | 1985L0611 — EN — 13.04.2005 — 006.001 - page 24
 M5
            — the index represents an adequate benchmark for the market to which it refers,




                                                                                                                                                           1
            — it is published in an appropriate manner.

          2. Member states may raise the limit laid down in paragraph 1 to a maximum of 35 % where that proves to be justified by
            exceptional market conditions in particular in regulated markets where certain transferable securities or money market
            instruments are highly dominant. the investment up to this limit is only permitted for a single issuer.


B
                                                                      Article 23

          1. By way of derogation from article 22 and without prejudice to article 68 (3) of the treaty, the Member states may authorize
            UCits to invest in accordance with the principle of risk-spreading up to 100 % of their assets in different transferable securi-
            ties  M5 and money market instruments  issued or guaranteed by any Member state, its local authorities, a non-member
            state or public international bodies of which one or more Member states are members.

            the competent authorities shall grant such a derogation only if they consider that unit-holders in the UCits have protection
            equivalent to that of unit-holders in UCits complying with the limits laid down in article 22.

            such a UCits must hold securities from at least six different issues, but securities from any one issue may not account for
            more than 30 % of its total assets.

          2. the UCits referred to in paragraph 1 must make express mention in the fund rules or in the investment company’s instru-
            ments of incorporation of the states, local authorities or public international bodies issuing or guaranteeing securities in
            which they intend to invest more than 35 % of their assets; such fund rules or instruments of incorporation must be approved
            by the competent authorities.

          3. in addition each such UCits referred to in paragraph 1 must include a prominent statement in its prospectus and any promo-
            tional literature drawing attention to such authorization and indicating the states, local authorities and/or public international
            bodies in the securities of which it intends to invest or has invested more than 35 % of its assets.

 M5
                                                                      Article 24

          1. a UCits may acquire the units of UCits and/or other collective investment undertakings referred to in article 19(1)(e), pro-
            vided that no more than 10 % of its assets are invested in units of a single UCits or other collective investment undertaking.
            the Member states may raise the limit to a maximum of 20 %.

          2. investments made in units of collective investment undertakings other than UCits may not exceed, in aggregate, 30 % of the
            assets of the UCits.

            the Member states may allow that, when a UCits has acquired units of UCits and/or other collective investment under-
            takings, the assets of the respective UCits or other collective investment undertakings do not have to be combined for the
            purposes of the limits laid down in article 22.

          3. When a UCits invests in the units of other UCits and/or other collective investment undertakings that are managed, directly
            or by delegation, by the same management company or by any other company with which the management company is
            linked by common management or control, or by a substantial direct or indirect holding, that management company or other
            company may not charge subscription or redemption fees on account of the UCits’s investment in the units of such other
            UCits and/or collective investment undertakings.

          4. a UCits that invests a substantial proportion of its assets in other UCits and/or collective investment undertakings shall
            disclose in its prospectus the maximum level of the management fees that may be charged both to the UCits itselfand to the
            other UCits and/or collective investment undertakings in which it intends to invest. in its annual report it shall indicate the
            maximum proportion of management fees charged both to the UCits itself and to the UCits and/or other collective invest-
            ment undertaking in which it invests.

page 25                                                                                                | Cross-border distribution of UCITS | Appendices
 M5
                                                                         Article 24a

           1. the prospectus shall indicate in which categories of assets a UCits is authorised to invest. it shall mention iftransactions in
               financial derivative instruments are authorised; in this event, it must include a prominent statement indicating if these opera-
               tions may be carried out for the purpose of hedging or with the aim of meeting investment goals, and the possible outcome
               of the use of financial derivative instruments on the risk profile.

           2. When a UCits invests principally in any category of assets defined in article 19 other than transferable securities and money
               market instruments or replicates a stock or debt securities index in accordance with article 22a, its prospectus and, where
               necessary, any other promotional literature must include a prominent statement drawing attention to the investment policy.

           3. When the net asset value of a UCits is likely to have a high volatility due to its portfolio composition or the portfolio manage-
               ment techniques that may be used, its prospectus and, where necessary, any other promotional literature must include a
               prominent statement drawing attention to this characteristic.

           4. Upon request of an investor, the management company must also provide supplementary information relating to the quanti-
               tative limits that apply in the risk management of the UCits, to the methods chosen to this end and to the recent evolution of
               the main instrument categories’ risks and yields.

B         ►

                                                                          Article 25

           1. an investment company or a management company acting in connection with all of the unit trusts which it manages and
               which fall within the scope of this directive may not acquire any shares carrying voting rights which would enable it to exer-
               cise significant influence over the management of an issuing body.

               Pending further coordination, the Member states shall take account of existing rules defining the principle stated in the first
               subparagraph under other Member states’ legislation.

           2. Moreover, an investment company or unit trust may acquire no more than:

               — 10 % of the non-voting shares of any single issuing body;

               — 10 % of the debt securities of any single issuing body;
 M5
               — 25 % of the units of any single UCits and/or other collective investment undertaking within the meaning of the first and
                  second indent of article 1(2);

               — 10 % of the money market instruments of any single issuing body.

               the limits laid down in the second, third and fourth indents may be disregarded at the time of acquisition if at that time the
               gross amount of the debt securities or of the money market instruments, or the net amount of the securities in issue, cannot
               be calculated.
B
           3. a Member state may waive application of paragraphs 1 and 2 as regards:

               (a) transferable securities  M5 and money market instruments  issued or guaranteed by a Member state or its local
                  authorities;

               (b) transferable securities  M5 and money market instruments  issued or guaranteed by a non-member state;

               (c) transferable securities  M5 and money market instruments  issued by public international bodies of which one or
                  more Member states are members;

               (d) shares held by a UCits in the capital of a company incorporated in a non-member state investing its assets mainly in the
                  securities of issuing bodies having their registered offices in that state, where under the legislation of that state such




appendice 1 | 1985L0611 — EN — 13.04.2005 — 006.001 - page 26
B
               a holding represents the only way in which the UCits can invest in the securities of issuing bodies of that state. this




                                                                                                                                                          1
               derogation, however, shall apply only ifin its investment policy the company from the non-member state complies with
               the limits laid down in articles 22, 24 and 25 (1) and (2). Where the limits set in articles 22 and 24 are exceeded. article 26
               shall apply mutatis mutandis;
 M5
            (e) shares held by an investment company or investment companies in the capital of subsidiary companies carrying on only
               the business of management, advice or marketing in the country where the subsidiary is located, in regard to the repur-
               chase of units at unitholders’ request exclusively on its or their behalf.

B
                                                                        Article 26
 M5
          1. UCits need not comply with the limits laid down in this section when exercising subscription rights attaching to transferable
            securities or money market instruments which form part of their assets.

            While ensuring observance of the principle of risk spreading, the Member states may allow recently authorised UCits to
            derogate from articles 22, 22a, 23 and 24 for six months following the date of their authorisation.
B
          2. if the limits referred to in paragraph 1 are exceeded for reasons beyond the control of a UCits or as a result of the exercise
            of subscription rights, that UCits must adopt as a priority objective for its sales transactions the remedying of that situation,
            taking due account of the interests of its unit-holders.



                                                                       seCtion vi

                                         Obligations concerning information to be supplied to unitholders

                                               a. Publication of a prospectus and periodical reports

                                                                        Article 27
 M4
          1. an investment company and, for each of the unit trusts and common funds it manages, a management company,
           must publish:

            — a simplified prospectus,

            — a full prospectus,

            — an annual report for each financial year, and

            — a half-yearly report covering the first six months of the financial year.
B
          2. the annual and half-yearly reports must be published within the following time limits, with effect from the ends of the periods
            to which they relate:

            — Four months in the case of the annual report,

            — two months in the case of the half-yearly report.

 M4
                                                                        Article 28

          1. Both the simplified and the full prospectuses must include the information necessary for investors to be able to make an
            informed judgement of the investment proposed to them, and, in particular, of the risks attached thereto. the latter shall
            include, independent of the instruments invested in, a clear and easily understandable explanation of the fund’s risk profile.

          2. the full prospectus shall contain at least the information provided for in schedule a, annex i to this directive, in so far as
            that information does not already appear in the fund rules or instruments of incorporation annexed to the full prospectus in
            accordance with article 29(1).

page 27                                                                                               | Cross-border distribution of UCITS | Appendices
 M4
           3. the simplified prospectus shall contain in summary form the key information provided for in schedule C, annex i to this
             directive. it shall be structured and written in such a way that it can be easily understood by the average investor. Member
             states may permit that the simplified prospectus be attached to the full prospectus as a removable part of it. the simplified
             prospectus can be used as a marketing tool designed to be used in all Member states without alterations except translation.
             Member states may therefore not require any further documents or additional information to be added.

           4. Both the full and the simplified prospectus may be incorporated in a written document or in any durable medium having an
             equivalent legal status approved by the competent authorities.

           5. the annual report must include a balance-sheet or a statement of assets and liabilities, a detailed income and expenditure
             account for the financial year, a report on the activities of the financial year and the other information provided for in sched-
             ule B, annex i to this directive, as well as any significant information which will enable investors to make an informed judg-
             ment on the development of the activities of the UCits and its results.

           6. the half-yearly report must include at least the information provided for in Chapters i to iv of schedule B, annex i to this
             directive; Where a UCits has paid or proposes to pay an interim dividend, the figures must indicate the results after tax for
             the half-year concerned and the interim dividend paid or proposed.



                                                                        Article 29

           1. the fund rules or an investment company’s instruments of incorporation shall form an integral part of the full prospectus and
             must be annexed thereto.

           2. the documents referred to in paragraph 1 need not, however, be annexed to the full prospectus provided that the unit-holder
             is informed that on request he or she will be sent those documents or be apprised of the place where, in each Member state
             in which the units are placed on the market, he or she may consult them.



                                                                        Article 30

           the essential elements of the simplified and the full prospectuses must be kept up to date.


B
                                                                        Article 31

           the accounting information given in the annual report must be audited by one or more persons empowered by law to audit
           accounts in accordance with Council directive 84/253/eeC of 10 april 1984 based on article 54 (3) (g) of the eeC treaty on the
           approval of persons responsible for carrying out the statutory audits of accounting documents (1). the auditor’s report, includ-
           ing any qualifications, shall be reproduced in full in the annual report.


 M4
                                                                        Article 32

           UCits must send their simplified and full prospectuses and any amendments thereto, as well as their annual and half-yearly
           reports, to the competent authorities.



                                                                        Article 33

           1. the simplified prospectus must be of fered to subscribers free of charge before the conclusion of the contract.

              in addition, the full prospectus and the latest published annual and halfyearly reports shall be supplied to subscribers free of
              charge on request.

           (1) OJ No L 126, 12. 5. 1984, p. 20.

appendice 1 | 1985L0611 — EN — 13.04.2005 — 006.001 - page 28
 M4
          the annual and half-yearly reports shall be supplied to unit-holders free of charge on request.




                                                                                                                                                          1
          the annual and half-yearly reports must be available to the public at the places, or through other means approved by the com-
          petent authorities, specified in the full and simplified prospectus.

B
                                                          B. Publication of other information

                                                                       Article 34

          a UCits must make public in an appropriate manner the issue, sale, repurchase or redemption price of its units each time it
          issues, sells, repurchases or redeems them, and at least twice a month. the competent authorities may, however, permit a
          UCits to reduce the frequency to once a month on condition that such a derogation does not prejudice the interests of the
          unit-holders.


 M4
                                                                       Article 35

          all publicity comprising an invitation to purchase the units of UCits must indicate that prospectuses exist and the places where
          they may be obtained by the public or how the public may have access to them.


B
                                                                     seCtion vii

                                                          The general obligations of UCITS

                                                                       Article 36

          1. neither:

            — an investment company, nor

            — a management company or depositary acting on behalfof a unit trust, may borrow.

            However, a UCtis may acquire foreign currency by means of a ‘backto-back’ loan.

          2. By way of derogation from paragraph 1, a Member state may authorize a UCits to borrow:

            (a) Up to10%

            — of its assets, in the case of an investment company, or

            — of the value of the fund, in the case of a unit trust, provided that the borrowing is on a temporary basis;

            (b) Up to 10 % of its assets, in the case of an investment company, provided that the borrowing is to make possible the acqui-
               sition of immovable property essential for the direct pursuit of its business; in this case the borrowing and that referred to
               in subparagraph (a) may not in any case in total exceed 15 % of the borrower’s assets.



                                                                       Article 37

          1. a UCits must re-purchase or redeem its units at the request of any unit-holder.

          2. By way of derogation from paragraph 1:

            (a) a UCits may, in the cases and according to the procedures provided for by law, the fund rules or the investment com-
               pany’s instruments of incorporation, temporarily suspend the re-purchase or redemption of its units. suspension may be
               provided for only in exceptional cases where circumstances so require, and suspension is justified having regard to the
               interests of the unit-holders;



page 29                                                                                               | Cross-border distribution of UCITS | Appendices
B
              (b) the Member states may allow the competent authorities to require the suspension of the re-purchase or redemption of
                 units in the interest of the unit-holders or of the public.

           3. in the cases mentioned in paragraph 2 (a), a UCits must without delay communicate its decision to the competent authorities
             and to the authorities of all Member states in which it markets its units.



                                                                          Article 38

           the rules for the valuation of assets and the rules for calculating the sale or issue price and the re-purchase or redemp-
           tion price of the units of a UCits must be laid down in the law, in the fund rules or in the investment company’s instru-
           ments of incorporation.



                                                                          Article 39

           the distribution or reinvestment of the income of a unit trust or of an investment company shall be effected in accordance with
           the law and with the fund rules or the investment company’s instruments of incorporation.



                                                                          Article 40

           a UCits unit may not be issued unless the equivalent of the net issue price is paid into the assets of the UCits within the usual
           time limits. this provision shall not preclude the distribution of bonus units.



                                                                          Article 41

           1. Without prejudice to the application of articles 19 and 21, neither:

              — an investment company, nor

              — a management company or depositary acting on behalfof a unit trust

           may grant loans or act as a guarantor on behalfof third parties.
 M5
           2. Paragraph 1 shall not prevent such undertakings from acquiring transferable securities, money market instruments or other
             financial instruments referred to in article 19(1)(e), (g) and (h) which are not fully paid.



                                                                          Article 42

           neither:

           — an investment company, nor

           — a management company or depositary acting on behalfof a unit trust

           may carry out uncovered sales of transferable securities, money market instruments or other financial instruments referred to
           in article 19(1)(e), (g) and (h).


B
                                                                          Article 43

           the law or the fund rules must prescribe the remuneration and the expenditure which a management company is empowered
           to charge to a unit trust and the method of calculation of such remuneration.




appendice 1 | 1985L0611 — EN — 13.04.2005 — 006.001 - page 30
B
          the law or an investment company’s instruments of incorporation must prescribe the nature of the cost to be borne by




                                                                                                                                                              1
          the company.



                                                                     seCtion viii

                              Special provisions applicable to UCITS which market their units in Member States
                                                     other than those in which they are situated

                                                                       Article 44

          1. a UCits which markets its units in another Member state must comply with the laws, regulations and administrative provi-
            sions in force in that state which do not fall within the field governed by this directive.

          2. any UCits may advertise its units in the Member state in which they are marketed. it must comply the provisions governing
            advertising in that state.

          3. the provisions referred to in paragraphs 1 and 2 must be applied without discrimination.



                                                                       Article 45

          in the case referred to in article 44, the UCits must, inter alia, in accordance with the laws, regulations and administrative
          provisions in force in the Member state of marketing, take the measures necessary to ensure that facilities are available in
          that state for making payments to unit-holders, re-purchasing or redeeming units and making available the information which
          UCits are obliged to provide.

 M4
                                                                       Article 46

          if a UCits proposes to market its units in a Member state other than that in which it is situated, it must first inform the compe-
          tent authorities of that other Member state accordingly. it must simultaneously send the latter authorities:

          — an attestation by the competent authorities to the effect that it fulfils the conditions imposed by this directive,

          — its fund rules or its instruments of incorporation,

          — its full and simplified prospectuses,

          — Where appropriate, its latest annual report and any subsequent halfyearly report, and

          — details of the arrangements made of the marketing of its units in that other Member state.

          an investment company or a management company may begin to market its units in that other Member state two months after
          such communication, unless the authorities of the Member states concerned establish, in a reasoned decision taken before
          the expiry of that period of two months, that the arrangements made for the marketing of units do not comply with the provisions
          referred to in article 44(1) and article 45.



                                                                       Article 47

          if a UCits markets its units in a Member state other than that in which it is situated, it must distribute in that other Member
          state, in accordance with the same procedures as those provided for in the home Member state, the full and simplified pro-
          spectuses, the annual and half-yearly reports and the other information provided for in articles 29 and 30.

          these documents shall be provided in the or one of the of ficial languages of the host Member state or in a language approved
          by the competent authorities of the host Member state.



page 31                                                                                                   | Cross-border distribution of UCITS | Appendices
B
           ►

                                                                         Article 48

           For the purpose of carrying on its activities, a UCits may use the same generic name (such as investment company or unit
           trust) in the Community as it uses in the Member state in which it is situated. in the event of any danger of confusion, the host
           Member state may, for the purpose of clarification, require that the name be accompanied by certain explanatory particulars.



                                                                        seCtion iX

                                    Provisions concerning the authorities responsible for authorization and supervision

                                                                         Article 49

           1. the Member states shall designate the authorities which are to carry out the duties provided for in this directive. they shall
               inform the Commission thereof, indicating any division of duties.

           2. the authorities referred to in paragraph 1 must be public authorities or bodies appointed by public authorities.

           3. the authorities of the state in which a UCits is situated shall be competent to supervise that UCits. However, the authorities
               of the state in which a UCits markets its units in accordance with article 44 shall be competent to supervise compliance
               with section viii.

           4. the authorities concerned must be granted all the powers necessary to carry out their task.

           ►

                                                                         Article 50

           1. the authorities of the Member states referred to in article 49 shall collaborate closely in order to carry out their task and
               must for that purpose alone communicate to each other all information required.
 M2
           2. Member states shall provide that all persons who work or who have worked for the competent authorities, as well as audi-
               tors and experts instructed by the competent authorities, shall be bound by the obligation of prof essional secrecy. such
               secrecy implies that no confidential information which they may receive in the course of their duties may be divulged to
               any person or authority whatsoever, save in summary or aggregate form such that Ucits and management companies and
               depositaries (hereinafter referred to as undertakings contributing towards their business activity) cannot be individually
               identified, without prejudice to cases covered by criminal law.

               nevertheless, when an Ucits or an undertaking contributing towards its business activity has been declared bankrupt or is
               being compulsorily wound up, confidential information which does not concern third parties involved in rescue attempts may
               be divulged in civil or commercial proceedings.

           3. Paragraph 2 shall not prevent the competent authorities of the various Member states from exchanging information in ac-
               cordance with this directive or other directives applicable to Ucits or to undertakings contributing towards their business
               activity. that information shall be subject to the conditions of prof essional secrecy imposed in paragraph 2.
 M3
           4. Member states may conclude cooperation agreements providing for exchange of information with the competent authorities
               of third countries or with authorities or bodies of third countries as defined in paragraphs 6 and 7 only if the information dis-
               closed is subject to guarantees of prof essional secrecy at least equivalent to those referred to in this article. such exchange
               of information must be intended for the performance of the supervisory task of the authorities or bodies mentioned.

               Where the information originates in another Member state, it may not be disclosed without the express agreement of the
               competent authorities which have disclosed it and, where appropriate, solely for the purposes for which those authorities
               gave their agreement.




appendice 1 | 1985L0611 — EN — 13.04.2005 — 006.001 - page 32
 M2        
          5. Competent authorities receiving confidential information under paragraphs 2 or 3 may use it only in the course of




                                                                                                                                                          1
            their duties:

            — to check that the conditions governing the taking-up of the business of Ucits or of undertakings contributing towards their
                business activity are met and to facilitate the monitoring of the conduct of that business, administrative and accounting
                procedures and internalcontrol mechanisms,

            — to impose sanctions,

            — in administrative appeals against decisions by the competent authorities, or

            — in court proceedings initiated under article 51 (2).

          6. Paragraphs 2 and 5 shall not preclude the exchange of information:

            (a) Within a Member state, where there are two or more competent authorities; or

            (b) Within a Member state or between Member states, between competent authorities; and

                — authorities with public responsibility for the supervision of credit institutions, investment undertakings, insurance un-
                   dertakings and other financial organizations and the authorities responsible for the supervision of financial markets,

                — Bodies involved in the liquidation or bankruptcy of Ucits and other similar procedures and of undertakings contributing
                   towards their business activity,

                — Persons responsible for carrying out statutory audits of the accounts of insurance undertakings, credit institutions,
                   investment undertakings and other financial institutions,

            in the performance of their supervisory functions, or the disclosure to bodies which administer compensation schemes of
            information necessary for the performance of their functions. such information shall be subject to the conditions of prof es-
            sional secrecy imposed in paragraph 2.

          7. notwithstanding paragraphs 2 to 5, Member states may authorize exchanges of information between the competent
            authorities and:

            — the authorities responsible for overseeing the bodies involved in the liquidation and bankruptcy of undertakings for col-
                lective investment in transferable securities (Ucits) or undertakings contributing towards their business activity and other
                similar procedures, or

            — the authorities responsible for overseeing persons charged with carrying out statutory audits of the accounts of insur-
                ance undertakings, credit institutions, investment firms and other financial institutions.

            Member states which have recourse to the option provided for in the first subparagraph shall require at least that the follow-
            ing conditions are met:

            — the information shall be for the purpose of performing the task of overseeing referred to in the first subparagraph,

            — information received in this context shall be subject to the conditions of prof essional secrecy imposed in paragraph 2,

            — Where the information originates in another Member state, it may not be disclosed without the express agreement of the
                competent authorities which have disclosed it and, where appropriate, solely for the purposes for which those authorities
                gave their agreement.

            Member states shall communicate to the Commission and to the other Member states the names of the authorities which
            may receive information pursuant to this paragraph.

          8. notwithstanding paragraphs 2 to 5, Member states may, with the aim of strengthening the stability, including integrity, of the
            financial system, authorize the exchange of information between the competent authorities and the authorities or bodies
            responsible under the law for the detection and investigation of breaches of company law.



page 33                                                                                               | Cross-border distribution of UCITS | Appendices
 M2
              Member states which have recourse to the option provided for in the first subparagraph shall require at least that the follow-
              ing conditons are met:

              — the information shall be for the purpose of performing the task referred to in the first subparagraph,

              — information received in this context shall be subject to the conditions of prof essional secrecy imposed in paragraph 2,

              — Where the information originates in another Member state, it may not be disclosed without the express agreement of the
                 competent authorities which have disclosed it and, where appropriate, solely for the purposes for which those authorities
                 gave their agreement.

              Where, in a Member state, the authorities or bodies referred to in the first subparagraph perform their task of detection or
              investigation with the aid, in view of their specific competence, of persons appointed for that purpose and not employed in
              the public sector the possibility of exchanging information provided for in the first subparagraph may be extended to such
              persons under the conditions stipulated in the second subparagraph.

              in order to implement the final indent of the second subparagraph, the authorities or bodies referred to in the first subpara-
              graph shall communicate to the competent authorities which have disclosed the information the names and precise respon-
              sibilities of the persons to whom it is to be sent.

              Member states shall communicate to the Commission and to the other Member states the names of the authorities or bodies
              which may receive information pursuant to this paragraph.

              Before 31 december 2000, the Commission shall draw up a report on the application of this paragraph.

           9. this article shall not prevent a competent authority from transmitting to central banks and other bodies with a similar func-
             tion in their capacity as monetary authorities information intended for the performance of their tasks, nor shall it prevent such
             authorities or bodies from communicating to the competent authorities such information as they may need for the purposes
             of paragraph 5. information received in this context shall be subject to the conditions of prof essional secrecy imposed in
             this article.

           10. this article shall not prevent the competent authorities from communicating the information referred to in paragraphs 2 to 5
               to a clearing house or other similar body recognized under national law for the provision of clearing or settlement services
               for one of their Member state’s markets if they consider that it is necessary to communicate the information in order to
               ensure the proper functioning of those bodies in relation to defaults or potential defaults by market participants. the infor-
               mation received in this context shall be subject to the conditions of prof essional secrecy imposed in paragraph 2. Member
               states shall, however, ensure that information received under paragraph 3 may not be disclosed in the circumstances
               referred to in this paragraph without the express consent of the competent authorities which disclosed it.

           11. in addition, notwithstanding the provisions referred to in paragraphs 2 and 5, Member states may, by virtue of provisions laid
               down by law, authorize the disclosure of certain information to other departments of their central government administra-
               tions responsible for legislation on the supervision of Ucits and of undertakings contributing towards their business activity,
               credit institutions, financial institutions, investment undertakings and insurance undertakings and to inspectors instructed
               by those departments.

               such disclosures may, however, be made only where necessary for reasons of prudential control.

               Member states shall, however, provide that information received under paragraphs 3 and 6 may never be disclosed in
               the circumstances referred to in this paragraph except with the express agreement of the competent authorities which
               disclosed the information.




appendice 1 | 1985L0611 — EN — 13.04.2005 — 006.001 - page 34
 M2
                                                                            Article 50a




                                                                                                                                                                    1
          1. Member states shall provide at least that:

            (a) any person authorized within the meaning of directive 84/253/ eeC (1), performing in an undertaking for collective invest-
                ment in transferable securities (Ucits) or an undertaking contributing towards its business activity the task described in
                article 51 of directive 78/ 660/eeC (2), article 37 of directive 83/349/eeC or article 31 of directive 85/611/eeC or any other
                statutory task, shall have a duty to report promptly to the competent authorities any fact or decision concerning that
                undertaking of which he has become aware while carrying out that task which is liable to:

                — Constitute a material breach of the laws, regulations or administrative provisions which lay down the conditions gov-
                   erning authorization or which specifically govern pursuit of the activities of undertakings for collective investment in
                   transferable securities (Ucits) or undertakings contributing towards their business activity, or

                — affect the continuous functioning of the undertaking for collective investment in transferable securities (Ucits) or an
                   undertaking contributing towards its business activity, or

                — lead to refusal to certify the accounts or to the expression of reservations;

            (b) that person shall likewise have a duty to report any facts and decisions of which he becomes aware in the course of
                carrying out a task as described in (a) in an undertaking having close links resulting from a control relationship with the
                undertaking for collective investment in transferable securities (Ucits) or an undertaking contributing towards its busi-
                ness activity within which he is carrying out the abovementioned task.

          2. the disclosure in good faith to the competent authorities, by persons authorized within the meaning of directive 84/253/eeC,
            of any fact or decision referred to in paragraph 1 shall not constitute a breach of any restriction on disclosure of information
            imposed by contract of by any legislative, regulatory or administrative provision and shall not involce such persons in liability
            of any kind.

B
                                                                             Article 51

          1. the authorities referred to in article 49 must give reasons for any decision to refuse authorization, and any negative
            decision taken in implementation of the general measures adopted in application of this directive, and communicate
            them to applicants.

          2.the Member states shall provide that decisions taken in respect of a UCits pursuant to laws, regulations and administrative
           provisions adopted in accordance with this directive are subject to the right to apply to the courts; the same shall apply ifno
           decision is taken within six months of its submission on an authorization application made by a UCits which includes all the
           information required under the provisions in force.



                                                                             Article 52

          1. only the authorities of the Member state in which a UCits is situated shall have the power to take action against it ifit
            infringes any law, regulation or administrative provision or any regulation laid down in the fund rules or in the investment
            company’s instruments of incorporation.

          2. nevertheless, the authorities of the Member state in which the units of a UCits are marketed may take action against it ifit
            infringes the provisions referred to in section viii.




          (1) OJ No L 126, 12. 5. 1984, p. 20.
          (2) OJ No L 222, 14. 8. 1978, p. 11. Directive as last amended by Directive 90/ 605/EEC (OJ No L 317, 16. 11. 1990, p. 60).


page 35                                                                                                         | Cross-border distribution of UCITS | Appendices
B
           3. any decision to withdraw authorization, or any other serious measure taken against a UCits, or any suspension of re-pur-
             chase or redemption imposed upon it, must be communicated without delay by the authorities of the Member state in which
             the UCits in question is situated to the authorities of the other Member states in which its units are marketed.

 M4

                                                                         Article 52a

           1. Where, through the provision of services or by the establishment of branches, a management company operates in one or
             more host Member states, the competent authorities of all the Member states concerned shall collaborate closely.

              they shall supply one another on request with all the information concerning the management and ownership of such man-
              agement companies that is likely to facilitate their supervision and all information likely to facilitate the monitoring of such
              companies. in particular, the authorities of the home Member state shall cooperate to ensure that the authorities of the host
              Member state collect the particulars referred to in article 6c(2).

           2. nsof ar as it is necessary for the purpose of exercising their powers of supervision, the competent authorities of the home
             Member state shall be informed by the competent authorities of the host Member state of any measures taken by the host
             Member state pursuant to article 6c(6) which involve penalties imposed on a management company or restrictions on a
             management company’s activities.



                                                                         Article 52b

           1. each host Member state shall ensure that, where a management company authorised in another Member state carries on
             business within its territory through a branch, the competent authorities of the management company’s home Member state
             may, after informing the competent authorities of the host Member state, themselves or through the intermediary of persons
             they instruct for the purpose, carry out on-the-spot verification of the information referred to in article 52a.

           2. the competent authorities of the management company’s home Member state may also ask the competent authorities of the
             management company’s host Member state to have such verification carried out. authorities which receive such requests
             must, within the framework of their powers, act upon them by carrying out the verifications themselves, by allowing the
             authorities who have requested them to carry them out or by allowing auditors or experts to do so.

           3. this article shall not affect the right of the competent authorities of the host Member state, in discharging their responsibili-
             ties under this directive, to carry out on-the-spot verifications of branches established within their territory.

B
                                                                         seCtion X
 M7
                                                                European Securities Committee

                                                                         Article 53a

           the technical amendments to be made to this directive in the following areas shall be adopted in accordance with the proce-
           dure referred to in article 53b(2):

           (a) Clarification of the definitions in order to ensure uniform application of this directive throughout the Community;

           (b) alignment of terminology and the framing of definitions in accordance with subsequent acts on UCits and related matters.




appendice 1 | 1985L0611 — EN — 13.04.2005 — 006.001 - page 36
 M7
                                                                           article 53b




                                                                                                                                                                     1
          1. the Commission shall be assisted by the european securities Committee instituted by Commission decision 2001/528/eC (1),
            hereinafter ‘the Committee’.

          2. Where reference is made to this paragraph, articles 5 and 7 of decision 1999/468/eC (2) shall apply, having regard to the
            provisions of article 8 thereof.
            the period laid down in article 5(6) of decision 1999/468/eC shall be set at three months.

          3. the Committee shall adopt its rules of procedure.


B
                                                                          seCtion Xi

                                                    Transitional provisions, derogations and final provisions

                                                                            Article 54

          solely for the purpose of danish UCits, pantebreve issued in denmark shall be treated as equivalent to the transferable securi-
          ties referred to in article 19 (1) (b).



                                                                            Article 55

          By way of derogation from articles 7 (1) and 14 (1), the competent authorities may authorize those UCits which, on the date
          of adoption of this directive, had two or more depositaries in accordance with their national law to maintain that number of
          depositaries ifthose authorities have guarantees that the functions to be performed under articles 7 (3) and 14 (3) will be per-
          formed in practice.



                                                                            Article 56

          1. By way of derogation from article 6, the Member states may authorize management companies to issue bearer certificates
            representing the registered securities of other companies.

          2. the Member states may authorize those management companies which, on the date of adoption of this directive, also carry
            on activities other than those provided for in article 6 to continue those other activities for five years after that date.




                                                                            Article 57

          1. the Member states shall bring into force no later than 1 october 1989 the measures necessary for them to comply with this
            directive. they shall forthwith inform the Commission thereof.

          2. the Member states may grant UCits existing on the date of implementation of this directive a period of not more than 12
            months from that date in order to comply with the new national legislation.

          3. the Hellenic republic and the Portuguese republic shall be authorized to postpone the implementation of this directive until
            1 april 1992 at the latest.

            one year before that date the Commission shall report to the Council on progress in implementing the directive and on any
            difficulties which the Hellenic republic or the Portuguese republic may encounter in implementing the directive by the date
            referred to in the first subparagraph.



          (1) OJ L 191, 13.7.2001, p. 45. Decision as amended by Decision 2004/8/EC (OJ L 3, 7.1.2004, p. 33).
          (2) OJ L 184, 17.7.1999, p. 23.

page 37                                                                                                          | Cross-border distribution of UCITS | Appendices
B
              the Commission shall, ifnecessary, propose that the Council extend the postponement by up to four years.



                                                                      Article 58

           the Member states shall ensure that the Commission is informed of the texts of the main laws, regulations and administrative
           provisons which they adopt in the field covered by this directive.



                                                                      Article 59

           this directive is addressed to the Member states.




appendice 1 | 1985L0611 — EN — 13.04.2005 — 006.001 - page 38
B
                                                                  ANNEX  M4 1 
                                                                      SCHEDULE A


 1. Information concerning the unit trust            1. Information concerning                          1.Information concerning




                                                                                                                                                                    1
                                                        the management company                            the investment company

 1.1 name                                            1.1 name or style, form in law, registered         1.1 name or style, form in law, registered
                                                         office and head office if different from the       office and head office if different from the
                                                         registered office                                  registered office

 1.2 date of establishment of the common fund.       1.2 date of incorporation of the company.          1.2 date of the incorporation of the company.
     indication of duration, if limited                  indication of duration, if limited.                indication of duration,
                                                                                                            if limited.
                                                     1.3 if the company manages other common             M4 1.3 in the case of investment
                                                         funds , indication of those other funds                      companies having different
                                                                                                                      investment compartments, the
                                                                                                                      indication of the compartments.


 1.4 statement of the place where the fund                                                              1.4 statement of the place where the
     rules, if they are not annexed, and periodic                                                           instruments of incorporation, if they are
     reports may be obtained.                                                                               not annexed, and periodical reports may
                                                                                                            be obtained.

 1.5 Brief indications relevant to unit-holders of                                                      1.5 Brief indications relevant to unit-holders of
     the tax system applicable to the common                                                                the tax system applicable to the company.
     fund. details of whether deductions are                                                                details of whether deductions are made at
     made at source from the income and                                                                     source from the income and capital gains
     capital gains paid by the common fund to                                                               paid by the company to unit-holders.
     unit-holders.
 1.6 accounting and distribution dates                                                                  1.6. accounting and distribution dates.

 1.7 names of the persons responsible for                                                               1.7 names of the persons responsible for
     auditing the accounting information                                                                    auditing the accounting information
     referred to in article 31.                                                                             referred to in article 31.
                                                     1.8 names and positions in the company             1.8 names and positions in the company
                                                         of the members of the administrative,              of the members of the administrative,
                                                         management and supervisory bodies.                 management and supervisory bodies.
                                                         details of their main activities outside the       details of their main activities outside the
                                                         company where these are of significance            company where these are of significance
                                                         with respect to that company                       with respect to that company.

                                                     1.9 amount of the subscribed capital with an       1.9 Capital
                                                         indication of the capital paid-up
 1.10 details of the types and main                                                                     1.10 details of the types and main
       characteristics of the units and in                                                                   characteristics of the units and in
       particular:                                                                                           particular:
  . the nature of the right (real, personal or                                                          . original securities or certificates providing
    other) represented by the unit,                                                                       evidence of title; entry in a register or in an
 . original securities or certificates providing                                                          account,
   evidence of title; entry in a register or in an                                                      . Characteristics of the units: registered or
   account,                                                                                               bearer. indication of any denominations
 . Characteristics of the units: registered or                                                            which may be provided for,
   bearer. indication of any denominations                                                              . indication of unit-holders’ voting rights,
   which may be provided for,                                                                           .Circumstances in which winding-up of the
 . indication of unit-holders’ voting rights if                                                          investment company can be decided on
   these exist,                                                                                          and winding-up procedure, in particular as
 . Circumstances in which winding-up of                                                                  regards the rights of unit-holders.
   the common fund can be decided on and
   winding-up procedure, in particular as
   regards the rights of unit-holders.


 1.11 Where applicable, indication of stock                                                             1. 11 Where applicable, indication of stock
      exchanges or markets where the units                                                                    exchanges or markets where the units
      are listed or dealt in.                                                                                 are listed or dealt in.
 1.12 Procedures and conditions of issue and                                                            1.12 Procedures and conditions of issue and
      sale of units                                                                                          sale of units




page 39                                                                                                         | Cross-border distribution of UCITS | Appendices
B

 1.13 Procedures and conditions for re-                                                           1.13 Procedures and conditions for re-
      purchase or redemption of units, and                                                             purchase or redemption of units, and
      circumstances in which re-purchase or                                                            circumstances in which re-purchase or
      redemption may be suspended.                                                                     redemption may be suspended.
                                                                                                   M4 in the case of investment companies
                                                                                                           having different investment
                                                                                                           compartments, information on how
                                                                                                           a unit-holder may pass from one
                                                                                                           compartment into another and the
                                                                                                           charges applicable in such cases. 
 1.14 description of rules for determining and                                                    1.14 description of rules for determining and
     applying income.                                                                                 applying income.

 1.15 description of the unit trust’s investment                                                  1.15 description of the company’s
      objectives, including its financial                                                              investment objectives, including
      objectives (e.g. capital growth or                                                               its financial objectives (e.g. capital
      income), investment policy (e.g.                                                                 growth or income), investment policy
      specialisation in geographical or                                                                (e.g. specialisation in geographical or
      industrial sectors), any limitations on                                                          industrial sectors), any limitations on
      that investment policy and an indication                                                         that investment policy and an indication
      of any techniques and instruments or                                                             of any techniques and instruments or
      borrowing powers which may be used in                                                            borrowing powers which may be used in
      the management of the unit trust                                                                 the management of the company
 1.16 rules for the valuation of assets                                                           1.16 rules for the valuation of assets

 1.17 determination of the sale or issue price                                                    1.17 determination of the sale or issue price
       and the re-purchase or redemption price                                                          and the re-purchase or redemption price
       of units, in particular:                                                                         of units, in particular:
 - the method and frequency of the calculation                                                    - the method and frequency of the calculation
   of those prices,                                                                                 of those prices,
 - information concerning the charges relating                                                    - information concerning the charges relating
   to the sale or issue and the re-purchase or                                                      to the sale or issue and the re-purchase or
   redemption of units,                                                                             redemption of units,
 - the means, places and frequency of the                                                         - the means, places and frequency of the
   publication of those prices.                                                                     publication of those prices(1)


 1.18 information concerning the manner,                                                          1.18 information concerning the manner,
      amount and calculation of remuneration                                                           amount and calculation of remuneration
      payable by the common fund to the                                                                paid by the company to its directors,
      management company, the depositary or                                                            and members of the administrative,
      third parties, and reimbursement of costs                                                        management and supervisory bodies, to
      by the common fund to the management                                                             the depositary, or to third parties, and
      company, to the depositary or to third                                                           reimbursement of costs by the company
      parties.                                                                                         to its directors, to the depositary or to
                                                                                                       third parties.


(1) Investment companies within the meaning of Article 29 (5) of the Directive shall also indicate:
    - The method and frequency of calculation of the net asset value of units,
    - The means, place and frequency of the publication of that value,
    - The stock exchange in the country of marketing the price on which determines the price of transactions effected outwith stock exchanges in
      that country.




appendice 1 | 1985L0611 — EN — 13.04.2005 — 006.001 - page 40
B
          2. information concerning the depositary:
             2.1. name or style, form in law, registered office and head office if different from the registered office;




                                                                                                                                                                       1
             2.2. Main activity.


          3. information concerning the advisory firms or external investment advisers who give advice under contract which is paid for out of the
             assets of the UCits:
             3.1. name or style of the firm or name of the adviser;
             3.2. Material provisions of the contract with the management company or the investment company which may be relevant to the unit-
                  holders, excluding those relating to remuneration;
             3.3. other significant activities.


          4. information concerning the arrangements for making payments to unit-holders, re-purchasing or redeeming units and making available
             information concerning the UCits. such information must in any case be given in the Member state in which the UCits is established.
             in addition, where units are marketed in another Member state, such information shall be given in respect of that Member state in the
             prospectus published there.
 M4
          5. other investment information:
             5.1. Historical performance of the common fund or of the investment company (where applicable) — such information may be either
                  included in or attached to the prospectus;
             5.2. Profile of the typical investor for whom the common fund or the investment company is designed.


          6. economic information:
             6.1. Possible expenses or fees, other than the charges mentioned in point 1.17., distinguishing between those to be paid by the unit-holder
                  and those to be paid out of the common fund’s or of the investment company’s assets.




page 41                                                                                                            | Cross-border distribution of UCITS | Appendices
B
                                                                                SCHEDULE B
                                                            Information to be included in the periodic reports


           I. Statement of assets and liabilities -transferable securities,
             -debt instruments of the type referred to in Article 19 (2) (b),
             -bank balances,
             -other assets,
             -total assets,
             -liabilities,
             -net asset value.
           II. Number of units in circulation
           III. Net asset value per unit
           IV. Portfolio, distinguishing between:
              (a) Transferable securities admitted to official stock exchange listing;
              (b) Transferable securities dealt in on another regulated market;
              (c) Recently issued transferable securities of the type referred to in Article 19 (1) (d);
              (d) Other transferable securities of the type referred to in Article 19 (2) (a);
              (e) Debt instruments treated as equivalent in accordance with Article 19 (2) (b);
              And analyzed in accordance with the most appropriate criteria in the light of the investment policy of the UCITS (e. g. in accordance
              with economic, geographical or currency criteria) as a percentage of net assets; For each of the above investments the proportion it
              represents of the total assets of the UCITS should be stated.
              Statement of changes in the composition of the portfolio during the reference period.
           V. Statement of the developments concerning the assets of the UCITS during the reference period including the following:
             - Income from investments,
             - Other income,
             - Management charges,
             - Depositary’s charges,
             - Other charges and taxes,
             - Net income,
             - Distributions and income reinvested,
             - Changes in capital account,
             - Appreciation or depreciation of investments,
             - Any other changes affecting the assets and liabilities of the UCITS.
           VI. A comparative table covering the last three financial years and including, for each financial year, at the end of the financial year:
              - The total net asset value,
              - The net asset value per unit.
           VII.Details, by category of transaction within the meaning of Article 21 carried out by the UCITS during the reference period, of the resulting
              amount of commitments.




appendice 1 | 1985L0611 — EN — 13.04.2005 — 006.001 - page 42
 M4
                                                                             SCHEDULE C




                                                                                                                                                                    1
                                                                 Contents of the simplified prospectus


          Brief presentation of the UCITS
          - when the unit trust/common fund or the investment company was created and indication of the Member State where the unit trust/common
           fund or the investment company has been registered/incorporated,
          - in the case of UCITS having different investment compartments, the indication of this circumstance,
          - management company (when applicable),
          - expected period of existence (when applicable),
          - depositary,
          - auditors,
          - financial group (e.g. a bank) promoting the UCITS.
          Investment information
          - short definition of the UCITS’ objectives,
          - the unit trust’s/common fund’s or the investment company’s investment policy and a brief assessment of the fund’s risk profile (including, if
           applicable, information according to Article 24a and by investment compartment),
          - historical performance of the unit trust/common fund/investment company (where applicable) and a warning that this is not an indicator of
           future performance - such information may be either included in or attached to the prospectus,
          - profile of the typical investor the unit trust/common fund or the investment company is designed for.
          Economic information
          - tax regime,
          - entry and exit commissions,
          - other possible expenses or fees, distinguishing between those to be paid by the unit-holder and those to be paid out of the unit trust’s/
           common fund’s or the investment company’s assets.
          Commercial information
          - how to buy the units,
          - how to sell the units,
          - in the case of UCITS having different investment compartments how to pass from one investment compartment into another and the
           charges applicable in such cases,
          - when and how dividends on units or shares of the UCITS (if applicable) are distributed,
          - frequency and where/how prices are published or made available.
          Additional information
          - statement that, on request, the full prospectus, the annual and half-yearly reports may be obtained free of charge before the conclusion of
           the contract and afterwards,
          - competent authority,
          - indication of a contact point (person/department, timing, etc.) where additional explanations may be obtained if needed,
          - publishing date of the prospectus.»



                                                                              ANNEX II


          Functions included in the activity of collective portfolio management:
          - Investment management.
          - Administration:
           (a) Legal and fund management accounting services;
           (b) Customer inquiries;
           (c) Valuation and pricing (including tax returns);
           (d) Regulatory compliance monitoring;
           e) Maintenance of unit-holder register;
           (f) Distribution of income;
           (g) Unit issues and redemptions;
           (h) Contract settlements (including certificate dispatch);
           (i) Record keeping.
          - Marketing.


page 43                                                                                                         | Cross-border distribution of UCITS | Appendices
                                                                               APPENDIX 2




                                                                                               2
          Regulation at domestic level



          You will find hereafter the references to the main
          legal texts regarding cross-border distribution of
          UCITS for the top 5 target markets in terms of foreign
          fund registration as per PwC figures at the end of
          2007, as well as for the other countries where CACEIS
          is established.


          Germany             luxembourg
          austria             ireland
          switzerland         netherlands
          France              Belgium
          spain               Hong Kong




page 45                                    | Cross-border distribution of UCITS | Appendices
  Germany     • Investmentgesetz (German Investment Act)
               - Chapter 5 – Marketing provisions - art. 121 to 142
               - Chapter 6 - Penal provisions, provisions on administrative fines and transitional provisions - art. 144


              Source: http://www.bafin.de and http://www.freshfields.com/locations/germany/briefings/




                                                                                                                                                 2
    Austria   • Investment Funds Act 532/1993 amended through the Federal Act BGBI I n°69/2008
               - Chapter ii - rules concerning the marketing of units of foreign investment funds - section 24 to 32
               - Chapter iia - Freedom to provide services and freedom of establishment - section 32a
               - Chapter iii - rules concerning the marketing of units of an eea investment fund - section 33 to 39


              Source: www.fma.gv.at


Switzerland   • Collective Investment Schemes Act (« loi fédérale sur les placements collectifs de capitaux » - lPCC rs 951.31)
               titre 1 - dispositions générales
               - Chapitre 1 - But et champ d’application - art. 2
               - Chapitre 3 - autorisation et approbation - art. 13 to art. 17
               titre 4 - Placements collectifs étrangers
               - Chapitre 1 - définition et approbation - art. 119 to art. 122
               - Chapitre 2 - représentant de placements collectifs étrangers - art. 123 to art. 125


              • Collective Investment Scheme Ordinance (« ordonnance sur les placements collectifs de capitaux » -
               oPCC rs 951.311)
               titre 4 - Placements collectifs étrangers
               - Chapitre 1 - approbation - art. 127 to art. 130
               - Chapitre 2 - représentant de placements collectifs étrangers - art. 131 to art. 133


              • Guidelines on the Distribution of Collective Investment Schemes (self regulation)


              • SFBC Circular 03/1 relating to public advertising within the meaning
               of the Collective Investment Schemes legislation


              Sources: www.sfa.ch and www.admin.ch


     France   • General regulation of the Autorité des Marchés Financiers (AMF)
               Book iv - Collective investment products
               - title i - Collective investment schemes
                Chapter i - Common provisions for collective investment schemes
                section 4 - Marketing foreign collective investment schemes in France
                - sub-section 1 - Undertakings for collective investment in transferable securities (UCits) - article 411-57 to 411-59
                - sub-section 2 - other foreign collective investment schemes - article 411-60
                - sub-section 3 - Common requirements - article 411-61




page 47                                                                                      | Cross-border distribution of UCITS | Appendices
                              • AMF instruction n0 2005-01 of 25 January 2005 defining the fund registration procedure in France and the
                                centralizing agent’s role
                                titre iv - oPCvM étrangers désirant être commercialisés en France
                                - Chapitre 1 - oPCvM européens coordonnés
                                 . section 1 - Procédure d’autorisation de commercialisation en France - article 42 to 45
                                 . section 2 - Correspondant(s) en France de l’oPCvM et obligations d’information - article 46 to 48
                                - Chapitre 2 - autres oPCvM étrangers- article 49


                              • CMF (Code Monétaire et Financier) General regulation
                                art. l621-5-3 and d621-27


                                Source: http://www.amf-france.org


           Spain              • Law 35/2003 on the regulation of Collective Investment Schemes
                                título ii - disposiciones comunes
                                - Capítulo ii - Comercialización transfronteriza de acciones y participaciones de iiC - artículo 15 y 16


                              • Real decreto 1309/2005 (enforcement decree of Law 35/2003)


                              • Circular 2/2006 regarding information of the foreign collective investment schemes registered at the
                                CNMV relevant registries


                              • Memorandum relating to methods of fund distribution in Spain


                              Source: www.cnmv.es/


  Luxembourg                  • Law of 20 December 2002 relating to undertakings for collective investment and amending the law of 12
                                February 1979 concerning the value added tax as amended:
                                Part i - UCits
                                - Chapter 6: UCits situated in luxembourg which market their units in other Member states of the
                                  european Union - articles 53 to 57
                                - Chapter 7: UCits situated in other Member states of the european Union which market their units in
                                  luxembourg - articles 58 to 62


                              • Circular CSSF 07/277 relating to the new notification procedure in line with the guidelines of CESR
                                regarding the simplification of the UCITS notification procedure


                              Source: www.cssf.lu


         Ireland              • UCITS 15 Notice relating to supervisory requirements for UCITS authorized in another Member State
                                intending to market their units in Ireland


                              • Investment funds, companies & miscellaneous provisions Act 2005


                              • Investment funds, companies & miscellaneous provisions Act 2006


                              Source: www.financialregulator.ie/ and www.entemp.ie


appendix 2 - regulation at domestic levels - page 48
 Netherlands        • Financial Supervision Act - Wet op het financieel toezicht (Wft)
                     Part 2 – Market access of financial undertakings
                     - Part 2.2.7. of fering units in collective investment schemes - section 2:65 to 2:74


                    • Act of 12 May 2005, containing rules for the provision of financial services (Financial Services Act)


                    • Decree of 15 December 2005, containing rules for the provision of financial services (Financial




                                                                                                                                                  2
                    Services Decree)
                     Chapter 7 - Provision of information - sections 38 to 49


                    Source: www.afm.nl


          Belgium   • Circulaire CBFA OPC 1/2007 relative à la procédure de notification pour les oPC relevant du droit d’un
                     autre etat membre de l’espace economique européen et répondant aux conditions
                     de la directive 85/611/Cee


                    • Circulaire CBFA OPC 2/2007 relative à la procédure de notification pour les organismes de placement
                     collectif de droit belge qui répondent aux conditions de la directive 85/611/Ce


                    • Circulaire CBFA OPC 4/2007 relative à la détention de titres d’organismes de placement collectif par
                     l’entremise d’un intermédiaire (nominee)


                    • Loi du 20 juillet 2004 relative à certaines formes de gestion collective de portefeuilles d’investissement


                    Source: www.cbfa.be


   Hong Kong        • The Unit Trust Code
                     Part i: General matters
                     - Chapter 1 - authorization Procedures - art. 1.1 to 1.7
                     Part ii: authorization requirements
                     - Chapter 9 - additional requirements For non-Hong Kong Based schemes - art. 9.1 to 9.10




                    Source: www.sfc.hk




page 49                                                                                       | Cross-border distribution of UCITS | Appendices
CONTACT PERSONS


Arianna Arzeni
+352 4767 2024
arianna.arzeni@caceis.com


Nathalie Collot
+33 1 57 78 12 21
nathalie.collot@caceis.com


Christian Laitat
+352 4767 5826
christian.laitat@caceis.com




1,3 place Valhubert 75206 Paris Cedex 13


5 Allée Scheffer L-2520 Luxembourg


www.caceis.com




This document is an official publication of CACEIS.
CACEIS cannot be held responsible for any
inaccuracy or interpretation error it may contain.

Copyright pending
                                                                                APPENDIX




         UCITS IV
         Recast of the Directive 85/611/EEC
         on the coordination of laws, regulations and
         administrative provisions relating to undertakings
         for collective investment in transferable securities
         (UCITS)


         Text adopted by the European Parliament
         at the sitting of 13 January 2009


         Source: www.europarl.europa.eu




page 1                                  | Cross-border distribution of UCITS | January 2009
UCITS IV - PE 418.771 - page 2
                                                              P6_TA-PROV(2009)0012
                               Undertakings for collective investment in transferable securities (UCITS) (recast) ***I
 European Parliament legislative resolution of 13 January 2009 on the proposal for a directive of the European Parliament and of the
 Council on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in
                           transferable securities (UCITS) (recast) (COM(2008)0458 – C6-0287/2008 – 2008/0153(COD))
                                                          (Codecision procedure: recast)


                                                           THE EUROPEAN PARLIAMENT


Having regard to the Commission proposal to the European Parliament and the Council (COM(2008)0458),
Having regard to Article 251(2) and Article 47(2) of the EC Treaty, pursuant to which the Commission submitted the proposal to Parliament
(C6 0287/2008),
Having regard to the Interinstitutional Agreement of 28 November 2001 on a more structured use of the recasting technique for legal
acts1,
Having regard to Rules 80a and 51 of its Rules of Procedure,
Having regard to the report of the Committee on Economic and Monetary Affairs and the opinion of the Committee on Legal Affairs(A6
0497/2008),


A. Whereas, according to the Consultative Working Party of the Legal Services of the European Parliament, the Council and the Commis-
   sion, the proposal in question does not include any substantive amendments other than those identified as such in the proposal and
   whereas, as regards the codification of the unchanged provisions of the earlier acts together with those amendments, the proposal
   contains a straightforward codification of the existing texts, without any change in their substance


1. Approves the Commission proposal as adapted to the recommendations of the Consultative Working Party of the legal services of the
  European Parliament, the Council and the Commission and as amended below;


2. Calls on the Commission to refer the matter to Parliament again if it intends to amend the proposal substantially or replace it with
  another text;


3. Instructs its President to forward its position to the Council and the Commission.




(1) OJ C 77, 28.3.2002, p.1.


page 3                                                                                                 | Cross-border distribution of UCITS | January 2009
UCITS IV - PE 418.771 - page 4
                                                               P6_TC1-COD(2008)0153


Position of the European parliament adopted at first reading on 13 January 2009 with a view to the adoption of Directive 2009/.../EC of
the European Parliament and of the Council on the coordination of laws, regulations and administrative provisions relating to under-
                                takings for collective investment in transferable securities (UCITS) (recast)
                                                              (Text with EEA relevance)




                              THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,


Having regard to the Treaty establishing the European Community, and in particular Article 47(2) thereof,
Having regard to the proposal from the Commission,
Acting in accordance with the procedure laid down in Article 251 of the Treaty1:


Whereas:


(1) Council Directive 85/611/EEC of 20 December 1985 on the coordination of laws, regulations and administrative provisions relating
   to undertakings for collective investment in transferable securities (UCITS)2 has been substantially amended several times3. Since
   further amendments are to be made, it should be recast in the interests of clarity.


(2) Directive 85/611/EEC has largely contributed to the development and success of the European investment funds industry. However,
    despite the improvements introduced since its adoption and in particular in 2001, it has steadily become clear that changes need to
    be introduced into the UCITS legal framework in order to adapt it to the 21st century financial markets. The ║Commission Green Paper
    of 12 July 2005 on the enhancement of the EU framework for investment funds launched a public debate on the way the Directive
    should be adapted in order to meet these new challenges. This intense consultation process led to the largely shared conclusion that
    substantial amendments are needed.


(3) National laws governing collective investment undertakings should be coordinated with a view to approximating the conditions
    of competition between those undertakings at Community level, while at the same time ensuring more effective and more uniform
    protection for unit-holders. Such coordination facilitates the removal of the restrictions on the free movement of the units of UCITS
    in the Community.


(4) Having regard to these objectives, it is desirable to provide for common basic rules for the authorisation, supervision, structure and
    activities of UCITS established in the Member States and the information they must publish.


(5) The coordination of the laws of the Member States should be confined to UCITS other than of the closed-ended type which promote
    the sale of their units to the public in the Community. It is desirable that UCITS should be permitted as part of their investment objec-
    tive to invest in financial instruments, other than transferable securities, which are sufficiently liquid. The financial instruments which
    are eligible to be investment assets of the portfolio of the UCITS should be listed in this Directive. The selection of investments for a
    portfolio by means of an index is a management technique.




(1) Position of the European Parliament of 13 January 2009.
(2) OJ L 375, 31.12.1985, p. 3.
(3 See Annex III, Part A.


page 5                                                                                                | Cross-border distribution of UCITS | January 2009
(6) Whereby a provision of this Directive requires the UCITS to take action, the provision should be understood to refer to the manage-
     ment company in cases where the UCITS is constituted as a common fund managed by a management company and where a com-
     mon fund is not in a position to act by itself because it has no legal personality of its own.


(7) Authorisation granted to the management company in its home Member State should ensure investor protection and the solvency
     of management companies, with a view to contributing to the stability of the financial system. The approach adopted is to ensure
     the essential harmonisation necessary and sufficient to secure the mutual recognition of authorisation and of prudential supervision
     systems, making possible the grant of a single authorisation valid throughout the Community and the application of the home Mem-
     ber State supervision.


(8) Units of UCITS are to be considered as financial instruments for the purposes of Directive 2004/39/EC of the European Parliament and
     of the Council of 21 April 2004 on markets in financial instruments1.


(9) It is necessary, for the protection of investors, to guarantee the internal overview of every management company in particular by
     means of a two-man management and by adequate internal control mechanisms.


(10) In order to ensure that the management company will be able to fulfil the obligations arising from its activities and thus to ensure
     its stability, initial capital and an additional amount of own funds are required. To take account of developments, particularly those
     pertaining to capital charges on operational risk within the Community and other international fora, these requirements, including the
     use of guarantees, should be reviewed.


(11) By virtue of the principle of home Member State supervision, management companies authorised in their home Member States
     should be permitted to carry on the services for which they have received authorisation throughout the Community by establishing
     branches or under the freedom to provide services. ║


(12) With regard to collective portfolio management (management of unit trusts/common funds and investment companies), the au-
     thorisation granted to a management company authorised in its home Member State should permit the company to carry on in host
     Member States the following activities without prejudice to Chapter XI: to distribute through a branch the units of the harmonised
     unit trusts/common funds managed by this company in its home Member State; to distribute the shares of the harmonised investment
     companies, managed by such a company, through the establishment of a branch; to distribute the units of the harmonised unit trusts/
     common funds or shares of the harmonised investment companies managed by other management companies; to perform all the
     other functions and tasks included in the activity of collective portfolio management; to manage the assets of investment companies
     incorporated in Member States other than its home Member State; to perform, on the basis of mandates, on behalf of management
     companies incorporated in Member States other than its home Member State, the functions included in the activity of collective port-
     folio management. When a management company distributes the units of its own harmonised unit trusts/common funds or shares of
     its own harmonised investment companies in host Member States, without the establishment of a branch, it should only be subject
     to rules regarding cross-border marketing.


(13) The principle of home Member State supervision requires that the competent authorities should not grant or should withdraw au-
     thorisation where factors, such as the content of programmes of operations, the geographical distribution or the activities actually
     carried on indicate clearly that a management company has opted for the legal system of one Member State for the purpose of
     evading the stricter standards in force in another Member State within the territory of which it intends to carry on or does carry on
     the greater part of its activities. For the purpose of this Directive, a management company should be authorised in the Member State
     in which it has its registered office. In accordance with the principle of ║home country supervision, only the competent authorities of
     the management company’s home Member State can be considered competent to supervise the organisation of the management


(1) OJ L 145, 30.4.2004, p. 1.


UCITS IV - PE 418.771 - page 6
    company, including all procedures and resources to perform the administrative functions referred to in Annex II, which should be
    subject to the law of the management company’s home Member State.


(14) The competent authorities which authorise the UCITS should take into account the rules of the common fund or the instruments
    of incorporation of the investment company, the choice of the depositary and the ability of the management company to manage
    the UCITS. When the management company is located in another Member State, they should be able to rely on an attestation, by
    the competent authorities of the management company’s home Member State, regarding the type of UCITS that the management
    company can manage. Authorisation of a UCITS should neither be conditioned to additional capital requirement at the level of the
    management company, nor to the location of the management company’s registered office in the UCITS home Member State, nor to
    the location of any activity of the management company in the UCITS home Member State.


(15) The competent authorities of the management company’s host Member State should be competent to supervise compliance with the
    rules regarding the constitution and functioning of the UCITS, which should be subject to the law of the UCITS home Member State.
    To this end, the competent authorities of the management company’s host Member State should be able to get information directly
    from the management company. In particular, management company’s host Member State may require management companies to
    provide information on transactions concerning the investments of the UCITS authorised in that Member State, including information
    contained in books and records of these transactions and fund accounts. To remedy any breach of the rules under their responsibil-
    ity, the competent authorities of the management company’s host Member States should be able to rely on the cooperation of the
    competent authorities of the management company’s home Member State and, if necessary, they should be able to take action
    directly against the management company.


(16) The UCITS home Member State may provide for rules regarding the content of the unit-holder register of the UCITS. The organisation
    of the maintenance and the location of this register should however remain part of the organisational arrangements of the manage-
    ment company.


(17) In the event that the UCITS is managed by a management company authorised in a Member State other than the UCITS home Mem-
    ber State, that management company should set up appropriate procedures and arrangements adopted by the management com-
    pany to deal with investor complaints, e.g. through appropriate provisions in distribution arrangements or through an address in the
    UCITS home Member State, which need not be an address of the management company itself. The management company should
    also set up appropriate procedures and arrangements to make information available at the request of the public or the competent
    authorities of the UCITS home Member State, e.g. through the designation of a contact person, from among the employees of the
    management company, to deal with requests for information. However, such management company should not be obliged by the law
    of the UCITS home Member State to have a local representative in that Member State in order to fulfil those duties.


(18) It is necessary to provide the UCITS home Member State with all means to remedy any breach in the rules of the UCITS; to that end,
    the UCITS home Member State should be able to take preventive measures as well as sanctions against the management company.
    As a last resort, the UCITS home Member State should have the possibility to require the management company to cease managing
    the UCITS. Member States should provide for the necessary provisions so as to arrange for an orderly management or liquidation of
    the UCITS in such a case.


(19) In order to prevent supervisory arbitrage and to promote confidence in the effectiveness of supervision by the home Member State
    authorities, a requirement for authorisation of a UCITS should be that it should not be prevented in any legal way from being mar-
    keted in its home Member State. This does not affect the free decision, once the UCITS has been authorised, to choose the Member
    State(s) where the units of the UCITS are to be marketed in accordance with this Directive.


(20) With regard to the scope of activity of management companies and in order to take into account national legislation of Member
    States and to permit such companies to achieve important economies of scale, it is desirable to permit such companies to carry out


page 7                                                                                            | Cross-border distribution of UCITS | January 2009
    also the activity of management of portfolios of investments on a client-by-client basis (individual portfolio management) including
    the management of pension funds as well as some specific non-core activities linked to the main business. Such a scope of the
    activity of the management company would not prejudice the stability of such companies. However, specific rules should be laid
    down preventing conflicts of interest when management companies are authorised to carry on both the business of collective and
    individual portfolio management.


(21) The activity of management of individual portfolios of investments is an investment service covered by Directive 2004/39/EC║. In order
     to ensure a homogeneous regulatory framework in this area, it is desirable to subject management companies, the authorisation of
     which also covers that service, to the operating conditions laid down in that Directive.


(22) A home Member State may, as a general rule, establish rules stricter than those laid down in this Directive, in particular as regards
     authorisation conditions, prudential requirements and the rules on reporting and the prospectus.


(23)It is desirable to lay down rules defining the preconditions under which a management company may delegate, on the basis of man-
    dates, specific tasks and functions to third parties so as to increase the efficiency of the conduct of its business. In order to ensure
    the correct functioning of the principle of the home Member State supervision, Member States permitting such delegations should
    ensure that the management company to which they granted an authorisation does not delegate globally its functions to one or more
    third parties, so as to become a letter box entity, and that the existence of mandates does not hinder an effective supervision over the
    management company. However, the fact that the management company has delegated its own functions should in no case affect
    the liabilities of that company and of the depositary vis-à-vis the unit holders and the competent authorities.


(24) In order to ensure a level playing field and appropriate supervision in the long term, the Commission may examine the possibilities for
     harmonising delegation arrangements at Community level.


(25) To safeguard shareholders’ interests and to secure a level playing field in the market for harmonised collective investment undertak-
     ings, an initial capital is required for investment companies. However, investment companies which have designated a management
     company will be covered through the management company’s additional amount of own funds.


(26) Articles 13 and 14 should always be complied with by authorised investment companies, either by the company directly in accord-
     ance with Article 30 or indirectly, due to the fact that if an authorised investment company chooses to designate a management com-
     pany, that management company should be authorised in accordance with this Directive and thus obliged to comply with Articles 13
     and 14.


(27) Despite the need for consolidation between UCITS, mergers of UCITS encounter many legislative and administrative difficulties in
    the Community. It is therefore necessary, in order to improve the functioning of the internal market, to lay down Community provisions
    facilitating mergers between UCITS (and investment compartments thereof). Although some Member States may authorise only
    contractual funds, cross border mergers between all types of UCITS (contractual, corporate and unit trusts) should be allowed and
    recognised by ║each Member State. This does not require Member States to introduce new legal forms of UCITS into their national
    regulation.


(28) This Directive covers those merger techniques which are most commonly used in ║Member States. It does not imply that all Member
     States have to introduce all three techniques into their national laws but each Member State should recognise a transfer of assets
     resulting from these merger techniques. This Directive does not prevent UCITS from using other techniques on a purely domestic
     ║basis, in situations where none of the UCITS concerned by the merger has been notified for cross-border marketing of its units.
     Those mergers will ║remain subject to the relevant provisions of national law. Quorum rules should not discriminate between national
     and cross-border mergers, nor should they be more stringent than those laid down for mergers of corporate entities.




UCITS IV - PE 418.771 - page 8
(29) In order to safeguard investors’ interests, Member States should require proposed mergers between UCITS either within their ju-
     risdiction or on a cross-border basis to be subject to authorisation by their competent authorities. For cross-border mergers, the
     competent authorities of the ║ merging UCITS should approve the merger so as to ensure that the interests of the unit-holders who
     effectively change UCITS are duly protected. If the merger involves more than one merging UCITS and such UCITS are domiciled in
     different Member States, the competent authorities of each merging UCITS will need to approve the merger, in close cooperation
     with each other, including through appropriate information sharing. Since the interests of the unit-holders of the ║receiving UCITS
     also need to be adequately safeguarded, they should be taken into account by the competent authorities of the receiving UCITS’
     home Member State.


(30) Furthermore, unit-holders of both the merging UCITS and the receiving UCITS should have the right to request the re-purchase or re-
     demption of their units or, where possible, to convert them into units in another UCITS with similar investment policies and managed
     by the same management company or by another company linked to it. This right should not be subject to any additional charge, i.e.
     it should be subject only to the fees to be retained exclusively by the respective UCITS to cover disinvestment costs in all situations,
     as laid down in the respective prospectuses.


(31) Third-party control of mergers should also be ensured. The depositaries of each of the UCITS involved in the merger should verify the
     conformity of the common draft terms of the merger with the relevant provisions of this Directive and of the UCITS fund rules. Either a
     depositary or an independent auditor should draw-up a report on behalf of all the UCITS involved in the merger validating the valua-
     tion methods of the assets and liabilities of such UCITS and the calculation method of the exchange ratio as set forth ║in the common
     draft terms of merger as well as the actual exchange ratio and, where applicable, the cash payment per unit. In order to limit costs
     connected with cross-border mergers, it should be possible to draw up a single report for all UCITS involved and the statutory auditor
     of the merging UCITS and/or the receiving UCITS should be enabled to do so. For investor protection reasons, unit-holders should be
     offered the possibility to obtain a copy of such report free of charge.


(32) It is particularly important that the unit-holders are adequately informed about the proposed merger and that their rights are suf-
     ficiently protected. Although unit-holders of the merging UCITS are most concerned, the interests of the unit-holders of the receiving
     UCITS should also be safeguarded.


(33) The provisions on mergers laid down in this Directive are without prejudice to the application of the legislation on control of concen-
     trations between undertakings, in particular Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations
     between undertakings (the EC Merger Regulation)1


(34) The free marketing of the units issued by UCITS authorised to invest up to 100 % of their assets in transferable securities issued by
    the same body (State, local authority, etc.) may not have the direct or indirect effect of disturbing the functioning of the capital market
    or the financing of the Member States.


(35) The definition of transferable securities included in this Directive is valid only for this Directive and in no way affects the various
     definitions used in national legislation for other purposes such as taxation. Consequently, shares and other securities equivalent to
     shares issued by bodies such as building societies and industrial and provident societies, the ownership of which cannot in practice
     be transferred except by the issuing body buying them back, are not covered by this definition.


(36) Money market instruments cover those transferable instruments which are normally not traded on regulated markets but dealt in on
     the money market, for example treasury and local authority bills, certificates of deposit, commercial papers, medium-term notes and
     bankers’ acceptances.




(1) OJ L 24, 29.1.2004, p. 1


page 9                                                                                                | Cross-border distribution of UCITS | January 2009
(37) It is useful to ensure that the concept of regulated market in this Directive corresponds to that in Directive 2004/39/EC.


(38) It is desirable to permit a UCITS to invest its assets in units of UCITS and other collective investment undertakings of the open-ended
     type which also invest in liquid financial assets mentioned in this Directive and which operate on the principle of risk spreading. It is
     necessary that UCITS or other collective investment undertakings in which a UCITS invests be subject to effective supervision.


(39) The development of opportunities for a UCITS to invest in UCITS and in other collective investments undertakings should be facili-
     tated. It is therefore essential to ensure that such investment activity does not diminish investor protection. Owing to the enhanced
     possibilities for UCITS to invest in the units of other UCITS and collective investment undertakings, it is necessary to lay down certain
     rules on quantitative limits, the disclosure of information and prevention of the cascade phenomenon.


(40)To take market developments into account and in consideration of the completion of economic and monetary union it is desirable to
    permit UCITS to invest in bank deposits. To ensure adequate liquidity of investments in deposits, these deposits are to be repayable on
    demand or have the right to be withdrawn. If the deposits are made with a credit institution the registered office of which is located in
    a third country, the credit institution should be subject to prudential rules equivalent to those laid down in Community legislation.


(41) In addition to the case in which a UCITS invests in bank deposits according to its fund rules or instruments of incorporation, it may be
     necessary to allow all UCITS to hold ancillary liquid assets, such as bank deposits at sight. The holding of such ancillary liquid assets
     may be justified, for example, in the following cases: in order to cover current or exceptional payments; in the case of sales, for the
     time necessary to reinvest in transferable securities, money market instruments and/or in other financial assets provided for in this
     Directive; for a period of time strictly necessary when, because of unfavourable market conditions, the investment in transferable
     securities, money market instruments and in other financial assets must be suspended.


(42) For prudential reasons it is necessary to avoid excessive concentration by a UCITS in investments which expose it to counterparty
     risk to the same entity or to entities belonging to the same group.


(43) UCITS should be explicitly permitted, as part of their general investment policy and/or for hedging purposes in order to reach a set
     financial target or the risk profile indicated in the prospectus, to invest in financial derivative instruments. In order to ensure investor
     protection, it is necessary to limit the maximum potential exposure relating to derivative instruments so that it does not exceed the
     total net value of the UCITS’s portfolio. In order to ensure constant awareness of the risks and commitments arising from derivative
     transactions and to check compliance with investment limits, these risks and commitments will have to be measured and monitored
     on an ongoing basis. Finally, in order to ensure investor protection through disclosure, UCITS should describe their strategies, tech-
     niques and investment limits governing their derivative operations.


(44) Measures to address the potential misalignment of interests in products where credit risk is transferred by securitisation, as envis-
     aged in respect of Directives 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and
     pursuit of the business of credit institutions (recast)1 and 2006/49/EC of the European Parliament and of the Council of 14 June 2006 on
     the capital adequacy of investment firms and credit institutions (recast)2, need to be consistent and coherent in all relevant financial
     sector regulation. The Commission intends to bring forward the appropriate legislative proposals, including regarding this Directive,
     to ensure this will be the case, after duly considering the impact.


(45) With regard to over-the-counter (OTC) derivatives, requirements should be set in terms of the eligibility of counterparties and instru-
    ments, liquidity and ongoing assessment of the position. The purpose of such requirements is to ensure an adequate level of investor
    protection, close to that which they obtain when they acquire derivatives dealt in on regulated markets.


(1) OJ L 177, 30.6.2006, p. 1.
(2) OJ L 177, 30.6.2006, p. 201.


UCITS IV - PE 418.771 - page 10
(46) Operations in derivatives may never be used to circumvent the principles and rules set out in this Directive. With regard to OTC
    derivatives, additional risk-spreading rules should apply to exposures to a single counterparty or group of counterparties.


(47) Some portfolio management techniques for collective investment undertakings investing primarily in shares and/or debt securities
    are based on the replication of stock indices and/or debt-security indices. It is desirable to permit UCITS to replicate well-known and
    recognised stock indices and/or debt-security indices. It may therefore be necessary to introduce more flexible risk-spreading rules
    for UCITS investing in shares and/or debt securities to this end.


(48) Collective investment undertakings falling within the scope of this Directive should not be used for purposes other than the collec-
    tive investment of the money raised from the public according to the rules laid down in this Directive. In the cases identified by this
    Directive a UCITS may have subsidiaries only when necessary to carry out effectively on behalf of that UCITS certain activities, also
    defined in this Directive. It is necessary to ensure an effective supervision of UCITS. Therefore the establishment of a subsidiary of
    a UCITS in a third country should be permitted only in the cases and under the conditions identified in this Directive. The general
    obligation to act solely in the interests of unit-holders and, in particular, the objective of increasing cost efficiencies, never justify a
    UCITS undertaking measures which may hinder the competent authorities from exercising effectively their supervisory functions.


(49) The original version of Directive 85/611/EEC contained a derogation from the restriction on the percentage of its assets that a UCITS
    can invest in transferable securities issued by the same body, which applied in the case of bonds issued or guaranteed by a Member
    State. This derogation allowed UCITS to invest in particular up to 35 % of their assets in such bonds. A similar derogation, but of a
    more limited extent is justified with regard to private sector bonds which, even in the absence of a State guarantee, nevertheless
    offer special guarantees to the investor under the specific rules applicable thereto. It is necessary therefore to extend such a dero-
    gation to the totality of such bonds which fulfil jointly fixed criteria, while leaving it to the Member States to draw up the list of bonds
    to which they intend, where appropriate, to grant a derogation.


(50) Several Member States have enacted provisions that enable non-coordinated collective investment undertakings to pool their as-
    sets in one so-called master fund. In order to allow UCITS to make use of these structures, it is necessary to exempt “feeder UCITS”
    wishing to pool their assets in a “master UCITS”, from the prohibition to invest more than 10% or, as the case may be 20% in one
    investment fund. This exemption is justified as the feeder UCITS invests all or almost all of its assets into the diversified portfolio of
    the master UCITS which itself is subject to UCITS diversification rules.


(51) In order to facilitate the effective operation of the internal market and to ensure the same level of investor protection throughout the
    Community, both master-feeder-structures where the master and the feeder are established in the same Member State and where
    they are established in different Member States should be allowed. In order to allow investors ║ better to understand master-feeder-
    structures and regulators to supervise them more easily, notably in a cross-border context, no feeder UCITS should be able to invest
    into more than one master. In order to ensure the same level of investor protection throughout the Community the master should
    ║itself be an authorised UCITS. In order to avoid undue administrative burden, provisions on notification of cross-border marketing
    should not apply if a master UCITS does not raise capital from the public in a Member State other than that in which it is established,
    but has only one or more feeder UCITS in that other Member State.


(52) In order to protect the feeder UCITS’ investors, the feeder UCITS’ investment into the master UCITS should be subject to prior ap-
    proval by the competent authorities of the feeder UCITS’ home Member State. Only the initial investment into the master UCITS, by
    which the feeder UCITS exceeds the limit applicable for investing into another UCITS requires approval. In order to facilitate the ef-
    fective operation of the internal market and to ensure the same level of investor protection throughout the Community, the conditions
    which have to be met and the documents and information which have to be provided for approving the feeder UCITS’ investment into
    the master UCITS should be exhaustive.




page 11                                                                                                | Cross-border distribution of UCITS | January 2009
(53) In order to allow the feeder UCITS to act in the best interests of its unit-holders and notably place it in a position to obtain from the
    master UCITS all information and documents necessary to perform its obligations, the feeder UCITS and the master UCITS should
    enter into a binding and enforceable agreement. However, if both are managed by the same management company, it should be
    sufficient that the latter set up internal conduct of business rules. An information-sharing agreement between the depositaries or,
    respectively, the auditors of the feeder UCITS and the master UCITS should ensure the flow of information and documents that is
    needed for the feeder UCITS’ depositary or auditor to fulfil its duties. This Directive should ensure that, when complying with those
    requirements, the depositaries or the auditors would not be in breach of any restriction on disclosure of information or of data protec-
    tion.


(54) In order to ensure a high level of protection of the interests of the feeder UCITS’ investors, the prospectus, the key investor informa-
     tion as referred to in Article 78, as well as all marketing communications should be adapted to the specificities of master-feeder-
     structures. The investment of the feeder UCITS into the master UCITS should not affect the ability of the feeder UCITS itself either to
     re-purchase or redeem units at the request of its unit-holders or to act in the best interests of its unit-holders.


(55) Under this Directive, unit-holders should be protected from being charged unjustified additional costs. The prohibition that master
     UCITS may not charge feeder UCITS subscription and redemption fees reflects that general principle. The master UCITS should
     however be able to charge subscription and redemption fees to other investors in the master UCITS.


(56) The conversion rules should enable an existing UCITS to convert into a feeder UCITS. At the same time they should sufficiently
     protect unit-holders. As such a conversion is a fundamental change of the investment policy, the converting feeder UCITS should be
     required to provide its unit-holders with sufficient information in order to enable them to decide whether or not to maintain their in-
     vestment ║. Competent authorities may not require the feeder UCITS to provide more or other information than those that specified.


(57) Whenever the competent authorities of the master UCITS are informed of an irregularity with regard to the master or detect that the
     master UCITS does not comply with the provisions of this Directive, they may decide, where appropriate, to take relevant actions to
     ensure that unit-holders of the master UCITS are informed accordingly.


(58) Member States should make a clear distinction between marketing communications and obligatory investor disclosures provided
     for under this Directive. Obligatory investor disclosures include key investor information, prospectus and annual and half-yearly
     reports.


(59) Key investor information should be provided as a specific document to investors free of charge, in good time before the subscription
    of the UCITS, in order to help them to reach informed investment decisions. Such key investor information should contain only the
    essential elements for making such decisions. The nature of the information to be found in the key investor information should be fully
    harmonised ║ so as to ensure adequate investor protection and comparability. Key investor information should be presented in a short
    format. A single document of limited length presenting the information in a specified order is the most appropriate way to achieve the
    clarity and simplicity of presentation that is required by retail investors, and should allow for useful comparisons, notably of costs and
    risk profile, relevant to the investment decision.


(60) The competent authorities of each Member State may make available to the public, in a dedicated section of their website, key inves-
     tor information concerning all UCITS constituted and authorised in that Member State.


(61) Key investor information should be produced for all UCITS. Management companies or, where applicable, investment companies
     should provide the key investor information to the relevant entities, depending on the distribution method used (direct sales or inter-
     mediated sales). Intermediaries should provide key investor information ║to clients and potential clients.


(62) The right for UCITS to sell their units should be subject to their taking the necessary measures to ensure that facilities are avail-


UCITS IV - PE 418.771 - page 12
    able for making payments to unit-holders, re-purchasing or redeeming units and making available the information which UCITS are
    obliged to provide.


(63) The right for UCITS to sell their units in other Member States should also be subject to a notification procedure based on improved
    communication between the competent authorities of the Member States. Following transmission of a complete notification file by
    the competent authorities of the UCITS home Member State, the UCITS host Member State should not be in the position to oppose
    access to its market by a UCITS established in another Member State or challenge the authorisation given by that other Member
    State.


(64) In order to facilitate cross-border marketing of units of UCITS, control of compliance of arrangements made for marketing of units of
    UCITS with laws regulations and administrative procedures applicable in the UCITS host Member State, should be performed ║after
    the UCITS has accessed the market of that Member State. This control can cover the adequacy of arrangements made for marketing,
    in particular the adequacy of distribution arrangements and the obligation for marketing communications to be presented in a fair,
    clear and not-misleading way. This Directive should not prevent competent authorities of the host Member State from checking mar-
    keting communications (which does not include key investor information, prospectus and annual and half-yearly reports) according
    to national law before the UCITS can use them, but this control should not be discriminatory and should not prevent this UCITS from
    accessing the market.


(65) For the purpose of enhancing legal certainty there is a need to ensure that a UCITS which markets its units on a cross-border basis
    has an easy access, in the form of an electronic publication and in a language customary in the field of international finance, to
    complete information on the laws, regulations and administrative provisions applicable in the UCITS host Member State and that
    specifically relate to the arrangements made for marketing of UCITS. Liabilities with regard to such publication shall be subject to
    national laws.


(66) To facilitate access of UCITS to the markets of Member States, a UCITS should be required to translate only the key investor informa-
    tion into the official language or one of the official languages of a UCITS host Member State or a language approved by its competent
    authority. Key investor information should specify the language(s) in which other obligatory disclosure documents and additional
    information are available.


(67) Translations are produced under the responsibility of the UCITS, which should decide whether a simple or a sworn translation is
    necessary.


(68) To facilitate the access to the markets of other Member States, it is important that notification fees are disclosed.


(69) Member States should take the necessary administrative and organisational measures to enable cooperation between national
    authorities and competent authorities of other Member States, including through bilateral or multilateral agreements between those
    authorities, which could provide for voluntary delegation of tasks.


(70) It is necessary to enhance convergence of powers at the disposal of competent authorities so as to bring about an equal enforce-
    ment of this Directive throughout the Member States. A common minimum set of powers, consistent with those conferred upon
    competent authorities by other Community financial services legislation should guarantee supervisory effectiveness. In addition,
    Member States should lay down rules on penalties, which may include criminal, civil and administrative penalties, and administra-
    tive measures, applicable to infringements of this Directive and should take the measures necessary to ensure that they are imple-
    mented.


(71) It is necessary to reinforce provisions on exchange of information between national competent authorities and to strengthen the
    duties of assistance and cooperation between them.


page 13                                                                                              | Cross-border distribution of UCITS | January 2009
(72) For the purpose of cross-border provision of services, clear competences should be assigned to the respective supervisory authori-
     ties so as to eliminate any gaps or overlaps; this should be consistent with the definition of applicable law.


(73) The reference to the supervisory authorities’ effective exercise of their supervisory functions covers supervision on a consolidated
     basis which must be exercised over a UCITS or an undertaking contributing towards its business activity where the provisions of
     Community law so provide. In such cases, the authorities applied to for authorisation must be able to identify the authorities compe-
     tent to exercise supervision on a consolidated basis over that UCITS or an undertaking contributing towards its business activity.


(74) The principle of home Member State supervision requires that the competent authorities should not grant or should withdraw au-
    thorisation where factors such as the content of programmes of operations, the geographical distribution or the activities actually
    carried on indicate clearly that a UCITS or an undertaking contributing towards its business activity has opted for the legal system of
    one Member State for the purpose of evading the stricter standards in force in another Member State within whose territory it carries
    on or intends to carry on the greater part of its activities. ║


(75) It is appropriate to provide for the possibility of exchanges of information between the competent authorities and authorities or
     bodies which, by virtue of their function, help to strengthen the stability of the financial system. In order to preserve the confidential
     nature of the information forwarded, the list of addressees must remain within strict limits.


(76) Certain behaviour, such as fraud and insider offences, is liable to affect the stability, including integrity, of the financial system, even
     when involving undertakings other than UCITS or undertakings contributing towards their business activity.


(77) It is necessary to specify the conditions under which such exchanges of information are authorised.


(78) Where it is stipulated that information may be disclosed only with the express agreement of the competent authorities, these may,
     where appropriate, make their agreement subject to compliance with strict conditions.


(79) Exchanges of information between, on the one hand, the competent authorities and, on the other, central banks and other bodies
     with a similar function in their capacity as monetary authorities and, where appropriate, other public authorities responsible for
     supervising payment systems should also be authorised.


(80) The same obligation of professional secrecy on the authorities responsible for authorising and supervising UCITS and the under-
     takings that take part in those activities and the same possibilities for exchanging information as those granted to the authorities
     responsible for authorising and supervising credit institutions, investment firms and insurance undertakings, should be included in
     this Directive.


(81) For the purpose of strengthening the prudential supervision of UCITS or of undertakings contributing towards their business activity
     and protection of clients of UCITS or of undertakings contributing towards their business activity, it should be stipulated that an audi-
     tor must have a duty to report promptly to the competent authorities, wherever, as provided for by this Directive, he becomes aware,
     while carrying out his tasks, of certain facts which are liable to have a serious effect on the financial situation or the administrative
     and accounting organisation of a UCITS or an undertaking contributing towards its business activity.


(82) Having regard to the aim in view, it is desirable for Member States to provide that such a duty should apply in all circumstances
     where such facts are discovered by an auditor during the performance of his tasks in an undertaking which has close links with a
     UCITS or an undertaking contributing towards its business activity.


(83) The duty of auditors to communicate, where appropriate, to the competent authorities certain facts and decisions concerning a
     UCITS or an undertaking contributing towards its business activity which they discover during the performance of their tasks in an


UCITS IV - PE 418.771 - page 14
    entity which is neither a UCITS nor an undertaking contributing towards the business activity of a UCITS does not in itself change the
    nature of their tasks in that undertaking nor the manner in which they must perform those tasks in that undertaking.


(84) This Directive should not affect national rules on taxation, including arrangements that may be imposed by Member States to ensure
    compliance with these rules in their territory.


(85) The measures necessary for the implementation of this Directive should be adopted in accordance with Council Decision 1999/468/
    EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission1.


(86) The Commission should be empowered to adopt the measures necessary for the implementation of this Directive. Concerning man-
    agement companies, those measures are designed to specify the details regarding organisational requirements, risk management,
    conflicts of interest and conduct of business. Concerning depositaries, those measures are designed to specify the duties of de-
    positaries as foreseen by this Directive in the context of the management company passport and the particulars of the agreement
    between the depositary and the management company. Those measures should facilitate a uniform application of the obligations of
    management companies and depositaries under this Directive. The adoption of those measures should not, however, be a precondi-
    tion to implement the right of management companies to carry on the services for which they have been authorised in their home
    Member State throughout the Community by establishing branches or under the freedom to provide services including the manage-
    ment of UCITS in another Member State.


(87) Concerning mergers, those measures are designed to specify detailed content and way to provide information to unit-holders. Con-
    cerning master-feeder structures, those measures are designed to specify the particulars to be included in the agreement between
    master and feeder, their depositories and their auditors, the definition of measures appropriate to prevent late trading risks, the im-
    pact of the merger of the master on the authorisation of the feeder, the type of irregularities originating from the master to be reported
    to the feeder, the way and format of the information to be provided to unit-holders in case of conversion from a UCITS to a feeder
    UCITS, the procedure for valuating and auditing the transfer of assets from a feeder to a master and the role of the depository of the
    feeder in this process. Concerning the provisions on disclosure, those measures are designed to specify the specific conditions to be
    met when the prospectus is provided in a durable medium other than paper and by means of a website which does not constitute a
    durable medium, the detailed content, form and presentation of the key investor information taking into account the different nature
    or components of the UCITS concerned, and the specific conditions for delivering key investor information in a durable medium other
    than paper and by means of a website which does not constitute a durable medium. Concerning notification, those measures are
    designed to specify the ║ scope of the information on the applicable local rules to be published by host competent authorities║ and
    the technical details on access by host competent authorities to stored and updated UCITS documents ║. Those measures are also
    designed to clarify definitions and to align terminology and framing definitions in accordance with subsequent acts on UCITS and
    related matters.


(88) Since those measures are of general scope and are designed to amend non essential elements of this Directive, by supplementing
    it with new non essential elements, they must be adopted in accordance with the regulatory procedure with scrutiny provided for
    in Article 5a of Decision 1999/468/EC ║. Powers not falling under the above category should be subject to the regulatory procedure
    provided in Article 5 of that Decision. Those measures are designed to specify the form and content of the standardised notification
    letter, the standard model of attestation and the procedure for the exchange of information and the use of electronic communication
    during the notification process. They are also designed to detail the procedures for on-the-spot verifications and investigations and
    exchange of information between competent authorities.


(89) Since the objectives of the action to be taken cannot be sufficiently achieved by the Member States in so far they involve the adop-
    tion of rules with common features applicable at transnational level and can therefore, by reason of the scale and effects of the


(1) OJ L 184.17.7.1999, p. 23


page 15                                                                                              | Cross-border distribution of UCITS | January 2009
     action, be better achieved at Community level, the Community may adopt measures, in accordance with the principle of subsidiarity
     as set out in Article 5 of the Treaty. In accordance with the principle of proportionality, as set out in that Article, this Directive does
     not go beyond what is necessary to achieve those objectives.


(90) The obligation to transpose this Directive into national law should be confined to those provisions which represent a substantive
    change as compared with the earlier Directive. The obligation to transpose the provisions which are unchanged arises under the
    earlier Directives.


(91) This Directive should be without prejudice to the obligations of the Member States relating to the time-limits for transposition into
    national law and application of the Directives set out in Annex III, Part B.


(92) In accordance with point 34 of the Interinstitutional Agreement on better law-making1, Member States are encouraged to draw up,
     for themselves and in the interest of the Community, their own tables illustrating, as far as possible, the correlation between this
     Directive and the transposition measures, and to make them public,


HAVE ADOPTED THIS DIRECTIVE:


CONTENT
CHAPTER I           GENERAL PROVISIONS AND SCOPE                                                               Articles 1 to 4
CHAPTER II          AUTHORISATION OF UCITS                                                                     Article 5
CHAPTER III         OBLIGATIONS REGARDING MANAGEMENT COMPANIES
          SECTION 1 Conditions for taking up business                                                          Articles 6 to 8
          SECTION 2 Relations with third countries                                                             Article 9
          SECTION 3 Operating conditions                                                                       Articles 10 to 15
          SECTION 4 Right of establishment and freedom to provide services                                     Articles 16 to 21
CHAPTER IV          OBLIGATIONS REGARDING THE DEPOSITARY                                                       Articles 22 to 26
CHAPTER V           OBLIGATIONS REGARDING INVESTMENT COMPANIES
          SECTION 1 Conditions for taking up business                                                          Articles 27 to 29
          SECTION 2 Operating conditions                                                                       Articles 30 and 31
          SECTION 3 Obligations regarding the depositary                                                       Articles 32 to 36
CHAPTER VI          MERGERS OF UCITS
          SECTION 1 Principle, authorisation and approval                                                      Articles 37 to 40
          SECTION 2 Third party control, information of unit-holders and other rights of unit-holders          Articles 41 to 45
          SECTION 3 Costs and entry into effect                                                                Articles 46 to 48
CHAPTER VII         OBLIGATIONS CONCERNING THE INVESTMENT POLICIES OF UCITS                                    Articles 49 to 57
CHAPTER VIII MASTER-FEEDER STRUCTURES
          SECTION 1 Scope and approval                                                                         Articles 58 and 59
          SECTION 2 Common provisions for feeder UCITS and master UCITS                                        Article 60
          SECTION 3 Depositaries and auditors                                                                  Articles 61 and 62
          SECTION 4 Compulsory information and marketing communications by the feeder UCITS                    Article 63
          SECTION 5 Conversion of existing UCITS into feeder UCITS and change of master UCITS                  Article 64
          SECTION 6 Obligations and competent authorities                                                      Articles 65 to 67
CHAPTER IX          OBLIGATIONS CONCERNING INFORMATION TO BE PROVIDED TO INVESTORS
          SECTION 1 Publication of a prospectus and periodical reports                                         Articles 68 to 75
          SECTION 2 Publication of other information                                                           Articles 76 and 77


(1) OJ C 321, 31.12.2003, p. 1


UCITS IV - PE 418.771 - page 16
          SECTION 3 Key investor information                                                                  Articles 78 to 82
CHAPTER X         GENERAL OBLIGATIONS OF UCITS                                                                Articles 83 to 90
CHAPTER XI        SPECIAL PROVISIONS APPLICABLE TO UCITS WHICH MARKET THEIR UNITS
                  IN MEMBER STATES OTHER THAN THOSE IN WHICH THEY ARE ESTABLISHED                             Articles 91 to 96
CHAPTER XII       PROVISIONS CONCERNING THE AUTHORITIES RESPONSIBLE FOR AUTHORISATION
                  AND SUPERVISION                                                                             Articles 97 to 110
CHAPTER XIII EUROPEAN SECURITIES COMMITTEE                                                                    Articles 111 and 112
CHAPTER XIV DEROGATIONS, TRANSITIONAL AND FINAL PROVISIONS
          SECTION 1 Derogations                                                                               Articles 113 and 114
          SECTION 2 Transitional and final provisions                                                         Articles 115 to 119
ANNEX I       Schedules A and B
ANNEX II      Functions included in the activity of collective portfolio management
ANNEX III
          Part A Repealed Directive with list of its successive amendments
          Part B List of time-limits for transposition into national law and application
ANNEX IV Correlation table


                                                              CHAPTER I
                                                     General provisions and scope


Article 1


1. Member States shall apply this Directive to undertakings for collective investment in transferable securities (hereinafter referred to as
  UCITS) established within their territories.


2. For the purposes of this Directive, and subject to Article 3, UCITS shall be undertakings:
  (a) The sole object of which is the collective investment in transferable securities and/or in other liquid financial assets referred to in
      Article 50 (1) of capital raised from the public and which operate on the principle of risk-spreading, and
  (b) The units of which are, at the request of holders, re-purchased or redeemed, directly or indirectly, out of those undertakings’ assets.
      Action taken by a UCITS to ensure that the stock exchange value of its units does not significantly vary from their net asset value
      shall be regarded as equivalent to such re-purchase or redemption.
  Member States may allow UCITS to be constituted of several investment compartments.


3. The undertakings referred to in paragraph 2 may be constituted according to law, either under the law of contract (as com-
  mon funds managed by management companies) or trust law (as unit trusts) or under statute (as investment companies).
  For the purposes of this Directive:
  (a) “Common funds” shall also include unit trusts;
  (b) “Units” of UCITS shall also include shares of UCITS.


4. Investment companies the assets of which are invested through the intermediary of subsidiary companies mainly otherwise than in
  transferable securities shall not be subject to this Directive.


5. The Member States shall prohibit UCITS which are subject to this Directive from transforming themselves into collective investment
  undertakings which are not covered by this Directive.


6. Subject to the provisions governing capital movements and to Articles 91, 92 and 108(1), second subparagraph, no Member State may
  apply any other provisions whatsoever in the field covered by this Directive to UCITS established in another Member State or to the


page 17                                                                                              | Cross-border distribution of UCITS | January 2009
  units issued by such UCITS, where they market their units within its territory.


7. With exception of Articles 1 to 4 and without prejudice to paragraph 6, a Member State may apply to UCITS established within its terri-
  tory requirements which are stricter than or additional to those laid down in this Directive, provided that they are of general application
  and do not conflict with the provisions of this Directive.




Article 2


1. For the purposes of this Directive the following definitions shall apply:
  (a) “Depositary” means any institution entrusted with the duties mentioned in Articles 22 and 33 and subject to the other provi-
      sions laid down in Chapter IV and section III of Chapter V;
  (b) “Management company” means any company, the regular business of which is the management of UCITS in the form of com-
      mon funds and/or of investment companies (collective portfolio management of UCITS);
  (c) A “management company’s home Member State” means the Member State, in which the management company has its reg-
      istered office;
  (d) A “management company’s host Member State” means the Member State, other than the home Member State, within the
      territory of which a management company has a branch or provides services;
  (e) A“UCITS home Member State” means: The Member State in which the UCITS is authorised pursuant to Article 5;
  (f) a “UCITS host Member State” means the Member State, other than the UCITS home Member State, in which the units of the
      common fund or of the investment company are marketed;
  (g) “branch” means a place of business which is a part of the management company, which has no legal personality and which
       provides the services for which the management company has been authorised;
  (h) “competent authorities” means the authorities which each Member State designates under Article 97;
  (i) “close links” means a situation in which two or more natural or legal persons are linked by either of the following:
       (i) “Participation”, which means the ownership, direct or by way of control, of 20% or more of the voting rights or capital of an
             undertaking;
       (ii) “control”, which means the relationship between a “parent undertaking” and a “subsidiary” as defined in Articles 1 and
             2 of Seventh Council Directive 83/349/EEC of 13 June 1983 based on the Article 54 (3) (g) of the Treaty on consolidated ac-
             counts1 and in all the cases referred to in Article 1 (1) and (2) of Directive 83/349/EEC, or a similar relationship between any
             natural or legal person and an undertaking;
  (j) “qualifying holdings” means any direct or indirect holding in a management company which represents 10 % or more of the
       capital or of the voting rights or which makes it possible to exercise a significant influence over the management of the man-
       agement company in which that holding subsists;
  (k) “initial capital” means capital as defined in Article 57(a) and (b) of Directive 2006/48/EC ║ ;
  (l) “own funds” means own funds as defined in Title V, Chapter 2, Section 1 of Directive 2006/48/EC;
  (m) “durable medium” means any instrument which enables an investor to store information addressed personally to it in a way
       accessible for future reference for a period of time adequate for the purposes of the information and which allows the un-
       changed reproduction of the information stored;
  (n) “transferable securities” means:
       (i)    shares in companies and other securities equivalent to shares in companies (“shares”);
       (ii) bonds and other forms of securitised debt (“debt securities”);
       (iii) any other negotiable securities which carry the right to acquire any such transferable securities by subscription or ex-
                change.




(1) OJ L 193, 18.7.1983, p. 1


UCITS IV - PE 418.771 - page 18
  (o) For the purposes of this Directive “money market instruments” mean instruments normally dealt in on the money market which
      are liquid, and have a value which can be accurately determined at any time.


2. For the purposes of paragraph 1(b), the regular business of a management company shall include the functions mentioned in An-
  nex II.


3. For the purposes of paragraph 1(g), all the places of business set up in the same Member State by a management company with its
  head office in another Member State shall be regarded as a single branch.


4. For the purposes of paragraph 1(i)(ii), the following shall apply:
  (a) any subsidiary undertaking of a subsidiary undertaking shall also be considered a subsidiary of the parent undertaking which is at
      the head of those undertakings;
  (b) a situation in which two or more natural or legal persons are permanently linked to one and the same person by a control relation-
      ship shall also be regarded as constituting a close link between such persons.


5. For the purposes of paragraph 1(j), the voting rights referred to in Articles 9 and 10 of Directive 2004/109/EC of the European Parliament
  and of the Council of 15 December 2004 on the harmonisation of transparency requirements in relation to information about issuers
  whose securities are admitted to trading on a regulated market1 shall be taken into account.


6. For the purposes of paragraph 1(l), Articles 13 to 16 of Directive 2006/49/EC ║ shall apply mutatis mutandis


7. For the purpose of paragraph 1(n), transferable securities shall exclude the techniques and instruments referred to in Article 51.




Article 3


The following undertakings shall not be UCITS subject to this Directive:
(a) UCITS of the closed-ended type;
(b) UCITS which raise capital without promoting the sale of their units to the public within the Community or any part of it;
(c) UCITS the units of which, under the fund rules or the instruments of incorporation of the investment company, may be sold only to the
    public in third countries;
(d) categories of UCITS prescribed by the regulations of the Member States in which such UCITS are established, for which the rules
    laid down in Chapter VII and Article 83 are inappropriate in view of their investment and borrowing policies.




Article 4


For the purposes of this Directive, a UCITS shall be deemed to be established in its home Member State.




(1) OJ L 390, 31.12.2004, p. 38


page 19                                                                                              | Cross-border distribution of UCITS | January 2009
                                                            CHAPTER II
                                                       Authorisation of UCITS


Article 5


1. No UCITS shall carry on activities as such unless it has been authorised by the competent authorities of its home Member State.


  Such authorisation shall be valid for all Member States.


2. A common fund shall be authorised only if the competent authorities of its home Member State have approved the application of the
  management company to manage the UCITS, the fund rules and the choice of depositary. An investment company shall be authorised
  only if the competent authorities of its home Member State have approved both its instruments of incorporation and the choice of
  depositary, and, where relevant, the application of the designated management company to manage the UCITS.


3. Without prejudice to paragraph 2, if the UCITS is not established in the management company’s home Member State, the competent
  authorities of the UCITS home Member State shall approve the application of the management company to manage the UCITS pursu-
  ant to Article 20. It must not be made a condition of authorisation that the UCITS be managed by a management company having its
  registered office in the UCITS home Member State or that the management company performs or delegates any activities in the UCITS
  home Member State.


4. The competent authorities of the UCITS home Member State may not authorise a UCITS if:
  (a) such authorities establish that the investment company does not comply with the preconditions laid down in Chapter V; or,
  (b) the management company is not authorised as a UCITS management company in its home Member State.
  Without prejudice to Article 27, the management company or, where applicable, the investment company shall be informed, within two
  months of the submission of a complete application, whether or not authorisation has been granted.
  Moreover, the competent authorities of the UCITS home Member State may not authorise a UCITS if the directors of the depositary
  are not of sufficiently good repute or are not sufficiently experienced also in relation to the type of UCITS to be managed. To that end,
  the names of the directors of the depositary and of every person succeeding them in office shall be communicated forthwith to the
  competent authorities.
  Directors shall mean those persons who, under the law or the instruments of incorporation, represent the depositary, or who effec-
  tively determine the policy of the depositary.


5. The competent authorities of the UCITS home Member State shall not grant authorisation if the UCITS is legally prevented (for exam-
  ple, through a provision in the fund rules or instruments of incorporation) from marketing its units in its home Member State.


6. Neither the management company nor the depositary may be replaced, nor may the fund rules or the instruments of incorporation of
  the investment company be amended, without the approval of the competent authorities of the UCITS home Member State.


7. Member States shall ensure that complete information on the laws, regulations and administrative provisions implementing this Direc-
  tive which relate to the constitution and functioning of the UCITS is easily accessible at a distance or by electronic means. Member
  States shall ensure that this information is available, at least, in a language customary in the sphere of international finance, provided
  in a clear and unambiguous manner, and kept up-to-date.




UCITS IV - PE 418.771 - page 20
                                                           CHAPTER III
                                          Obligations regarding management companies


                                                                  SECTION 1
                                                 CONDITIONS fOR TAkING UP bUSINESS


Article 6


1. Access to the business of management companies shall be subject to prior of ficial authorisation to be granted by the competent
  authorities of the management company’s home Member State. Authorisation granted under this Directive to a management company
  shall be valid for all Member States.


2. No management company may engage in activities other than the management of UCITS authorised according to this Directive
  except the additional management of other collective investment undertakings which are not covered by this Directive and for
  which the management company is subject to prudential supervision but which cannot be marketed in other Member States
  under this Directive.
  The activity of management of common funds and of investment companies shall include, for the purpose of this Directive, the func-
  tions mentioned in Annex II.


3. By way of derogation from paragraph 2, Member States may authorise management companies to provide, in addition to the manage-
  ment of common funds and of investment companies, the following services:
  (a) Management of portfolios of investments, including those owned by pension funds, in accordance with mandates given by inves-
      tors on a discretionary, client-by-client basis, where such portfolios include one or more of the instruments listed in Annex I, Sec-
      tion C to Directive 2004/39/EC;
  (b) As non-core services:
      (i) Investment advice concerning one or more of the instruments listed in Annex I, Section C to Directive 2004/39/EC,
      (ii) Safekeeping and administration in relation to units of collective investment undertakings.
  Management companies may in no case be authorised under this Directive to provide only the services mentioned in this paragraph
  or to provide non-core services without being authorised for the service referred to in point (a) of the first subparagraph.


4. Articles 2 (2), 12, 13 and 19 of Directive 2004/39/EC shall apply to the provision of the services referred to in paragraph 3 of this Article
  by management companies.




Article 7


1. Without prejudice to other conditions of general application laid down by national law, the competent authorities shall not grant au-
  thorisation to a management company unless the following conditions are met:
  (a) The management company has an initial capital of at least EUR 125 000, taking into account the following:
      (i) When the value of the portfolios of the management company exceeds EUR 250 000 000, the management company shall be re-
          quired to provide an additional amount of own funds; This additional amount of own funds shall be equal to 0,02 % of the amount
          by which the value of the portfolios of the management company exceeds EUR 250 000 000; The required total of the initial capital
          and the additional amount shall not, however, exceed EUR 10 000 000;
      (ii) For the purpose of this paragraph, the following portfolios shall be deemed to be the portfolios of the management company:
          - Common funds managed by the management company including portfolios for which it has delegated the management func-
            tion but excluding portfolios that it is managing under delegation,




page 21                                                                                                | Cross-border distribution of UCITS | January 2009
           - Investment companies for which the management company is the designated management company,
           - Other collective investment undertakings managed by the management company including portfolios for which it has del-
            egated the management function but excluding portfolios that it is managing under delegation;
       (iii) Irrespective of the amount of these requirements, the own funds of the management company shall never be less than the
           amount prescribed in Article 21 of Directive 2006/49/EC;
       (iv) Member States may authorise management companies not to provide up to 50 % of the additional amount of own funds referred
           to in point (i) if they benefit from a guarantee of the same amount given by a credit institution or an insurance undertaking; The
           credit institution or insurance undertaking shall have its registered office in a Member State, or in a third country provided that
           it is subject to prudential rules considered by the competent authorities as equivalent to those laid down in Community law;
  (b) The persons who effectively conduct the business of a management company are of sufficiently good repute and are sufficiently
      Experienced also in relation to the type of UCITS managed by the management company; To that end, the names of these persons
      and of every person succeeding them in office must be communicated forthwith to the competent authorities; The conduct of the
      business of a management company must be decided by at least two persons meeting such conditions;
  (c) The application for authorisation is accompanied by a programme of activity setting out, at least, the organisational structure of the
      management company;
  (d) Both the head office and the registered office of the management company are located in the same Member State.


2. Where close links exist between the management company and other natural or legal persons, the competent authorities shall grant
  authorisation only if those close links do not prevent the effective exercise of their supervisory functions.
  The competent authorities shall also refuse authorisation if the laws, regulations or administrative provisions of a third country govern-
  ing one or more natural or legal persons with which the management company has close links, or difficulties involved in their enforce-
  ment, prevent the effective exercise of their supervisory functions.
  The competent authorities shall require management companies to provide them with the information they require to monitor compli-
  ance with the conditions referred to in this paragraph on a continuous basis.


3. An applicant shall be informed, within six months of the submission of a complete application, whether or not authorisation has been
  granted. Reasons shall be given whenever an authorisation is refused.


4. A management company may start business as soon as authorisation has been granted.


5. The competent authorities may withdraw the authorisation issued to a management company subject to this Directive only where
  that company:
  (a) Does not make use of the authorisation within 12 months, expressly renounces the authorisation or has ceased the activity covered
      by this Directive more than six months previously unless the Member State concerned has provided for authorisation to lapse in
      such cases;
  (b) Has obtained the authorisation by making false statements or by any other irregular means;
  (c) No longer fulfils the conditions under which authorisation was granted;
  (d) No longer complies with Directive 2006/49/EC if its authorisation also covers the discretionary portfolio management service re-
      ferred to in Article 6 (3) (a) of this Directive;
  (e) Has seriously and/or systematically infringed the provisions adopted pursuant to this Directive; Or
  (f) Falls within any of the cases where national law provides for withdrawal.




Article 8


1. The competent authorities shall not grant authorisation to take up the business of management companies until they have been
  informed of the identities of the shareholders or members, whether direct or indirect, natural or legal persons, that have qualifying


UCITS IV - PE 418.771 - page 22
  holdings and of the amounts of those holdings.
  The competent authorities shall refuse authorisation if, taking into account the need to ensure the sound and prudent management of
  a management company, they are not satisfied as to the suitability of the aforementioned shareholders or members.


2. In the case of branches of management companies that have registered offices outside the Community and are starting or carrying
  on business, the Member States shall not apply provisions that result in treatment more favourable than that accorded to branches of
  management companies that have registered offices in Member States.


3. The competent authorities of the other Member State involved shall be consulted beforehand on the authorisation of any management
  company which is one of the following:
  (a) A subsidiary of another management company, an investment firm, a credit institution or an insurance undertaking authorised in
      another Member State;
  (b) A subsidiary of the parent undertaking of another management company, an investment firm, a credit institution or an insurance
      undertaking authorised in another Member State;
  (c) A company controlled by the same natural or legal persons as control another management company, an investment firm, a credit
      institution or an insurance undertaking authorised in another Member State.



                                                                SECTION 2
                                                  RElATIONS wITh ThIRD COUNTRIES


Article 9


1. Relations with third countries shall be regulated in accordance with the relevant rules laid down in Article 15 of Directive 2004/39/EC.
  For the purpose of this Directive, the expressions “investment firm” and “investment firms” contained in Article 15 of Directive 2004/39/
  EC shall be construed respectively as “management company” and “management companies”; The expression “providing investment
  services” in Article 15 (1) of Directive 2004/39/EC shall be construed as “providing services”.


2. Member States shall inform the Commission of any general difficulties which UCITS encounter in marketing their units in any
  third country.


                                                                SECTION 3
                                                        OPERATING CONDITIONS


Article 10


1. The competent authorities of the management company’s home Member State shall require that the management com-
  pany which they have authorised complies at all times with the conditions laid down in Article 6 and Article 7 (1) and (2).
  The own funds of a management company may not fall below the level specified in Article 7 (1) (a). If they do, however, the com-
  petent authorities may, where the circumstances justify it, allow such firms a limited period in which to rectify their situations or
  cease their activities.


2. The prudential supervision of a management company shall be the responsibility of the competent authorities of management com-
  pany’s home Member State, whether the management company establishes a branch or provides services in another Member State
  or not, without prejudice to those provisions of this Directive which give responsibility to the competent authorities of management
  company’s host Member State.




page 23                                                                                             | Cross-border distribution of UCITS | January 2009
Article 11


1. Qualifying holdings in management companies shall be subject to the same rules as those laid down in Article 10 of Directive
  2004/39/EC.


2. For the purpose of this Directive, the expressions “investment firm” and “investment firms” contained in Article 10 of Directive 2004/39/
  EC shall be construed respectively as “management company” and “management companies”.




Article 12


1. Each management company’s home Member State shall draw up prudential rules which management companies authorised in that
  Member State, with regard to the activity of management of UCITS authorised according to this Directive, shall observe at all times.
  In particular, the competent authorities of the management company’s home Member State having regard also to the nature of the
  UCITS managed by a management company, shall require that each such company:
  (a) Has sound administrative and accounting procedures, control and safeguard arrangements for electronic data processing and
       adequate internal control mechanisms including, in particular, rules for personal transactions by its employees or for the holding
       or management of investments in financial instruments in order to invest own funds and ensuring, at least, that each transaction
       involving the UCITS may be reconstructed according to its origin, the parties to it, its nature, and the time and place at which it
       was effected and that the assets of the common funds or of the investment companies managed by the management company are
       invested according to the fund rules or the instruments of incorporation and the legal provisions in force;
  (b) is structured and organised in such a way as to minimise the risk of UCITS’ or clients’ interests being prejudiced by conflicts of
       interest between the company and its clients, between one of its clients and another, between one of its clients and a UCITS and
       between two UCITS.


2. Each management company the authorisation of which also covers the discretionary portfolio management service referred in Arti-
  cle 6 (3) (a):
  (a) Shall not be permitted to invest all or a part of the investor’s portfolio in units of common funds or of investment companies it man-
       ages, unless it receives prior general approval from the client;
  (b) Shall be subject with regard to the services referred to in Article 6(3) to the provisions laid down in Directive 97/9/EC of the European
      Parliament and of the Council of 3 March 1997 on investor-compensation schemes1.


3. Without prejudice to Article 116, the Commission shall adopt, by 1 July 2010, implementing measures specifying the procedures and
  arrangements as referred to under point (a) of paragraph 1 and the structures and organisational requirements to minimise conflicts
  of interests as referred to under point (b) of paragraph 1.
  Those measures, designed to amend non-essential elements of this Directive by supplementing it, shall be adopted in accordance with
  the regulatory procedure with scrutiny referred to in Article 112(2).




Article 13


1. If the law of the management company’s home Member State permits management companies to delegate to third parties for the
  purpose of a more efficient conduct of the companies’ business, to carry out on their behalf one or more of their own functions all of
  the following preconditions shall be complied with:
  (a) The competent authorities of the management company’s home Member State must be informed by the management company in


(1) OJ L 84, 26.3.1997, p. 22


UCITS IV - PE 418.771 - page 24
      an appropriate manner; the competent authorities of the management company’s home Member State shall without delay transmit
      the information to the competent authorities of the UCITS home Member State;
  (b) The mandate shall not prevent the effectiveness of supervision over the management company, and in particular it must not pre-
      vent the management company from acting, or the UCITS from being managed, in the best interests of its investors;
  (c) When the delegation concerns the investment management, the mandate may only be given to undertakings which are authorised
      or registered for the purpose of asset management and subject to prudential supervision; The delegation must be in accordance
      with investment-allocation criteria periodically laid down by the management companies;
  (d) Where the mandate concerns the investment management and is given to a third-country undertaking, cooperation between the
      supervisory authorities concerned must be ensured;
  (e) A mandate with regard to the core function of investment management shall not be given to the depositary or to any other under-
      taking whose interests may conflict with those of the management company or the unit-holders;
  (f) Measures shall exist which enable the persons who conduct the business of the management company to monitor effectively at
      any time the activity of the undertaking to which the mandate is given;
  (g) The mandate shall not prevent the persons who conduct the business of the management company to give at any time further
      instructions to the undertaking to which functions are delegated and to withdraw the mandate with immediate effect when this is
      in the interest of investors;
  (h) Having regard to the nature of the functions to be delegated, the undertaking to which functions will be delegated must be qualified
      and capable of undertaking the functions in question;
  (i) The UCITS’ prospectuses list the functions which the management company has been permitted to delegate by the management
      company’s home Member State.


2. In no case shall the management company’s and the depositary’s liability be affected by the fact that the management company del-
  egated any functions to third parties, nor shall the management company delegate its functions to the extent that it becomes a letter
  box entity.




Article 14


1. Each Member State shall draw up rules of conduct which management companies authorised in that Member State shall observe
  at all times. Such rules shall implement at least the principles set out in points (a) to (e). Those principles shall ensure that a
  management company:
  (a) Acts honestly and fairly in conducting its business activities in the best interests of the UCITS it manages and the integrity of
      the market;
  (b) Acts with due skill, care and diligence, in the best interests of the UCITS it manages and the integrity of the market;
  (c) Has and employs effectively the resources and procedures that are necessary for the proper performance of its business activi-
      ties;
  (d) Tries to avoid conflicts of interests and, when they cannot be avoided, ensures that the UCITS it manages are fairly treated, and
  (e) Complies with all regulatory requirements applicable to the conduct of its business activities so as to promote the best interests of
      its investors and the integrity of the market.


2. Without prejudice to Article 116, the Commission shall adopt, by 1 July 2010, implementing measures, with a view to ensuring that the
  management company complies with the duties set out in paragraph 1, in particular to:
  (a) Define the steps that management companies might reasonably be expected to take to identify, prevent, manage and/or disclose
      conflicts of interest as well as to establish appropriate criteria for determining the types of conflicts of interest whose existence
      may damage the interests of the UCITS;
  (b) Establish appropriate criteria for acting honestly and fairly and with due skill, care and diligence in the best interests of the
      UCITS;


page 25                                                                                             | Cross-border distribution of UCITS | January 2009
  (c) Specify the principles required to ensure that management companies employ effectively the resources and procedures that are
       necessary for the proper performance of their business activities.
  Those measures, designed to amend non-essential elements of this Directive by supplementing it, shall be adopted in accordance with
  the regulatory procedure with scrutiny referred to in Article 112(2).




Article 15


Management companies or, where relevant, investment companies shall take the measures in accordance with Article 92 and set up
appropriate procedures and arrangements to ensure that they deal properly with investor complaints and that there are no restriction for
investors to exercise their rights in the event that the management company is authorised in a Member State different from the UCITS
home Member State. Investors should be able to file complaints in their local language.
Management companies shall also set up appropriate procedures and arrangements to make information available at the request of the
public or the competent authorities of the UCITS home Member State.



                                                                SECTION 4
                                  RIGhT Of ESTAblIShMENT AND fREEDOM TO PROVIDE SERVICES


Article 16


1. Member States shall ensure that a management company, authorised by its home Member State, may carry on within their ter-
  ritories the activity for which it has been authorised, either by the establishment of a branch or under the freedom to provide
  services.
  If such a management company only proposes, without establishment of a branch, only to market the units of the UCITS it man-
  ages as provided for in Annex II in a Member State other than the one where the UCITS has been authorised, without proposing
  to carry out any other activities or services, such a marketing shall be subject only to the requirements of Chapter XI.


2. Member States may not make the establishment of a branch or the provision of the services subject to any authorisation require-
  ment, to any requirement to provide endowment capital or to any other measure having equivalent effect.


3. Subject to the conditions set out in this Article, a UCITS shall be free to designate, or to be managed by a management company
  authorised in Member State other than the UCITS home Member State in accordance with the relevant provisions of this Direc-
  tive, provided that such a management company fulfils the following criteria:
  (a) It complies with the provisions of Article 17 or Article 18;
  (b) It complies with the provisions of Article 19 and Article 20.




Article 17


1. In addition to meeting the conditions imposed in Articles 6 and 7, any management company wishing to establish a branch within
  the territory of another Member State to perform the activities for which it has been authorised shall notify the competent authori-
  ties of its home Member State.


2. Member States shall require every management company wishing to establish a branch within the territory of another Member
  State to provide the following information and documents, when effecting the notification provided for in paragraph 1:
  (a) the Member State within the territory of which the management company plans to establish a branch;


UCITS IV - PE 418.771 - page 26
  (b) a programme of operations setting out the activities and services according to Article 6(2) and (3) envisaged and the organi-
      sational structure of the branch. This programme shall include a description of the risk management process put in place by
      the management company. It shall also include a description of the arrangements taken in accordance with Article 15;
  (c) the address in the management company’s host Member State from which documents may be obtained;
  (d) the names of those responsible for the management of the branch.


3. Unless the competent authorities of the management company’s home Member State have reason to doubt the adequacy of the
  administrative structure or the financial situation of a management company, taking into account the activities envisaged, they
  shall, within two months of receiving all the information referred to in paragraph 2, communicate that information to the compe-
  tent authorities of the management company’s host Member State and shall inform the management company accordingly. They
  shall also communicate details of any compensation scheme intended to protect investors.
  Where the competent authorities of the management company’s home Member State refuse to communicate the information
  referred to in paragraph 2 to the competent authorities of the management company’s host Member State, they shall give reasons
  for their refusal to the management company concerned within two months of receiving all the information. That refusal or failure
  to reply shall be subject to the right to apply to the courts in the management company’s home Member State.
  Where a management company wishes to carry out the service of collective portfolio management referred to in Annex II, the
  competent authorities of the management company’s home Member State shall attach to the documentation an attestation that
  the management company has been authorised pursuant to the provisions of this Directive, a description of the scope of the
  management company’s authorisation and details of any restriction on the types of UCITS that the management company is au-
  thorised to manage.


4. The services provided by the branch of a management company within the territory of the host Member State shall comply with
  the rules drawn up by the management company’s host Member State pursuant to Article 14.


5. The competent authorities of the management company’s host Member State are responsible for supervising compliance with
  respect to the matters listed under paragraph 4.


6. Before the branch of a management company starts business, the competent authorities of the management company’s host
 Member State shall, within two months of receiving the information referred to in paragraph 2, prepare for the supervision of the
 compliance of the management company with the rules under their responsibility.


7. On receipt of a communication from the competent authorities of the management company’s host Member State or on the expiry
  of the period provided for in paragraph 6 without receipt of any communication from those authorities, the branch may be estab-
  lished and start business. ║


8. In the event of change of any particulars communicated in accordance with paragraph 2(b), (c) or (d), a management company
  shall give written notice of that change to the competent authorities of the management company’s home Member State and
  to the management company’s host Member State at least one month before implementing the change so that the competent
  authorities of the management company’s home Member State may take a decision on the change under paragraph 3 and the
  competent authorities of the management company’s host Member State may do so under paragraph 6.


9. In the event of a change in the particulars communicated in accordance with the first subparagraph of paragraph 3, the authori-
  ties of the management company’s home Member State shall inform the authorities of the management company’s host Member
  State accordingly.
  The competent authorities of the management company’s home Member State shall update the information contained in the
  attestation referred to in paragraph 3 and inform the competent authorities of the management company’s host Member State
  whenever there is a change in the scope of the management company’s authorisation or in the details of any restriction on the
  types of UCITS that the management company is authorised to manage.
page 27                                                                                      | Cross-border distribution of UCITS | January 2009
Article 18


1. Any management company wishing to carry on the activities for which it has been authorised within the territory of another Member
  State for the first time under the freedom to provide services shall communicate the following information to the competent authorities
  of the management company’s home Member State:
  (a) the Member State within the territory of which the management company intends to operate;
  (b) a programme of operations stating the activities and services referred to in Article 6(2) and (3) envisaged. This programme shall
       include a description of the risk management process put in place by the management company. It shall also include a description
       of the arrangements taken in accordance with Article 15;


2. The competent authorities of the ║management company’s home Member State shall, within one month of receiving the information
  referred to in paragraph 1, forward it to the competent authorities of the management company’s host Member State.
  The competent authorities of the management company’s home Member State shall also communicate details of any applicable com-
  pensation scheme intended to protect investors.
  Where a management company wishes to carry out the service of collective portfolio management as referred to in Annex II, the
  competent authorities of the management company’s home Member State shall enclose to the documentation an attestation that the
  management company has been authorised pursuant to the provisions of this Directive, a description of the scope of the management
  company’s authorisation and details of any restriction on the types of UCITS that the management company is authorised to manage.
  The management company may then start business in the management company’s host Member State, notwithstanding the provisions
  of Article 20 and Article 93.


3. The services provided by the management company under the freedom to provide services shall comply with the rules drawn up by
  the management company’s home Member State pursuant to Article 14.


4. Should the content of the information communicated in accordance with paragraph 1(b) be amended, the management company shall
  give notice of the amendment in writing to the competent authorities of the management company’s home Member State and of the
  management company’s host Member State before implementing the change. The competent authority of the management company
  shall update the information contained in the attestation referred to in paragraph 2 and inform the competent authorities of the man-
  agement company’s host Member State whenever there is a change in the scope of the management company’s authorisation or in
  the details of any restriction on the types of UCITS that the management company is authorised to manage.




Article 19


1. A management company which provides the service of cross border collective portfolio management under the free provision of serv-
  ices or by the establishment of a branch shall comply with the rules of the management company’s home Member State which relate
  to the organisation of the management company, including delegation arrangements, risk management procedures, prudential rules
  and supervision, procedures referred to in Article 12 and the management company’s reporting requirements. These rules may not be
  stricter than the rules applicable to management companies conducting their activities only in their home Member State.


2. The competent authorities of the management company’s home Member State shall be responsible for supervising compliance with
  respect to the matters listed under paragraph 1.


3. A management company which provides the service of cross border collective portfolio management through the free provision of
  services or by the establishment of a branch shall comply with the rules of the UCITS home Member State which relate to the constitu-
  tion and functioning of the UCITS, which are namely the rules applicable to:




UCITS IV - PE 418.771 - page 28
  (a) the set up and authorisation of the UCITS;
  (b) the issuance and redemption of units and shares ;
  (c) investment policies and limits, including calculation of total exposure and leverage;
  (d) restrictions on borrowing, lending and uncovered sales;
  (e) the valuation of assets and the accounting of the UCITS;
  (f) the calculation of the issue price and/or redemption price, and rules regarding errors in the calculation of the net asset value and
      the related investor compensation;
  (g) the distribution or reinvestment of the income;
  (h) the disclosure and reporting requirements of the UCITS, including the prospectus, the key investor information and periodic re-
      ports;
  (i) the arrangements made for marketing;
  (j) the relationship with unit holders;
  (k) the merging and restructuring of UCITS;
  (l) the winding-up and liquidation of the UCITS;
  (m) where applicable, the content of the unit-holder register;
  (n) the licensing and supervision fees regarding the UCITS;
  (o) the exercise of unit holders’ voting rights and other unit holders’ rights related to points (a) to (m).


4. The management company shall comply with the obligations set out in the fund rules or in the instruments of incorporation, and the
  obligations set out in the prospectus, which shall be consistent with applicable law as referred to in paragraphs 1 and 3.


5. The competent authorities of the UCITS home Member State shall be responsible for supervising compliance with respect to the mat-
  ters listed under paragraphs 3 and 4.


6. The management company shall decide and be responsible for adopting and implementing all the arrangements and organisational
  decisions which are necessary to ensure compliance with the rules which relate to the constitution and functioning of the UCITS and
  with the obligations set out in the fund rules or in the instruments of incorporation, and with the obligations set out in the prospectus.


7. The competent authorities of the management company’s home Member State are responsible for supervising the adequacy of the
  arrangements and organisation of the management company so that the management company is in a position to comply with the
  obligations and rules which relate to the constitution and functioning of all the UCITS it manages.


8. Member States shall ensure that any management company authorised in a Member State is not subject to any additional require-
  ment established in the UCITS home Member State in respect of the matters covered by this Directive, except in the cases expressly
  referred to in this Directive.




Article 20


1. Without prejudice to Article 5, a management company which applies to manage a UCITS established in another Member State shall
  provide the competent authorities of the UCITS home Member State with the following documentation:
  (a) the written agreement with the depositary referred to in Articles 23 and 33;
  (b) information on delegation arrangements regarding functions of investment management and administration referred to in An-
      nex II.
  If a management company already manages the same type of UCITS in the UCITS home Member State, reference to the documenta-
  tion already provided shall be sufficient.




page 29                                                                                                 | Cross-border distribution of UCITS | January 2009
2. Insofar as it is necessary to ensure compliance with the rules for which they are responsible, the competent authorities of the UCITS
  home Member State may ask the competent authorities of the management company’s home Member State for clarification and
  information regarding the documentation referred to in paragraph 1 and, based on the attestation referred to in Articles 17 and 18, as
  to whether the type of UCITS for which authorisation is requested falls within the scope of the management company’s authorisation.
  Where applicable, the competent authorities of the management company’s home Member State shall provide their opinion within 10
  working days of the initial request.


3. The competent authorities of the UCITS home Member State may refuse the application of the management company only if:
  (a) the management company does not comply with the rules falling within their remit pursuant to Article 19, or
  (b) the management company is not authorised by the competent authorities of its home Member State to manage the type of UCITS
       for which authorisation is requested, or
  (c) the management company has not provided the documentation referred to in paragraph 1.
  Before refusing the application, the competent authorities of the UCITS home Member State should consult the competent authorities
  of the management company’s home Member State.


4. Any subsequent material modifications of the documentation referred to in paragraph 1 should be notified by the management com-
  pany to the competent authorities of the UCITS home Member State.




Article 21


1. Management companies’ host Member States may, for statistical purposes, require all management companies with branches within
  their territories to report periodically on their activities in those host Member States to the competent authorities of those management
  company’s host Member States.


2. Management companies’ host Member States may require management companies, carrying on business within their territories
  through the establishment of a branch or under the freedom to provide services, to provide the information necessary for the monitor-
  ing of their compliance with the rules under the responsibility of the management company’s host Member State that apply to them.
  Those requirements may not be more stringent than those which the same Member State imposes on ║management companies au-
  thorised in that Member State for the monitoring of their compliance with the same standards.
  Management companies shall ensure that the procedures and arrangements referred to in Article 15 enable the competent authorities
  of the UCITS home Member State to get directly from the management company the above-mentioned information.


3. Where the competent authorities of a management company’s host Member State ascertain that a management company that has a
  branch or provides services within its territory is in breach of one of the rules under their responsibility, those authorities shall require
  the management company concerned to put an end to its irregular situation and inform the competent authorities of the management
  company’s home Member State.


4. If the management company concerned refuses to provide management company’s host Member State with information falling within
  their remit, or fails to take the necessary steps to put an end to the irregular situation referred to in paragraph 3, the competent authori-
  ties of the management company’s host Member State shall inform the competent authorities of the management company’s home
  Member State accordingly. The competent authorities of the management company’s home Member State shall, at the earliest op-
  portunity, take all appropriate measures to ensure that the management company concerned provides the information requested by
  the management company’s host Member State pursuant to paragraph 2 or puts an end to its irregular situation. The nature of those
  measures shall be communicated to the competent authorities of the management company’s host Member State.




UCITS IV - PE 418.771 - page 30
5. If, despite the measures taken by the management company’s home Member State or because such measures prove inadequate or
    are not available in the Member State in question, the management company continues to refuse to provide the information requested
    by the management company’s host Member State pursuant to paragraph 2, or persists in breaching the legal or regulatory provi-
    sions referred to in the same paragraph in force in the management company’s host Member State, the management company’s host
    Member State may, after informing the competent authorities of the management company’s home Member State, take appropriate
    measures, including those referred to in Articles 98 and 99, to prevent or to penalise further irregularities and, insofar as necessary, to
    prevent that management company from initiating any further transaction within its territory. Member States shall ensure that within
    their territories it is possible to serve the legal documents necessary for those measures on management companies. Where the serv-
    ice provided within the management company’s host Member State is the management of a UCITS, the management company’s host
    Member State may require the management company to cease managing this UCITS.
║
6. Any measure adopted pursuant to paragraphs 4 and 5 involving measures or penalties ║shall be properly justified and communicated
    to the management company concerned. Every such measure shall be subject to the right to apply to the courts in the Member State
    which adopted it.


7. Before following the procedure laid down in paragraphs 3, 4 or 5 the competent authorities of the management company’s host Mem-
    ber State may, in emergencies, take any precautionary measures necessary to protect the interests of investors and others for whom
    services are provided. The Commission and the competent authorities of the other Member States concerned shall be informed of
    such measures at the earliest opportunity.
    After consulting the competent authorities of the Member States concerned, the Commission may decide that the Member State in
    question must amend or abolish those measures.


8. The competent authorities of the management company’s home Member State shall consult the competent authorities of the UCITS
    home Member State before withdrawing the authorisation of the management company. In such cases, the competent authorities of
    the UCITS home Member State shall take appropriate measures to safeguard investors’ interests. Those measures may include deci-
    sions preventing the management company concerned from initiating any further transactions within its territory and to safeguard
    investors’ interests.
    Every two years the Commission shall issue a report on such cases.


9. Member States shall inform the Commission of the number and type of cases in which there have been refusals pursuant to Articles
    17 and 20 or measures have been taken in accordance with paragraph 5 of this Article.
    Every two years the Commission shall issue a report on such cases.




                                                               CHAPTER IV
                                                   Obligations regarding the depositary


Article 22


1. A common fund’s assets must be entrusted to a depositary for safe-keeping.


2. A depositary’s liability as referred to in Article 21 shall not be affected by the fact that it has entrusted to a third party all or some of the
    assets in its safe-keeping.


3. A depositary shall:
    (a) Ensure that the sale, issue, re-purchase, redemption and cancellation of units effected on behalf of a common fund or by a manage-
       ment company are carried out in accordance with the law and the fund rules;


page 31                                                                                                   | Cross-border distribution of UCITS | January 2009
  (b) Ensure that the value of units is calculated in accordance with the law and the fund rules;
  (c) Carry out the instructions of the management company, unless they conflict with the law or the fund rules;
  (d) Ensure that in transactions involving a common fund’s assets any consideration is remitted to it within the usual time limits;
  (e) Ensure that a common fund’s income is applied in accordance with the law and the fund rules.




Article 23


1. A depositary shall either have its registered office in the UCITS home Member State ║or be established in that Member State if its
  registered office is in another Member State.


2. A depositary shall be an institution which is subject to prudential regulation and on-going supervision. It shall also furnish sufficient
  financial and professional guarantees to be able effectively to pursue its business as depositary and meet the commitments inherent
  in that function.


3. Member States shall determine which of the categories of institutions referred to in paragraph 2 shall be eligible to be depositaries.


4. The depositary shall enable the competent authorities of the UCITS home Member State to obtain on request all information, which the
  depositary has obtained while discharging its duties, and which are necessary for the competent authorities to supervise compliance
  of the UCITS with the requirements under this Directive.


5. If the management company’s home Member State is not the UCITS home Member State, the depositary shall sign a written agree-
  ment with the management company regulating the flow of information deemed necessary to allow it to perform the functions referred
  to in Article 22 and in other laws, regulations and administrative provisions which are relevant for depositaries in the UCITS home
  Member State.


6. The Commission may adopt implementing measures on the measures to be taken by a depositary in order to fulfil its duties regarding
  a UCITS managed by a management company situated in another Member State, including the particulars that need to be included in
  the standard agreements to be used by the depositary and the management company as referred to in paragraph 4.


  Those measures, designed to amend non-essential elements of this Directive by supplementing it, shall be adopted in accordance with
  the regulatory procedure with scrutiny referred to in Article 112(2).




Article 24


A depositary shall, in accordance with the national law of the UCITS home Member State, be liable to the management company and
the unit-holders for any loss suffered by them as a result of its unjustifiable failure to perform its obligations or its improper performance
of them.
Liability to unit-holders may be invoked either directly or indirectly through the management company, depending on the legal nature of
the relationship between the depositary, the management company and the unit-holders.




Article 25


1. No single company shall act as both management company and depositary.




UCITS IV - PE 418.771 - page 32
2. In the context of their respective roles the management company and the depositary shall act independently and solely in the interest
  of the unit-holders.




Article 26


The law or the fund rules shall lay down the conditions for the replacement of the management company and the depositary and rules to
ensure the protection of unit-holders in the event of such replacement.




                                                            CHAPTER V
                                            Obligations regarding investment companies


                                                                 SECTION 1
                                                 CONDITIONS fOR TAkING UP bUSINESS


Article 27


Access to the business of investment company shall be subject to prior of ficial authorisation to be granted by the competent authorities
of investment company’s home Member State.
Member States shall determine the legal form which an investment company must take.
The registered office of the investment company must be situated in the investment company’s home Member State.




Article 28


No investment company may engage in activities other than those referred to in Article 1 (2).




Article 29


1. Without prejudice to other conditions of general application laid down by national law, the competent authorities of the investment
 company’s home Member State shall not grant authorisation to an investment company that has not designated a management com-
 pany unless the investment company has a sufficient initial capital of at least EUR 300 000.
  In addition, when an investment company has not designated a management company authorised pursuant to this Directive, the fol-
  lowing conditions shall apply:
  (a) The authorisation shall not be granted unless the application for authorisation is accompanied by a programme of activity setting
      out, at least, the organisational structure of the investment company;
  (b) The directors of the investment company shall be of sufficiently good repute and be sufficiently experienced also in relation to the
      type of business carried out by the investment company; To that end, the names of the directors and of every person succeeding
      them in office must be communicated forthwith to the competent authorities; The conduct of an investment company’s business
      must be decided by at least two persons meeting such conditions; Directors shall mean those persons who, under the law or the
      instruments of incorporation, represent the investment company, or who effectively determine the policy of the company;
  (c) Where close links exist between the investment company and other natural or legal persons, the competent authorities shall grant
      authorisation only if those close links do not prevent the effective exercise of their supervisory functions.
      The competent authorities of the investment company’s home Member State shall also refuse authorisation if the laws, regulations
      or administrative provisions of a third country governing one or more natural or legal persons with which the investment company


page 33                                                                                              | Cross-border distribution of UCITS | January 2009
       has close links, or difficulties involved in their enforcement, prevent the effective exercise of their supervisory functions.
  The competent authorities of the investment company’s home Member State shall also refuse authorisation if the laws, regulations or
  administrative provisions of a third country governing one or more natural or legal persons with which the investment company has
  close links, or difficulties involved in their enforcement, prevent the effective exercise of their supervisory functions.
  The competent authorities of the investment company’s home Member State shall require investment companies to provide them with
  the information they need.


2. Where an investment company has not designated a management company, the investment company shall be informed, within six
  months of the submission of a complete application, whether or not authorisation has been granted. Reasons shall be given whenever
  an authorisation is refused.


3. An investment company may start business as soon as authorisation has been granted.


4. The competent authorities of the investment company’s home Member State may withdraw the authorisation issued to an investment
  company subject to this Directive only where that company:
  (a) Does not make use of the authorisation within 12 months, expressly renounces the authorisation or has ceased the activity
       covered by this Directive more than 6 months previously unless the Member State concerned has provided for authorisation
       to lapse in such cases;
  (b) Has obtained the authorisation by making false statements or by any other irregular means;
  (c) No longer fulfils the conditions under which authorisation was granted;
  (d) Has seriously and/or systematically infringed the provisions adopted pursuant to this Directive; Or
  (e) Falls within any of the cases where national law provides for withdrawal.




                                                                  SECTION 2
                                                          OPERATING CONDITIONS


Article 30


Articles 13 and 14 shall apply mutatis mutandis to investment companies that have not designated a management company authorised
pursuant to this Directive.
For the purpose of this Article “management company” shall be construed as “investment company”.
Investment companies may only manage assets of their own portfolio and may not, under any circumstances, receive any mandate to
manage assets on behalf of a third party.




Article 31


Each investment company’s home Member State shall draw up prudential rules which shall be observed at all times by investment com-
panies that have not designated a management company authorised pursuant to this Directive.
In particular, the competent authorities of the investment company’s home Member State, having regard also to the nature of the invest-
ment company, shall require that the company has sound administrative and accounting procedures, control and safeguard arrange-
ments for electronic data processing and adequate internal control mechanisms including, in particular, rules for personal transactions
by its employees or for the holding or management of investments in financial instruments in order to invest its initial capital and ensuring,
at least, that each transaction involving the company may be reconstructed according to its origin, the parties to it, its nature, and the
time and place at which it was effected and that the assets of the investment company are invested according to the instruments of
incorporation and the legal provisions in force.


UCITS IV - PE 418.771 - page 34
                                                                    SECTION 3
                                                OblIGATIONS REGARDING ThE DEPOSITARy


Article 32


1. An investment company’s assets shall be entrusted to a depositary for safe-keeping.


2. A depositary’s liability as referred to in Article 34 shall not be affected by the fact that it has entrusted to a third party all or some of the
  assets in its safe-keeping.


3. A depositary shall ensure the following:
  (a) That the sale, issue, re-purchase, redemption and cancellation of units effected by or on behalf of a company are carried out in
      accordance with the law and with the company’s instruments of incorporation;
  (b) That in transactions involving a company’s assets any consideration is remitted to it within the usual time limits;
  (c) That a company’s income is applied in accordance with the law and its instruments of incorporation.


4. Investment companies’ home Member States may decide that investment companies established on their territory which market their
  units exclusively through one or more stock exchanges on which their units are admitted to of ficial listing shall not be required to have
  depositaries within the meaning of this Directive.
  Articles 76, 84 and 85 shall not apply to such companies. However, the rules for the valuation of such companies’ assets shall be stated
  in law or in their instruments of incorporation.


5. Investment company’s home Member States may decide that investment companies established on their territory which market at
  least 80 % of their units through one or more stock exchanges designated in their instruments of incorporation shall not be required to
  have depositaries within the meaning of this Directive provided that their units are admitted to of ficial listing on the stock exchanges
  of those Member States within the territories of which the units are marketed, and that any transactions which such a company may
  effect outwith stock exchanges are effected at stock exchange prices only.
  The instruments of incorporation of a company shall specify the stock exchange in the country of marketing the prices on which shall
  determine the prices at which that company will effect any transactions outwith stock exchanges in that country.
  A Member State shall avail itself of the derogation provided for in the first subparagraph only if it considers that unit-holders have
  protection equivalent to that of unit-holders in UCITS which have depositaries within the meaning of this Directive.
  In particular, such companies and the companies referred to in paragraph 4, shall:
  (a) In the absence of provision in law, state in their instruments of incorporation the methods of calculation of the net asset values of
      their units;
  (b) Intervene on the market to prevent the stock exchange values of their units from deviating by more than 5 % from their net
      asset values;
  (c) Establish the net asset values of their units, communicate them to the competent authorities at least twice a week and publish them
      twice a month.
  At least twice a month, an independent auditor shall ensure that the calculation of the value of units is effected in accordance with the
  law and the instruments of incorporation of the company.
  On such occasions, the auditor shall make sure that the company’s assets are invested in accordance with the rules laid down by law
  and the instruments of incorporation of the company.


6. Member States shall inform the Commission of the identities of the companies benefiting from the derogations provided for in para-
  graphs 4 and 5.




page 35                                                                                                   | Cross-border distribution of UCITS | January 2009
Article 33


1. A depositary shall either have its registered office in the same Member State as that of the investment company or be established in
  that Member State if its registered office is in another Member State.


2. A depositary shall be an institution which is subject to prudential regulation and on-going supervision.


3. Member States shall determine which of the categories of institutions referred to in paragraph 2 shall be eligible to be depositaries.


4. The depositary shall enable the competent authorities of the UCITS home Member State to obtain on request all information, which the
  depositary has obtained while discharging its duties, and which are necessary for the competent authorities to supervise compliance
  of the UCITS with the requirements under this Directive.


5. If the management company’s home Member State is not the UCITS home Member State, the depositary shall sign a written agree-
  ment with the management company regulating the flow of information deemed necessary to allow it to perform the functions referred
  to in Article 22 and in other laws, regulations and administrative provisions which are relevant for depositaries in the UCITS home
  Member State.


6. The Commission may adopt implementing measures on the measures to be taken by a depositary in order to fulfil its duties regarding
  a UCITS managed by a management company situated in another Member State, including the particulars that need to be included in
  the standard agreements to be used by the depositary and the management company referred to in paragraph 4.


  Those measures, designed to amend non-essential elements of this Directive by supplementing it, shall be adopted in accordance with
  the regulatory procedure with scrutiny referred to in Article 112(2).




Article 34


A depositary shall, in accordance with the national law of the investment company’s home Member State, be liable to the investment
company and the unit-holders for any loss suffered by them as a result of its unjustifiable failure to perform its obligations, or its improper
performance of them.




Article 35


1. No single company shall act as both investment company and depositary.
2. In carrying out its role as depositary, the depositary shall act solely in the interests of the unit-holders.




Article 36


The law or the instruments of incorporation of the investment company shall lay down the conditions for the replacement of the deposi-
tary and rules to ensure the protection of unit-holders in the event of such replacement.




UCITS IV - PE 418.771 - page 36
                                                             CHAPTER VI
                                                           Mergers of UCITS


                                                                SECTION 1
                                             PRINCIPlE, AUThORISATION AND APPROVAl


Article 37


For the purposes of this Chapter, “mergers” shall mean:
(a) An operation whereby one or more UCITS or investment compartments thereof, the ‘merging UCITS’, on being dissolved without
   going into liquidation, transfer all of their assets and liabilities to another existing UCITS or an investment compartment thereof, the
   ‘receiving UCITS’, in exchange for the issue to their unit-holders of units of the receiving UCITS and, if applicable, a cash payment not
   exceeding 10% of the net asset value of those units;
(b) An operation whereby two or more UCITS or investment compartments thereof, the ‘merging UCITS’, on being dissolved without go-
   ing into liquidation, transfer all of their assets and liabilities to a UCITS which they form or an investment compartment thereof, the
   ‘receiving UCITS’, in exchange for the issue to their unit-holders of units of the receiving UCITS and, if applicable, a cash payment not
   exceeding 10% of the net asset value of those units;
(c) An operation whereby one or more UCITS or investment compartments thereof, the ‘merging UCITS’, which continue to exist until the
   liabilities have been discharged, transfer their net assets to another investment compartment of the same UCITS, to a UCITS which
   they form or to another existing UCITS or an investment compartment thereof, the ‘receiving UCITS.
For the purposes of this Chapter, a UCITS shall include investment compartments thereof.




Article 38


1. Member States shall, subject to the conditions set out in this Chapter and irrespective of the manner in which UCITS are constituted as
  set out in Article 1(3), allow for cross border mergers and domestic mergers as defined in this Article in accordance with one or more
  of the merger techniques provided for in Article 37.


2. For the purpose of this Directive a cross border merger shall mean:
  (a) a merger of UCITS of which at least two are established in different Member States; and
  (b) a merger of UCITS established in the same Member State into a newly constituted UCITS established in another Member State.
  The merger techniques used for cross border mergers must be provided for under the laws of the merging UCITS home Member
  State.


3. For the purpose of this Directive, a domestic merger means a merger between UCITS established in the same Member State where at
  least one of the involved UCITS has been notified pursuant to Article 93. The merger techniques used for domestic mergers must be
  provided for under the laws of that Member State.




Article 39

1. Mergers shall be subject to prior authorisation by the competent authorities of the merging UCITS home Member State.


2. The merging UCITS shall provide all the following information to the competent authorities of its home Member State:
  (a) The common draft terms of the proposed merger duly approved by the merging UCITS and the receiving UCITS;
  (b) An up-to-date version of the prospectus and the key investor information of the receiving UCITS, as referred to in Article 78, if es-


page 37                                                                                             | Cross-border distribution of UCITS | January 2009
      tablished in another Member State;
  (c) A statement by each of the depositaries of the merging and the receiving UCITS confirming that, in accordance with Article 41, they
      have verified compliance of the elements set out in Article 40(1)(a), (f) and (g) with the requirements of this Directive and the fund
      rules or instruments of incorporation of their respective UCITS ;
  (d) The information on the proposed merger that the merging UCITS and the receiving UCITS intend to provide to their respective unit-
      holders.
That information shall be provided so that both the competent authorities of the merging UCITS home Member State and the competent
authorities of the receiving UCITS home Member State can read them in official language or one of the official languages of the relevant
Member State, or in language approved by those relevant competent authorities.


3. Once the file is complete, the competent authorities of the merging UCITS home Member State shall immediately transmit copies of
  the information referred to in paragraph 2 to the competent authorities of the receiving UCITS home Member State. The competent
  authorities of the merging UCITS home Member State and the competent authorities of the receiving UCITS home Member State shall,
  respectively, consider the potential impact of the proposed merger ║on unit-holders of the merging UCITS and the receiving UCITS to
  assess whether appropriate information is provided to unit-holders.
  If the competent authorities of the merging UCITS home Member State consider it necessary, they may require, in writing, that the
  information to unit-holders of the merging UCITS be clarified
  If the competent authorities of the receiving UCITS home Member State consider it necessary, they may require, in writing, no later
  than 15 working days after reception of the copies of the complete information referred to in paragraph 2, that the information to unit-
  holders of the receiving UCITS be modified by the receiving UCITS.
  In such a case, the competent authorities of the receiving UCITS home Member State shall send an indication of their dissatisfaction
  to the competent authorities of the merging UCITS home Member State. They shall inform the competent authorities of the merging
  UCITS home Member State within the delay set out in the second subparagraph of paragraph 5 that they are satisfied with the modified
  information to be provided to the unit-holders of the receiving UCITS.


4. The competent authorities of the merging UCITS home Member State shall authorise the proposed merger if the following conditions
  are met:
  (a) The proposed merger complies with all of the requirements of of Articles 39, 40, 41 and 42;
  (b) The receiving UCITS has been notified, in accordance with Article 93, to market its units in all Member States where the merging
      UCITS is either authorised or has been notified to market its units in accordance with Article 93;
  (c) The competent authorities of the merging and the receiving UCITS home Member State are, respectively, satisfied with the pro-
      posed information to be provided to unit-holders, or no indication of dissatisfaction from the competent authorities of the receiving
      UCITS home Member State has been received under the third subparagraph of paragraph 3.


5. If the competent authorities of the merging UCITS consider that the file is not complete, they shall request additional information within
  at the latest 10 working days after receiving the information referred to in paragraph 2.
  The competent authorities of the merging UCITS home Member State shall inform the merging UCITS, within at the latest 20 working
  days of the submission of the complete file as provided for in paragraph 2, whether or not the merger has been authorised.
║ The competent authorities of the merging UCITS home Member State shall also inform the competent authorities of the receiving
  UCITS home Member State of their decision.


6. Member States may, in accordance with the second subparagraph of Article 57(1), allow for a derogation from Articles 52 to 55 for the
  receiving UCITS.




UCITS IV - PE 418.771 - page 38
Article 40


1. Member States shall require that the merging UCITS and the receiving UCITS draw up common draft terms of merger.
  The common draft terms of merger shall set out the following particulars:
  (a) Identification of the type of merger and of the UCITS involved;
  (b) The background to and the rationale for the proposed merger;
  (c) The expected impact of the proposed merger on the unit-holders of both the merging UCITS and the receiving UCITS;
  (d) The criteria adopted for valuation of the assets and, where applicable, the liabilities on the date referred to in Article 47(1);
  (e) The calculation method of the exchange ratio;
  (f) The planned effective date of the merger;
  (g) The rules applicable respectively to the transfer of assets and the exchange of units;
  (h) In the case of a merger pursuant to point (b) of Article 37 and, where applicable, point (c) of Article 37, the fund rules or instruments
       of incorporation of the newly constituted receiving UCITS.
  The competent authorities may not require that any additional information is included in the common draft terms of mergers


2. The merging UCITS and the receiving UCITS may decide to include further items in the common draft terms of merger.



                                                                 SECTION 2
                     ThIRD PARTy CONTROl, INfORMATION Of UNIT-hOlDERS AND OThER RIGhTS Of UNIT-hOlDERS


Article 41


Member States shall require that the depositaries of the merging UCITS and of the receiving UCITS verify the conformity of the elements
set out in Article 40(1)(a), (f) and (g) with the requirements of this Directive and the fund rules or instruments of incorporation of their
respective UCITS.




Article 42


1. The law of the merging UCITS home Member States shall entrust either a depositary or an independent auditor, approved in accord-
  ance with Directive 2006/43/EC of the European Parliament and of the Council of 17 May 2006 on statutory audits of annual accounts
  and consolidated accounts1, with validating the following:
  (a) The criteria adopted for valuation of the assets and, where applicable, the liabilities on the ║date referred to in Article 47(1);
  (b) Where applicable, the cash payment per unit;
  (c) The calculation method of the exchange ratio as well as the actual exchange ratio determined at the date referred to in Article
      47(1).


2. The statutory auditors of the merging UCITS or the statutory auditor of the receiving UCITS shall be considered independent auditors
  for the purposes of paragraph 1.


3. A copy of the reports of the independent auditor, or, where applicable, the depositary shall be made available on request and free of
  charge to the unit-holders of both the merging UCITS and the receiving UCITS and to their respective competent authorities.




(1) OJ L 157, 9.6.2006, p. 87


page 39                                                                                                | Cross-border distribution of UCITS | January 2009
Article 43


1. Member States shall require merging and receiving UCITS to provide appropriate and accurate information on the proposed merger to
  their respective unit-holders so as to enable their respective unit-holders to make an informed judgement of the impact of the proposal
  on their investment.


2. That information shall be provided to unit-holders of the merging UCITS and of the receiving UCITS only after the competent authorities
  of the merging UCITS home Member State have authorised the proposed merger under Article 39.
  It shall be provided at least 30 days before the last date for requesting repurchase or redemption or, where applicable, conversion
  without additional charge as provided for in Article 45(1).


3. The information to be provided to unit-holders of the merging UCITS and ║the receiving UCITS, shall include appropriate and accurate
  information on the proposed merger such as to enable them to take an informed decision on the possible impact thereof on their in-
  vestment and to exercise their rights under Articles 44 and 45.
  It shall include ║the following:
  (a) The background to and the rationale for the proposed merger;
  (b) The possible impact of the proposed merger on unit-holders, including but not limited to any material differences in respect of in-
       vestment policy and strategy, costs, expected outcome, periodic reporting, possible dilution in performance, and, where relevant,
       a prominent warning to investors that their tax treatment may be changed following the merger;
  (c) any specific rights unit-holders have in relation to the proposed merger, including but not limited to the right to obtain additional
       information, the right to obtain a copy of the report of the independent auditor or the depositary on request, and the right to request
       the re-purchase or redemption or, where applicable, the conversion of their units without charge as specified in Article 45 and the
       last date for exercising that right;
  (d) the relevant procedural aspects and the planned effective date of the merger;
  (e) a copy of the key investor information referred to in Article 78 of the receiving UCITS.


4. If the merging UCITS or the receiving UCITS, has been notified in accordance with Article 93, the information referred to in paragraph 3
  shall be provided in the official language, or one of the official languages, of the relevant UCITS host Member State ║, or in a language
  approved by its competent authorities. That translation shall be produced under the responsibility of the UCITS required to provide the
  information. It shall faithfully reflect the content of the original information.


5. The Commission may adopt implementing measures specifying the detailed content, format and way to provide the information re-
  ferred to in paragraphs 1║and 3.
  Those measures, designed to amend non-essential elements of this Directive by supplementing it, shall be adopted in accordance with
  the regulatory procedure with scrutiny referred to in Article 112(2).




Article 44


Where the national laws of Member States require approval by the unit-holders of mergers between UCITS, Member States shall ensure
that such approval does not require more than 75% of the votes actually cast by unit-holders present or represented at the general meet-
ing of unit-holders.
The first paragraph shall be without prejudice to any presence quorum provided for under national laws. Where applicable, Member
States shall not impose more stringent presence quora for cross-border than for domestic mergers. Nor shall they impose more stringent
presence quora for UCITS mergers than in horizontal provisions on mergers of corporate entities.




UCITS IV - PE 418.771 - page 40
Article 45


1. The laws of Member States shall provide that unit-holders of both the merging UCITS and the receiving UCITS have the right to request,
    without any charge other than those retained by the UCITS to cover disinvestment costs, the re-purchase or redemption of their units
    or, where possible, to convert them into units in another UCITS with similar investment policies and managed by the same manage-
    ment company or by any other company with which the management company is linked by common management or control, or by a
    substantial direct or indirect holding. That right shall become effective from the moment that the unit-holders of the merging UCITS and
    ║those of the receiving UCITS, have been informed of the proposed merger in accordance with Article 43 and shall cease to exist five
    working days before the date for calculating the exchange ratio referred to in Article 47.


2. Without prejudice to paragraph 1, for mergers between UCITS and by way of derogation from Article 84(1), Member States may allow
    the competent authorities to require or to allow the temporary suspension of the subscription, re-purchase or redemption of units
    provided that such suspension is justified for the protection of the unit-holders.




                                                                  SECTION 3
                                                      COSTS AND ENTRy INTO EffECT


Article 46


Except in case where UCITS have not designated a management company, Member States shall ensure that any legal, advisory or
administrative costs associated with the preparation and the completion of the merger shall not be charged ║to the merging UCITS, the
receiving UCITS or any of their unit-holders.




Article 47


1. For domestic mergers, the laws of the Member States shall determine the date on which a merger takes effect as well as the date for
    calculating the ratio for exchange of units of the merging UCITS into units of the receiving UCITS and, where applicable, for determin-
    ing the relevant net asset value for cash payments.
    For cross-border mergers, the laws of the receiving UCITS home Member State shall determine those dates. Member States shall en-
    sure that, where applicable, those dates are set after the approval of the merger by unit-holders of the receiving UCITS or the merging
    UCITS.
║
2. The entry into effect of the merger shall be made public through all appropriate means in the manner prescribed by the laws of the
    receiving UCITS home Member State, and notified to the competent authorities.


3. A merger which has taken effect as provided for in paragraph 1 may not be declared null and void.




Article 48

1. A merger carried out as laid down in point (a) of Article 37 shall have the following consequences:
    (a) All the assets and liabilities of the merging UCITS shall be transferred to the receiving UCITS or, where applicable, the depositary
       of the receiving UCITS;
    (b) The unit-holders of the merging UCITS shall become unit-holders of the receiving UCITS; in addition, if applicable, they shall be




page 41                                                                                             | Cross-border distribution of UCITS | January 2009
       entitled to a cash payment not exceeding 10% of the net asset value of their units in the merging UCITS;
  (c) The merging UCITS shall cease to exist on the entry into effect of the merger.


2. A merger carried out as laid down in point (b) of Article 37 shall have the following consequences:
  (a) All the assets and liabilities of the merging UCITS shall be transferred to the newly constituted receiving UCITS or, where applica-
       ble, the depositary of the receiving UCITS;
  (b) The unit-holders of the merging UCITS shall become unit-holders of the newly constituted receiving UCITS; in addition, if applica-
       ble, they shall be entitled to a cash payment not exceeding 10% of the net asset value of their units in the merging UCITS;
  (c) The merging UCITS shall cease to exist on the entry into effect of the merger.


3. A merger carried out as laid down in point (c) of Article 37 shall have the following consequences:
  (a) The net assets of the merging UCITS shall be transferred to the receiving UCITS or, where applicable, the depositary of the receiv-
       ing UCITS;
  (b) The unit-holders of the merging UCITS shall become unit-holders of the receiving UCITS;
  (c) The merging UCITS continues to exist until the liabilities have been discharged.


4. Member States shall provide that a procedure is established, whereby the management company of the receiving UCITS confirms to
  the depositary of the receiving UCITS that transfer of assets and, where applicable, liabilities is complete. Where the receiving UCITS
  has not designated a management company, it shall give that confirmation to the depositary of the receiving UCITS.




                                                            CHAPTER VII
                                       Obligations concerning the investment policies of UCITS


Article 49


For UCITS constituted of several compartments, each investment compartment shall be regarded as a separate UCITS for the purposes
of the rules laid down in this Chapter.




Article 50


1. The investments of a common fund or of an investment company shall consist solely of any one or more of the following:
  (a) Transferable securities and money market instruments admitted to or dealt in on a regulated market within the meaning of point (14)
      of Article 4 (1) of Directive 2004/39/EC
  (b) Transferable securities and money market instruments dealt in on another regulated market in a Member State which operates
      regularly and is recognised and open to the public,
  (c) Transferable securities and money market instruments admitted to of ficial listing on a stock exchange in a third country or dealt in
      on another regulated market in a third country which operates regularly and is recognised and open to the public provided that the
      choice of stock exchange or market has been approved by the competent authorities or is provided for in law or the fund rules or
      the instruments of incorporation of the investment company,
  (d) Recently issued transferable securities, provided that:
       (i) The terms of issue include an undertaking that application will be made for admission to of ficial listing on a stock exchange or to
          another regulated market which operates regularly and is recognised and open to the public, provided that the choice of stock
          exchange or market has been approved by the competent authorities or is provided for in law or the fund rules or the instruments
          of incorporation of the investment company,
       (ii) The admission referred to in point (i) is secured within a year of issue,


UCITS IV - PE 418.771 - page 42
  (e) Units of UCITS authorised according to this Directive or other collective investment undertakings within the meaning of Article 1 (2)
      (a) and (b), should they be established in a Member State or not, provided that:
       (i) Such other collective investment undertakings are authorised under laws which provide that they are subject to supervision
          considered by the competent authorities of the UCITS home Member State to be equivalent to that laid down in Community law,
          and that cooperation between authorities is sufficiently ensured;
       (ii) The level of protection for unit-holders in the other collective investment undertakings is equivalent to that provided for unit-
          holders in a UCITS, and in particular that the rules on assets segregation, borrowing, lending, and uncovered sales of transfer-
          able securities and money market instruments are equivalent to the requirements of this Directive;
       (iii) the business of the other collective investment undertakings is reported in half-yearly and annual reports to enable an assess-
           ment to be made of the assets and liabilities, income and operations over the reporting period;
       (iv) no more than 10 % of the UCITS’ or the other collective investment undertakings’ assets, whose acquisition is contemplated,
           can, according to their fund rules or instruments of incorporation, be invested in aggregate in units of other UCITS or other col-
           lective investment undertakings,
  (f) deposits with credit institutions which are repayable on demand or have the right to be withdrawn, and maturing in no more than
       12 months, provided that the credit institution has its registered office in a Member State or, if the registered office of the credit
       institution has its registered office in a third country, provided that it is subject to prudential rules considered by the competent
       authorities of the UCITS home Member State as equivalent to those laid down in Community law,
  (g) financial derivative instruments, including equivalent cash-settled instruments, dealt in on a regulated market referred to in
       points (a), (b) and (c); Or financial derivative instruments dealt in over-the-counter (hereinafter referred to as “OTC deriva-
       tives”), provided that:
       (i) The underlying consists of instruments covered by this paragraph, financial indices, interest rates, foreign exchange rates or
          currencies, in which the UCITS may invest according to its investment objectives as stated in its fund rules or instruments of
          incorporation,
       (ii) The counterparties to OTC derivative transactions are institutions subject to prudential supervision, and belonging to the cat-
          egories approved by the competent authorities of the UCITS home Member State, and
       (iii) The OTC derivatives are subject to reliable and verifiable valuation on a daily basis and can be sold, liquidated or closed by an
           of fsetting transaction at any time at their fair value at the UCITS’ initiative,
  (h) Money market instruments other than those dealt in on a regulated market, which fall under Article 2 (1) (o), if the issue or issuer of
       such instruments is itself regulated for the purpose of protecting investors and savings, and provided that they are:
       (i) Issued or guaranteed by a central, regional or local authority or central bank of a Member State, the European Central Bank, the
          Community or the European Investment Bank, a third country or, in the case of a Federal State, by one of the members making up
          the federation, or by a public international body to which one or more Member States belong,
       (ii) Issued by an undertaking any securities of which are dealt in on regulated markets referred to in points (a), (b) or (c),
       (iii) Issued or guaranteed by an establishment subject to prudential supervision, in accordance with criteria defined by Community
           law, or by an establishment which is subject to and complies with prudential rules considered by the competent authorities to
           be at least as stringent as those laid down by Community law, or
       (iv) Issued by other bodies belonging to the categories approved by the competent authorities of UCITS home Member State pro-
           vided that investments in such instruments are subject to investor protection equivalent to that laid down in points (i), (ii) or (iii)
           and provided that the issuer is a company whose capital and reserves amount to at least EUR 10 million and which presents
           and publishes its annual accounts in accordance with Fourth Council Directive 78/660/EEC of 25 July 1978 based on Article 54 (3)
           (g) of the Treaty on the annual accounts of certain types of companies1, is an entity which, within a group of companies which
           includes one or several listed companies, is dedicated to the financing of the group or is an entity which is dedicated to the
           financing of securitisation vehicles which benefit from a banking liquidity line.




(1) OJ L 222, 14.8.1978, p. 11


page 43                                                                                                  | Cross-border distribution of UCITS | January 2009
2. However:
  (a) A UCITS may invest no more than 10 % of its assets in transferable securities and money market instruments other than those
      referred to in paragraph 1;
  (b) An investment company may acquire movable and immovable property which is essential for the direct pursuit of its business;
  (c) A UCITS may not acquire either precious metals or certificates representing them.


3. Common funds and investment companies may hold ancillary liquid assets.




Article 51


1. The management or investment company shall employ a risk-management process which enables it to monitor and measure at any
  time the risk of the positions and their contribution to the overall risk profile of the portfolio.
  It shall employ a process for accurate and independent assessment of the value of OTC derivatives.
  It shall communicate to the competent authorities of its home Member State regularly and the types of derivative instruments, the
  underlying risks, the quantitative limits and the methods which are chosen in order to estimate the risks associated with transactions
  in derivative instruments regarding each managed UCITS.


2. Member States may authorise UCITS to employ techniques and instruments relating to transferable securities and money market
  instruments under the conditions and within the limits which they lay down provided that such techniques and instruments are used
  for the purpose of efficient portfolio management.
  When these operations concern the use of derivative instruments, these conditions and limits shall conform to the provisions laid
  down in this Directive.
  Under no circumstances shall those operations cause the UCITS to diverge from its investment objectives as laid down in the UCITS’
  fund rules, instruments of incorporation or prospectus.


3. A UCITS shall ensure that its global exposure relating to derivative instruments does not exceed the total net value of its portfolio.
  The exposure is calculated taking into account the current value of the underlying assets, the counterparty risk, future market move-
  ments and the time available to liquidate the positions. This shall also apply to the third and fourth subparagraphs.
  A UCITS may invest, as a part of its investment policy and within the limit laid down in Article 52(5), in financial derivative instruments
  provided that the exposure to the underlying assets does not exceed in aggregate the investment limits laid down in Article 52. Member
  States may provide that, when a UCITS invests in index-based financial derivative instruments, those investments do not have to be
  combined to the limits laid down in Article 52.
  When a transferable security or money market instrument embeds a derivative, the derivative shall be taken into account when com-
  plying with the requirements of this Article.


4. Without prejudice to Article 116, the Commission shall adopt, by 1 July 2010, implementing measures specifying the following:
  (a) Criteria for assessing the adequacy of risk management process employed by the management company in accordance with the
       first sentence of paragraph 1;
  (b) Detailed rules regarding the accurate and independent assessment of the value of OTC derivatives;
  (c) Detailed rules regarding the content and the procedure to be followed for communicating the information to the competent authori-
       ties of the management company’s home Member State referred to in the third sentence of paragraph 1;
  Those measures, designed to amend non-essential elements of this Directive by supplementing it, shall be adopted in accordance with
  the regulatory procedure with scrutiny referred to in Article 112(2).




UCITS IV - PE 418.771 - page 44
Article 52


1. A UCITS may invest no more than 5 % of its assets in transferable securities or money market instruments issued by the same body.
  A UCITS may not invest more than 20 % of its assets in deposits made with the same body.
  The risk exposure to a counterparty of the UCITS in an OTC derivative transaction may not exceed either of the following:
  (a) 10 % of its assets when the counterparty is a credit institution referred to in Article 50 (1) (f),
  (b) 5 % of its assets, in other cases.


2. Member States may raise the 5 % limit laid down in the first subparagraph of paragraph 1 to a maximum of 10 %. However, the total
  value of the transferable securities and the money market instruments held by the UCITS in the issuing bodies in each of which it
  invests more than 5 % of its assets must not then exceed 40 % of the value of its assets. This limitation shall not apply to deposits and
  OTC derivative transactions made with financial institutions subject to prudential supervision.
  Notwithstanding the individual limits laid down in paragraph 1, a UCITS may not combine, where this would lead to investment of more
  than 20% of its assets in a single body, any of the following:
  (a) Investments in transferable securities or money market instruments issued by that body;
  (b) Deposits made with that body;
  (c) Exposures arising from OTC derivative transactions undertaken with that body.


3. Member States may raise the 5 % limit laid down in the first subparagraph of paragraph 1 to a maximum of 35 % if the transferable
  securities or money market instruments are issued or guaranteed by a Member State, by its local authorities, by a third country or by
  public international bodies to which one or more Member States belong.


4. Member States may raise the 5 % limit laid down in the first subparagraph of paragraph 1 to a maximum of 25 % in the case of certain
  bonds when these are issued by a credit institution which has its registered office in a Member State and is subject by law to special
  public supervision designed to protect bond-holders. In particular, sums deriving from the issue of these bonds shall be invested in
  conformity with the law in assets which, during the whole period of validity of the bonds, are capable of covering claims attaching to
  the bonds and which, in the event of failure of the issuer, would be used on a priority basis for the reimbursement of the principal and
  payment of the accrued interest.
  When a UCITS invests more than 5 % of its assets in the bonds referred to in the first subparagraph and issued by one issuer, the total
  value of these investments shall not exceed 80 % of the value of the assets of the UCITS.
  Member States shall send the Commission a list of the categories of bonds referred to in the first subparagraph together with the
  categories of issuers authorised, in accordance with the laws and supervisory arrangements mentioned in that subparagraph, to issue
  bonds complying with the criteria set out above. A notice specifying the status of the guarantees of fered shall be attached to these
  lists. The Commission shall immediately forward that information to the other Member States together with any comments which it
  considers appropriate, and shall make the information available to the public. Such communications may be the subject of exchanges
  of views within the European Securities Committee.


5. The transferable securities and money market instruments referred to in paragraphs 3 and 4 shall not be taken into account for the
 purpose of applying the limit of 40 % referred to in paragraph 2.
  The limits provided for in paragraphs to 4 may not be combined, and thus investments in transferable securities or money market
  instruments issued by the same body or in deposits or derivative instruments made with this body carried out in accordance with
  paragraphs 1 to 4 shall under no circumstances exceed in total 35 % of the assets of the UCITS.
  Companies which are included in the same group for the purposes of consolidated accounts, as defined in accordance with Directive
  83/349/EEC or in accordance with recognised international accounting rules, shall be regarded as a single body for the purpose of
  calculating the limits contained in this Article.
  Member States may allow cumulative investment in transferable securities and money market instruments within the same group up
  to a limit of 20 %.


page 45                                                                                                     | Cross-border distribution of UCITS | January 2009
Article 53


1. Without prejudice to the limits laid down in Article 56, Member States may raise the limits laid down in Article 52 to a maximum of 20 %
  for investment in shares or debt securities issued by the same body when, according to the fund rules or instruments of incorporation,
  the aim of the UCITS’ investment policy is to replicate the composition of a certain stock or debt securities index which is recognised
  by the competent authorities, on the following basis:
  (a) Its composition is sufficiently diversified;
  (b) The index represents an adequate benchmark for the market to which it refers;
  (c) It is published in an appropriate manner.


2. Member States may raise the limit laid down in paragraph 1 to a maximum of 35 % where that proves to be justified by exceptional
  market conditions in particular in regulated markets where certain transferable securities or money market instruments are highly
  dominant. The investment up to this limit shall only be permitted for a single issuer.




Article 54

1. By way of derogation from Article 52, Member States may authorise UCITS to invest in accordance with the principle of risk-spreading
  up to 100 % of their assets in different transferable securities and money market instruments issued or guaranteed by any Member
  State, its local authorities, a third country or public international bodies of which one or more Member States are members.
  The UCITS competent authorities shall grant such a derogation only if they consider that unit-holders in the UCITS have protection
  equivalent to that of unit-holders in UCITS complying with the limits laid down in Article 52.
  Such a UCITS shall hold securities from at least six different issues, but securities from any one issue shall not account for more than
  30 % of its total assets.


2. The UCITS referred to in paragraph 1 shall make express mention in the fund rules or in the instruments of incorporation of the invest-
  ment company of the Member States, local authorities or public international bodies issuing or guaranteeing securities in which they
  intend to invest more than 35 % of their assets.
  Such fund rules or instruments of incorporation shall be approved by the competent authorities.


3. Each UCITS referred to in paragraph 1 shall include a prominent statement in its prospectus and marketing communications drawing
  attention to such authorisation and indicating the Member States, local authorities and/or public international bodies in the securities
  of which it intends to invest or has invested more than 35 % of its assets.




Article 55


1. A UCITS may acquire the units of UCITS or other collective investment undertakings referred to in Article 50 (1)(e), provided that no
  more than 10 % of its assets are invested in units of a single UCITS or other collective investment undertaking. Member States may
  raise the limit to a maximum of 20 %.


2. Investments made in units of collective investment undertakings other than UCITS may not exceed, in aggregate, 30 % of the assets
  of the UCITS.
  Member States may allow that, when a UCITS has acquired units of UCITS or other collective investment undertakings, the assets of
  the respective UCITS or other collective investment undertakings do not have to be combined for the purposes of the limits laid down
  in Article 52.




UCITS IV - PE 418.771 - page 46
3.When a UCITS invests in the units of other UCITS or other collective investment undertakings that are managed, directly or by delega-
 tion, by the same management company or by any other company with which the management company is linked by common manage-
 ment or control, or by a substantial direct or indirect holding, that management company or other company may not charge subscrip-
 tion or redemption fees on account of the UCITS’s investment in the units of such other UCITS or collective investment undertakings.
  A UCITS that invests a substantial proportion of its assets in other UCITS or collective investment undertakings shall disclose in its
  prospectus the maximum level of the management fees that may be charged both to the UCITS itself and to the other UCITS or collec-
  tive investment undertakings in which it intends to invest. In its annual report it shall indicate the maximum proportion of management
  fees charged both to the UCITS itself and to the UCITS or other collective investment undertaking in which it invests.




Article 56


1. An investment company or a management company acting in connection with all of the common funds which it manages and which
  fall within the scope of this Directive shall not acquire any shares carrying voting rights which would enable it to exercise significant
  influence over the management of an issuing body.
  Pending further coordination, Member States shall take account of existing rules defining the principle stated in the first subparagraph
  under other Member States’ legislation.


2. An investment company or common fund may acquire no more than:
  (a) 10 % of the non-voting shares of any single issuing body;
  (b) 10 % of the debt securities of any single issuing body;
  (c) 25 % of the units of any single UCITS or other collective investment undertaking within the meaning of Article 1(2)(a) and (b),
  (d) 10 % of the money market instruments of any single issuing body.
  The limits laid down in points (b), (c) and (d) may be disregarded at the time of acquisition if at that time the gross amount of the debt
  securities or of the money market instruments, or the net amount of the securities in issue, cannot be calculated.


3. A Member State may waive application of paragraphs 1 and 2 as regards:
  (a) Transferable securities and money market instruments issued or guaranteed by a Member State or its local authorities;
  (b) Transferable securities and money market instruments issued or guaranteed by a third country;
  (c) Transferable securities and money market instruments issued by public international bodies of which one or more Member States
      are members;
  (d) Shares held by a UCITS in the capital of a company incorporated in a third country investing its assets mainly in the securities of
      issuing bodies having their registered offices in that country, where under the legislation of that country such a holding represents
      the only way in which the UCITS can invest in the securities of issuing bodies of that country. This derogation, however, shall apply
      only if in its investment policy the company from the third country complies with the limits laid down in Articles 52 and 55 and in
      paragraphs 1 and 2 of this Article. Where the limits set in Articles 52 and 55 are exceeded Article 57 shall apply mutatis mutandis;
  (e) Shares held by an investment company or investment companies in the capital of subsidiary companies carrying on only the busi-
      ness of management, advice or marketing in the country where the subsidiary is established, in regard to the repurchase of units
      at unit-holders’ request exclusively on its or their behalf.


Article 57


1. UCITS need not comply with the limits laid down in this Chapter when exercising subscription rights attaching to transferable securi-
  ties or money market instruments which form part of their assets.
  While ensuring observance of the principle of risk spreading, Member States may allow recently authorised UCITS to derogate from
  Articles 52 to 55 for six months following the date of their authorisation.




page 47                                                                                             | Cross-border distribution of UCITS | January 2009
2. If the limits referred to in paragraph 1 are exceeded for reasons beyond the control of a UCITS or as a result of the exercise of subscrip-
  tion rights, that UCITS shall adopt as a priority objective for its sales transactions the remedying of that situation, taking due account
  of the interests of its unit-holders.




                                                             CHAPTER VIII
                                                         Master-feeder structures


                                                                  SECTION 1
                                                           SCOPE AND APPROVAl


Article 58


1. A feeder UCITS is a UCITS or an investment compartment thereof, which has been approved to invest, by way of derogation from
  Article 1(2)(a), Article 50, Article 52, Article 55 and Article 56(2)(c), at least 85 % of its assets in units of another UCITS or an investment
  compartment thereof (“the master UCITS”).


2. A feeder UCITS may hold up to 15 % of its assets in one or more of the following:
  (a) Ancillary liquid assets in accordance with Article 50(3);
  (b) Financial derivative instruments, which may be used only for hedging purposes, in accordance with Article 50(1)(g) and Article 51(2)
       and (3).
  (c) Movable and immovable property which is essential for the direct pursuit of the business, if the feeder UCITS is an investment
       company.
  For the purposes of compliance with Article 51(3), the feeder UCITS may calculate its global exposure related to ║financial derivative
  instruments by combining its own direct exposure under point (b) with:
  - Either the master UCITS’ actual exposure to financial derivative instruments in proportion to the feeder UCITS’ investment into the
     master UCITS; or
  - The master UCITS potential maximum global exposure to financial derivative instruments provided for in the master UCITS’ fund rules
     or instruments of incorporation in proportion to the feeder UCITS investment into the master UCITS.


3. A master UCITS is a UCITS or an investment compartment thereof which:
  (a) Must have among its unit-holders at least one feeder UCITS ║;
  (b) Must not itself be a feeder UCITS;
  (c) Must not hold units of a feeder UCITS.


4. The following derogations for a master UCITS shall apply:
  (a) If a master UCITS has at least two feeder UCITS as unit-holders, Article 1(2)(a) and point (b) of Article 3shall not apply, giving the
       master UCITS the choice whether or not to raise capital from other investors;
  (b) If a master UCITS does not raise capital from the public in a Member State other than that in which it is established, but only has
       one or more feeder UCITS in that Member State, Chapter XI and subparagraph 2 of Article 108(1) shall not apply.


Article 59

1. Member States shall ensure that the investment of a feeder UCITS into a given master UCITS which exceeds the limit applicable under
  Article 55(1) for investments into other UCITS be subject to prior approval by the competent authorities of the feeder UCITS’ home
  Member State.




UCITS IV - PE 418.771 - page 48
2. The feeder UCITS shall be informed within at the latest 15 working days following the submission of a complete file, whether or not the
  competent authorities approved the feeder UCITS’ investment into the master UCITS.


3. The competent authorities of the feeder UCITS home Member State shall grant approval if the feeder UCITS, its depositary and its
  auditor, as well as the master UCITS, comply with all the requirements set out in this Chapter. For such purpose, the feeder UCITS shall
  provide to the competent authorities of its home Member State the following documents:
  (a) The fund rules or instruments of incorporation of the feeder UCITS and the master UCITS;
  (b) The prospectus and the key investor information referred to in Article 78 of the feeder UCITS and the master UCITS;
  (c) The agreement between the feeder UCITS and the master UCITS or the internal conduct of business rules referred to in Article
      60(1);
  (d) Where applicable, the information to be provided to unit-holders referred to in Article 64(1);
  (e) If the master UCITS and the feeder UCITS have different depositaries, the information-sharing agreement referred to in Article 61(1)
      between their respective depositaries;
  (f) If the master UCITS and the feeder UCITS have different auditors, the information-sharing agreement referred to in Article 62(1)
     between their respective auditors.
  When the feeder UCITS is established in another Member State other than the master UCITS home Member State, the feeder UCITS
  should also provide an attestation by the competent authorities of the master UCITS home Member State ║ that the master UCITS is
  a UCITS, or an investment compartment thereof, which fulfils the conditions set out in Article 58(3)(b) and (c). Documents shall be
  provided by the feeder UCITS in the official language, or one of the official languages, of the feeder UCITS home Member State or in a
  language approved by its competent authorities.




                                                                SECTION 2
                                   COMMON PROVISIONS fOR fEEDER UCITS AND MASTER UCITS


Article 60


1. Member States shall require that the master UCITS provide the feeder UCITS with all documents and information necessary for the
  latter to meet the requirements laid down in this Directive. For this purpose, the feeder UCITS shall enter into an agreement with the
  master UCITS.
  The feeder UCITS shall not invest in excess of the limits applicable under Article 55(1) in units of that master UCITS until the agreement
  referred to in subparagraph 1 has become effective. This agreement shall be available, on request and without charges, to all unit-
  holders.
  In the event that both master and feeder UCITS are managed by the same management company, the agreement may be replaced by
  internal conduct of business rules ensuring compliance with the requirements set out in this paragraph.


2. The master UCITS and the feeder UCITS shall take appropriate measures to coordinate the timing of their net asset value calculation
  and publication in order to avoid market timing in their fund units, preventing arbitrage opportunities.


3. Without prejudice to Article 84, if a master UCITS temporarily suspends the re-purchase, redemption or subscription of its units, wheth-
  er at its own initiative or at the request of its competent authorities, each of its feeder UCITS is entitled to suspend the re-purchase,
  redemption or subscription of its units notwithstanding the conditions laid down in Article 84(2) within the same period of time as the
  master UCITS.


4. If a master UCITS is liquidated, the feeder UCITS shall also be liquidated, unless the competent authorities of its home Member State
  approve:
  (a) The investment of at least 85% of the assets of the feeder UCITS in units of another master UCITS; or


page 49                                                                                                | Cross-border distribution of UCITS | January 2009
  (b) The amendment of its fund rules or instruments of incorporation in order to enable the feeder UCITS to convert into a UCITS which
       is not a feeder UCITS.
  Without prejudice to specific national provisions regarding compulsory liquidation, a master UCITS may be liquidated only three
  months after the master UCITS informed all of its unit-holders and the competent authorities of those feeder UCITS’ home Member
  States of the binding decision to liquidate.


5. If a master UCITS merges with another UCITS or is divided into two or more UCITS, the feeder UCITS shall be liquidated, unless the
  competent authorities of the feeder UCITS’ home Member State approve that the feeder UCITS:
  (a) Continues to be a feeder UCITS of the master UCITS or another UCITS resulting from the merger or division of the master UCITS;
       or
  (b) Invests at least 85% of its assets in units of another master UCITS not resulting from the merger or the division; or
  (c) Amends its fund rules or its instruments of incorporation in order to convert into a UCITS which is not a feeder UCITS.
  No merger or division of a master UCITS shall become effective, unless the master UCITS provided all of its unit-holders and the com-
  petent authorities of its feeder UCITS’ home Member States with the information referred to in or comparable with Article 43 no later
  than 60 days before the proposed effective date.
  Unless the competent authorities of the feeder UCITS’ home Member State had granted approval pursuant to point (a) of the first sub-
  paragraph, the master UCITS shall enable the feeder UCITS to re-purchase or redeem all units in the master UCITS before the merger
  or division of the master UCITS becomes effective.


6. The Commission may adopt implementing measures specifying:
  (a) The content of the agreement or of the internal conduct of business rules referred to in ║paragraph 1;
  (b) Which measures referred to in paragraph 2 are deemed appropriate and;
  (c) The procedures for the required approvals pursuant to paragraphs 4 and 5 in the event of a liquidation, merger or division of a
       master UCITS.
  Those measures, designed to amend this Directive by supplementing it, shall be adopted in accordance with the regulatory procedure
  with scrutiny referred to in Article 112(2).


                                                                SECTION 3
                                                     DEPOSITARIES AND AUDITORS


Article 61


1. Member States shall require that, if the master UCITS and the feeder UCITS have different depositaries, those depositaries enter into
  an information-sharing agreement in order to ensure the fulfilment of the duties of both depositaries.
  The feeder UCITS shall not invest in units of the master UCITS until such agreement has become effective.
  Neither the depositary of the master UCITS nor that of the feeder UCITS, when complying with the requirements laid down in this Chap-
  ter, shall be in breach of any restriction on disclosure of information or of data protection imposed by contract or by any legislative,
  regulatory or administrative provision nor shall such behaviour involve such depositary or any person acting on its behalf in liability of
  any kind.
  Member States shall require that the feeder UCITS or, when applicable, the management company of the feeder UCITS be in charge of
  communicating to the depositary of the feeder UCITS any information about the master UCITS and required for the completion of the
  duties of the depositary of the feeder UCITS.


2. The depositary of the master UCITS shall immediately inform the competent authorities of the master UCITS home Member State,
  the feeder UCITS or, where applicable, the management company and the depositary of the feeder UCITS about any irregularities it
  detects with regard to the master UCITS which are deemed to have a negative impact on the feeder UCITS.




UCITS IV - PE 418.771 - page 50
3. The Commission may adopt implementing measures further specifying the following:
  (a) The particulars that need to be included in the agreement referred to in paragraph 1 ║;
  (b) The types of irregularities referred to in paragraph 2 which are deemed to have a negative impact on the feeder UCITS.
  Those measures, designed to amend this Directive by supplementing it, shall be adopted in accordance with the regulatory procedure
  with scrutiny referred to in Article 112(2).




Article 62


1. Member States shall require that, if the master UCITS and the feeder UCITS have different auditors, these auditors enter into an
  information-sharing agreement in order to ensure the fulfilment of the duties of both auditors, including the arrangements taken to
  comply with the requirements of paragraph 2.
  The feeder UCITS shall not invest in units of the master UCITS until such agreement has become effective.


2. In its audit report, the auditor of the feeder UCITS shall take into account the audit report of the master UCITS. If the feeder and the
  master UCITS do not have the same accounting year, the auditor of the master UCITS shall make an ad hoc report on the same closing
  date as that of the feeder UCITS.
  The auditor shall in particular report on any irregularities revealed in the audit report of the master UCITS and on their impact on the
  feeder UCITS.


3. When complying with the requirements laid down in this Chapter, neither the auditor of the master UCITS nor that of the feeder UCITS
  shall be in breach of any restriction on disclosure of information or of data protection imposed by contract or by any legislative, regula-
  tory or administrative provision nor shall such behaviour involve such auditor or any person acting on its behalf in liability of any kind.


4. The Commission may adopt implementing measures specifying the content of the agreement referred to in subparagraph 1 of para-
  graph 1║.
  Those measures, designed to amend non-essential elements of this Directive by supplementing it, shall be adopted in accordance with
  the regulatory procedure with scrutiny referred to in Article 112(2).




                                                                 SECTION 4
                       COMPUlSORy INfORMATION AND MARkETING COMMUNICATIONS by ThE fEEDER UCITS


Article 63


1. Member States shall require that, in addition to the information provided for in Schedule A of Annex I, the prospectus of the feeder
  UCITS contains the following information:
  (a) A declaration that the feeder UCITS is a feeder of a given master UCITS and as such permanently invests 85 % or more its assets
      in units of such given master UCITS;
  (b) The investment objective and policy, including the risk profile and whether the performance of the feeder and the master UCITS
      are identical, or to what extent and for which reasons they differ, including a description of investment made in accordance with
      Article 58(2);
  (c) A brief description of the master UCITS, its organisation, its investment objective and policy, including the risk profile, and an indi-
      cation of how the prospectus of the master UCITS may be obtained;║
  (d) A summary of the agreement entered into between the feeder UCITS and the master UCITS or of the internal conduct of business
      rules pursuant to Article 60(1);
  (e) How the unit-holders may obtain further information on the master UCITS and the agreement entered into between the feeder


page 51                                                                                              | Cross-border distribution of UCITS | January 2009
       UCITS and the master UCITS pursuant to Article 60(1);
    (f) A description of all remuneration or reimbursement of costs payable by the feeder UCITS by virtue of its investment in units of the
       master UCITS, as well as of the aggregate charges of the feeder UCITS and the master UCITS;
    (g) A description of the tax implications of the investment into the master UCITS for the feeder UCITS.
║
2. In addition to the information provided for in Schedule B of Annex I, the annual report of the feeder UCITS shall include a statement on
    the aggregate charges of the feeder UCITS and the master UCITS.
    The annual and the half-yearly reports of the feeder UCITS shall indicate how the annual and the half-yearly report of the master UCITS
    can be obtained.


3. In addition to the requirements laid down in Articles 74 and 82, the feeder UCITS shall send the prospectus, the key investor information
    referred in Article 78 and any amendment thereto, as well as the annual and half-yearly reports of the master UCITS, to the competent
    authorities of its home Member State.


4. A feeder UCITS shall disclose in any relevant marketing communications that it ║ permanently invests 85 % or more of its assets in units
    of such master UCITS.


5. A paper copy of the prospectus, annual and half-yearly report of the master shall be delivered by the feeder UCITS to investors upon
    their request, free of charge.




                                                                  SECTION 5
                                     CONVERSION Of ExISTING UCITS AND ChANGE Of MASTER UCITS




Article 64


1. Member States shall require that, if a feeder UCITS already carries on activities as a UCITS, including a feeder UCITS of a different
    master UCITS, the feeder UCITS shall provide the following information to all its unit-holders:
    (a) A statement that the competent authorities of the feeder UCITS’ home Member State approved the investment of the feeder UCITS
       in units of such master UCITS;
    (b) The key investor information referred to in Article 78 concerning the feeder UCITS and the master UCITS;
    (c) The date when the feeder UCITS is to start to invest into the master UCITS or, if it has already invested into the master UCITS, the
       date when its investment is to exceed the limit applicable under Article 55(1);
    (d) A statement that the unit-holders have the right to request within 30 days the re-purchase or redemption of their units without any
       charges other than that retained by the UCITS to cover disinvestment costs; that right shall become effective from the moment the
       feeder UCITS has provided the information referred to in this paragraph.
    That information shall be provided at least 30 days before the date referred to in point (c) of the first subparagraph.


2. If the feeder UCITS has been notified in accordance with Article 93, the information referred to in paragraph 1 shall be provided in the
    official language, or one of the official languages, of the feeder UCITS host Member State or in a language approved by its competent
    authorities. The translation shall be produced under the responsibility of the feeder UCITS and shall faithfully reflect the content of the
    original information.


3. Member States shall ensure that the feeder UCITS does not invest into the units of the given master UCITS in excess of the limit laid
    down in Article 55(1) before the period of 30 days referred to in the second subparagraph of paragraph 1 has elapsed.




UCITS IV - PE 418.771 - page 52
4. The Commission may adopt implementing measures specifying:
  (a) The format and the way to provide the information referred to in paragraph 1;
  (b) If the feeder UCITS transfers all or parts of its assets to the master UCITS in exchange for units, the procedure for valuating and
      auditing such a contribution in kind and the role of the depositary of the feeder UCITS in this process.
  Those measures, designed to amend non-essential elements of this Directive by supplementing it, shall be adopted in accordance with
  the regulatory procedure with scrutiny referred to in Article 112(2




                                                                SECTION 6
                                            OblIGATIONS AND COMPETENT AUThORITIES


Article 65


1. The feeder UCITS ║ shall monitor effectively the activity of the master UCITS. In performing this obligation, the feeder UCITS ║may rely
  on information and documents received from the master UCITS or, where applicable, its management company, depositary and audi-
  tor, unless there is reason to doubt their accuracy.


2. Where, in connection with an investment in the units of the master UCITS, a distribution fee, commission or other monetary benefit is
  received by the feeder UCITS, the management company of the feeder UCITS or any person acting on behalf of either the feeder UCITS
  or the management company of the feeder UCITS, the fee, commission or other monetary benefit shall be paid into the assets of the
  feeder UCITS.




Article 66


1. The master UCITS shall immediately inform the competent authorities of its home Member State of the identity of each feeder
  UCITS which invests in its units. If the master UCITS and the feeder UCITS are established in different Member States, the com-
  petent authorities of the master UCITS’ home Member State shall immediately inform those of the feeder UCITS’ home Member
  State of such investment.


2. The master UCITS shall not charge subscription or redemption fees for the investment of the feeder UCITS into its units or the divest-
  ment thereof.


3. The master UCITS shall ensure the timely availability of all information that is required according to this Directive, other Community
  law, the applicable national law, the fund rules or the instruments of incorporation to the feeder UCITS or, where applicable, its man-
  agement company, and to the competent authorities, the depositary and the auditor of the feeder UCITS.




Article 67


1. If the master UCITS and the feeder UCITS are established in the same Member State, the competent authorities shall immediately
  inform the feeder UCITS of any decision, measure, observation of non-compliance with the conditions of this Chapter or of any
  information reported pursuant to Article 106 (1) with regard to the master UCITS or, where applicable, its management company,
  depositary or auditor.


2. If the master UCITS and the feeder UCITS are established in different Member States, the competent authorities of the master UCITS’
  home Member State shall immediately communicate any decision, measure, observation of non-compliance with the conditions of


page 53                                                                                             | Cross-border distribution of UCITS | January 2009
  this Chapter or information reported pursuant to Article 101 (1) with regard to the master UCITS or, where applicable, its management
  company, depositary or auditor, to the competent authorities of the feeder UCITS’ home Member State. The latter shall then immedi-
  ately inform the feeder UCITS.


                                                          CHAPTER IX
                                  Obligations concerning information to be provided to investors


                                                                 SECTION 1
                                     PUblICATION Of A PROSPECTUS AND PERIODICAl REPORTS


Article 68


1. An investment company and, for each of the common funds it manages, a management company, shall publish the following:
  (a) A prospectus;
  (b) An annual report for each financial year,
  (c) A half-yearly report covering the first six months of the financial year.


2. The annual and half-yearly reports shall be published within the following time limits, with effect from the following ends of the periods
  to which they relate:
  (a) Four months in the case of the annual report,;
  (b) Two months in the case of the half-yearly report.




Article 69


1. The prospectus shall include the information necessary for investors to be able to make an informed judgement of the investment
  proposed to them, and, in particular, of the risks attached thereto.
  The prospectus shall include, independent of the instruments invested in, a clear and easily understandable explanation of the fund’s
  risk profile.


2. The prospectus shall contain at least the information provided for in Schedule A of Annex I, in so far as that information does not al-
  ready appear in the fund rules or instruments of incorporation annexed to the prospectus in accordance with Article 71 (1).


3. The annual report shall include a balance-sheet or a statement of assets and liabilities, a detailed income and expenditure account
  for the financial year, a report on the activities of the financial year and the other information provided for in Schedule B, of Annex I,
  as well as any significant information which will enable investors to make an informed judgement on the development of the activities
  of the UCITS and its results.


4. The half-yearly report shall include at least the information provided for in Sections I to IV of Schedule B of Annex I. Where a UCITS has
  paid or proposes to pay an interim dividend, the figures must indicate the results after tax for the half-year concerned and the interim
  dividend paid or proposed.




Article 70


1. The prospectus shall indicate in which categories of assets a UCITS is authorised to invest. It shall mention if transactions in financial
  derivative instruments are authorised; In this event, it shall include a prominent statement indicating if these operations may be carried


UCITS IV - PE 418.771 - page 54
  out for the purpose of hedging or with the aim of meeting investment goals, and the possible outcome of the use of financial derivative
  instruments on the risk profile.


2. Where a UCITS invests principally in any category of assets defined in Article 50 other than transferable securities and money market
  instruments or replicates a stock or debt securities index in accordance with Article 53, its prospectus and, where necessary, market-
  ing communications shall include a prominent statement drawing attention to the investment policy.


3. When the net asset value of a UCITS is likely to have a high volatility due to its portfolio composition or the portfolio management
  techniques that may be used, its prospectus and, where necessary, marketing communications shall include a prominent statement
  drawing attention to this characteristic.


4. Upon request of an investor, the management company shall also provide supplementary information relating to the quantitative limits
  that apply in the risk management of the UCITS, to the methods chosen to this end and to the recent evolution of the main instrument
  categories’ risks and yields.



Article 71


1. The fund rules or instruments of incorporation of an investment company shall form an integral part of the prospectus and shall be
  annexed thereto.


2. he documents referred to in paragraph 1 need not, however, be annexed to the prospectus provided that the investor is informed that
  on request he or she will be sent those documents or be apprised of the place where, in each Member State in which the units are
  marketed, he or she may consult them.




Article 72


The essential elements of the prospectus shall be kept up to date.




Article 73


The accounting information given in the annual report shall be audited by one or more persons empowered by law to audit accounts in
accordance with Directive 2006/43/EC. The auditor’s report, including any qualifications, shall be reproduced in full in the annual report.




Article 74
UCITS shall send their prospectus and any amendments thereto, as well as their annual and half-yearly reports, to the competent
authorities of the UCITS home Member State. UCITS shall provide this documentation to the competent authorities of the manage-
ment company’s home Member State on request.




Article 75


1. The prospectus and the latest published annual and half-yearly reports shall be provided to investors free of charge on request.




page 55                                                                                             | Cross-border distribution of UCITS | January 2009
2. The prospectus may be provided in a durable medium or by means of a website. A paper copy shall be provided to the investors on
  request, free of charge.


3. The annual and half-yearly reports shall be available to investors in the manner specified in the prospectus and in the key investor
  information referred to in Article 78. A paper copy of the annual and half-yearly reports shall be delivered to the investors on request,
  free of charge.


4. The Commission may adopt implementing measures which define the specific conditions which need to be met when providing the
  prospectus in a durable medium other than paper or by means of a website which does not constitute a durable medium.
  Those measures, designed to amend non-essential elements of this Directive, shall be adopted in accordance with the regulatory
  procedure with scrutiny referred to in Article 112(2).




                                                                  SECTION 2
                                                  PUblICATION Of OThER INfORMATION


Article 76


A UCITS shall make public in an appropriate manner the issue, sale, re-purchase or redemption price of its units each time it issues, sells,
re-purchases or redeems them, and at least twice a month.
The competent authorities may, however, permit a UCITS to reduce the frequency to once a month on condition that such a derogation
does not prejudice the interests of the unit-holders.




Article 77
All marketing communications to investors shall be clearly identifiable as such. They shall be fair, clear and not misleading. In particular,
any marketing communications comprising an invitation to purchase units of UCITS that contains specific information about a UCITS
shall make no statements that contradict or diminish the significance of the information contained in the prospectus and the key investor
information referred to in Article 78. It shall indicate that a prospectus exists and that the key investor information referred to in Article 78
is available and specify where and in which language such information or documents may be obtained by investors or potential investors
or how they may have access to them.


                                                                  SECTION 3
                                                        kEy INVESTOR INfORMATION




Article 78


1. Member States shall require that an investment company and, for each of the common funds it manages, a management company
  draw up a short document containing key information for investors. This document shall be referred to as “key investor information”
  in this Directive. The words “key investor information” should be clearly mentioned in that document, in the language referred to in
  Article 94(1)(b).


2. Key investor information shall include appropriate product information about the essential characteristics of the UCITS concerned,
  which is to be provided to investors so that they are reasonably able to understand the nature and the risks of the investment product
  that is being offered to them and, consequently, to take investment decisions on an informed basis.




UCITS IV - PE 418.771 - page 56
3. Key investor information shall provide information on the following essential elements in respect of the UCITS concerned:
  (a) Identification of the UCITS;
  (b) A short description of its investment objectives and investment policy;
  (c) Past performance presentation or, where relevant, performance scenarios;
  (d) Costs and associated charges;
  (e) Risk/reward profile of the investment, including appropriate guidance on and warnings of the risks associated with investments in
      the relevant UCITS.
  These essential elements shall be understandable by the investor without any reference to other documents.


4. Key investor information shall clearly specify where and how to obtain additional information on the proposed investment, including
  but not limited to where and how the prospectus and the annual and half-yearly report can be obtained free of charge at any time, and
  the language in which such information is available to investors.


5. Key investor information shall be written in a brief manner and in non-technical language. It shall be drawn up in a common format,
  allowing for comparison, and shall be presented in a way that is likely to be understood by retail investors.


6. Key investor information shall be used without alterations or supplements, except translation, in all Member States where the UCITS
  is notified to market its units in accordance with Article 93.


7. The Commission shall adopt implementing measures which define the following:
  (a) The detailed and exhaustive content of the key investor information to be provided to investors as referred to under paragraphs 2,
      3 and 4;
  (b) The detailed and exhaustive content of the key investor information to be provided to investors in the following specific cases:
      (i) For UCITS having different investment compartments, the key investor information to be provided to investors subscribing to a
          specific investment compartment, including how to pass from one investment compartment into another and the costs related
          thereto;
      (ii) For UCITS offering different share classes, the key investor information to be provided to investors subscribing to a specific
          share class;
      (iii) For fund of funds structures, the key investor information to be provided to investors subscribing to a UCITS, which invests itself
           in other UCITS or other collective investment undertakings referred to in Article 50(1)(e);
      (iv) For master-feeder structures, the key investor information to be provided to investors subscribing to a feeder UCITS;
      (v) For structured, capital protected and other comparable UCITS, the key investor information to be provided to investors in rela-
          tion to the special characteristics of such UCITS;
  (c) the specific details of the form and presentation of the key investor information to be provided to investors as referred to under
      paragraph 5.
  Those measures, designed to amend non-essential elements of this Directive by supplementing it, shall be adopted in accordance with
  the regulatory procedure with scrutiny referred to in Article 112(2).




Article 79


1. Key investor information shall constitute pre-contractual information. It shall be fair, clear and not misleading. It shall be consistent
  with the relevant parts of the prospectus.


2. Member States shall ensure that a person does not incur civil liability solely on the basis of the key investor information, including any
  translation thereof, unless it is misleading, inaccurate or inconsistent with the relevant parts of the prospectus. Key investor informa-
  tion shall contain a clear warning in this respect.


page 57                                                                                                  | Cross-border distribution of UCITS | January 2009
Article 80


1. Member States shall require that an investment company and, for each of the common funds it manages, a management company,
  which sells UCITS directly or through another natural or legal person who acts on its behalf and under its full and unconditional re-
  sponsibility, provides investors with key investor information on such UCITS in good time before their proposed subscription of units
  in such UCITS.


2. Member States shall require that an investment company and, for each of the common funds it manages, a management company,
  which does not sell UCITS directly or through another natural or legal person who acts on its behalf and under its full and unconditional
  responsibility to investors, provides key investor information to product manufacturers and intermediaries selling or advising inves-
  tors on potential investments in such UCITS or in products offering exposure to such UCITS upon their request. Member States shall
  require that the intermediaries selling or advising investors on potential investments in UCITS, provide key investor information ║to their
  clients or potential clients.


3. Key investor information shall be provided to investors free of charge.



Article 81


1. Member States shall allow investment companies and, for each of the common funds they manage, management companies, to
  provide key investor information in a durable medium or by means of a website. A paper copy shall be delivered free of charge to the
  investor, upon request.
  In addition, an up-to-date version of the key investor information shall be made available on the website of the investment company or
  management company.


2. The Commission may adopt implementing measures which define the specific conditions which need to be met when providing key
  investor information in a durable medium other than on paper or by means of a website which does not constitute a durable medium.
  Those measures, designed to amend non-essential elements of this Directive by supplementing it, shall be adopted in accordance with
  the regulatory procedure with scrutiny referred to in Article 112(2).


Article 82


1. UCITS shall send their key investor information and any amendments thereto, to the competent authorities of their home Mem-
  ber State.


2. The essential elements of key investor information shall be kept up to date.




                                                             CHAPTER X
                                                     General obligations of UCITS


Article 83


1. Neither:
  (a) An investment company, nor
  (b) A management company or depositary acting on behalf of a common fund may borrow.
  However, a UCITS may acquire foreign currency by means of a “back-to-back” loan.


UCITS IV - PE 418.771 - page 58
2. By way of derogation from paragraph 1, a Member State may authorise a UCITS to borrow:
  (a) Up to 10%
      - of its assets, in the case of an investment company, or
      - of the value of the fund, in the case of a common fund,
      provided that the borrowing is on a temporary basis;
   (b) Up to 10 % of its assets, in the case of an investment company, provided that the borrowing is to make possible the acquisition of
      immovable property essential for the direct pursuit of its business; In this case the borrowing and that referred to in point (a) may
      not in any case in total exceed 15 % of the borrower’s assets.




Article 84


1. A UCITS shall re-purchase or redeem its units at the request of any unit-holder.


2. By way of derogation from paragraph 1:
  (a) A UCITS may, in the cases and according to the procedures provided for by law, the fund rules or the instruments of incorporation
      of the investment company, temporarily suspend the re-purchase or redemption of its units. Suspension may be provided for only in
      exceptional cases where circumstances so require, and suspension is justified having regard to the interests of the unit-holders;
  (b) UCITS home Member States may allow their competent authorities to require the suspension of the re-purchase or redemption of
      units in the interest of the unit-holders or of the public.


3. In the cases mentioned in paragraph 2 (a), a UCITS shall without delay communicate its decision to the competent authorities and to
  the authorities of all Member States in which it markets its units.




Article 85


The rules for the valuation of assets and the rules for calculating the sale or issue price and the re-purchase or redemption price of the
units of a UCITS shall be laid down in the law, in the fund rules or in the instruments of incorporation of the investment company.




Article 86


The distribution or reinvestment of the income of a common fund or of an investment company shall be effected in accordance with the
law and with the fund rules or the instruments of incorporation of the investment company.




Article 87


A UCITS unit shall not be issued unless the equivalent of the net issue price is paid into the assets of the UCITS within the usual time limits.
This provision shall not preclude the distribution of bonus units.




Article 88


1. Without prejudice to the application of Articles 50 and 51, neither:
  (a) An investment company, nor


page 59                                                                                                | Cross-border distribution of UCITS | January 2009
  (b) A management company or depositary acting on behalf of a common fund, may grant loans or act as a guarantor on behalf of third
       parties.


2. Paragraph 1 shall not prevent such undertakings from acquiring transferable securities, money market instruments or other financial
  instruments referred to in Article 50 (1)(e), (g) and (h) which are not fully paid.




Article 89


Neither:
  (a) An investment company, nor
  (b) A management company or depositary acting on behalf of a common fund
  may carry out uncovered sales of transferable securities, money market instruments or other financial instruments referred to in Arti-
  cle 50 (1)(e), (g) and (h).



Article 90


The law or the fund rules shall prescribe the remuneration and the expenditure which a management company is empowered to charge
to a common fund and the method of calculation of such remuneration.
The law or the instruments of incorporation of an investment company shall prescribe the nature of the cost to be borne by the
company.




                                                           CHAPTER XI
                                  Special provisions applicable to UCITS which market their units
                                  in Member States other than those in which they are established


Article 91


1. UCITS host Member States shall ensure that UCITS can market their units within their territories upon notification under Article 93.


2. UCITS host Member States shall not impose any additional requirements or administrative procedures on UCITS as referred to in
  paragraph 1 in respect of the field governed by this Directive.


3. Member States shall ensure that complete information on the laws, regulations and administrative provisions which do not fall within
  the field governed by this Directive and which are specifically relevant to the arrangements made for the marketing of units of UCITS,
  established in another Member State within their territories, is easily accessible at distance and by electronic means. Member States
  shall ensure that this information is available in a language customary in the sphere of international finance, is provided in a clear and
  unambiguous manner and is kept up to date.


4. For the purpose of this Chapter, a UCITS shall include investment compartments thereof.



Article 92


UCITS shall, in accordance with the laws, regulations and administrative provisions in force in the Member State where the UCITS is


UCITS IV - PE 418.771 - page 60
marketed, take the measures necessary to ensure that facilities are available in that Member State for making payments to unit-holders,
re-purchasing or redeeming units and making available the information which UCITS are obliged to provide.




Article 93


1. If a UCITS proposes to market its units in a Member State other than its home Member State, it shall first submit a notification letter to
  the competent authorities of its home Member State.
  The notification letter shall include information on arrangements made for marketing of units of the UCITS in the host Member State,
  including where relevant in respect of share classes. In the case referred to in Article 16(1), it shall include an indication that the UCITS
  is marketed by the management company which manages the UCITS.


2. A UCITS shall enclose with the notification letter, as referred to in paragraph 1, the latest version of the following:
  (a) Its fund rules or its instruments of incorporation, its prospectus and, where appropriate, its latest annual report and any subsequent
      half-yearly report translated in accordance with the provisions of Article 94(1)(c) and (d).
  (b) Its key investor information referred to in Article 78, translated in accordance with Article 94(1)(b) and (d).


3. The competent authorities of the UCITS home Member State shall verify whether the documentation submitted by the UCITS in ac-
  cordance with paragraphs 1 and 2 is complete.
  The competent authorities of the UCITS home Member State shall transmit the complete documentation referred to in paragraphs 1
  and 2 to the competent authorities of the Member State in which the UCITS proposes to market its units, no later than ten working days
  after the date of receipt of the notification letter accompanied by the complete documentation provided for in paragraph 2. They shall
  enclose to the documentation an attestation that the UCITS fulfils the conditions imposed by this Directive.
  Upon the transmission of the documentation, the competent authorities of the UCITS home Member State shall immediately notify the
  UCITS about the transmission. The UCITS may access the market of the UCITS host Member State as of the date of this notification.


4. Member States shall ensure that the notification letter as referred to in paragraph 1 and the attestation as referred to in paragraph
  3 are provided in a language customary in the sphere of international finance, unless the UCITS home Member State and the UCITS
  host Member State agree to the notification letter as referred to in paragraph 1 and the attestation as referred to in paragraph 3 being
  provided in an official language of both Member States.


5. Member States shall ensure that the electronic transmission and filing of the documents referred to in paragraph 3 is accepted by their
  competent authorities.


6. For the purpose of the notification procedure set out in this Article, the competent authorities of the Member State in which a UCITS
  proposes to market its units shall not request any additional documents, certificates or information other than those provided for in this
  Article.


7. The UCITS home Member State shall ensure that the competent authorities of the UCITS host Member State have access, by elec-
  tronic means, to the documents referred to in paragraph 2 and, if applicable, to any translations thereof. It shall ensure that the UCITS
  keeps those documents and translations up to date. The UCITS shall notify any amendments to the documents referred to in paragraph
  2 to the competent authority of the UCITS host Member State and indicate where these documents can be obtained electronically.


8. In the event of a change in the information regarding the arrangements made for marketing communicated in the notification letter
  in accordance with paragraph 1, or a change regarding share classes to be marketed, the UCITS shall give a written notice of this
  change to the competent authorities of the host Member State before implementing the change.




page 61                                                                                               | Cross-border distribution of UCITS | January 2009
Article 94


1. If a UCITS markets its units in a UCITS host Member State, it shall provide to investors within the territory of such Member State all
  information and documents which it is required pursuant to Chapter IX to provide to investors in its home Member State.
  Such information and documents shall be provided to investors in compliance with the following provisions:
  (a) Without prejudice to the provisions of Chapter IX, such information and/or documents shall be provided to investors in the way
       prescribed by the laws, regulations and/or administrative provisions of the UCITS host Member State;
  (b) Key investor information referred to in Article 78 shall be translated into the official language, or one of the official languages, of the
       UCITS host Member State or into a language approved by the competent authorities of the UCITS host Member State;
  (c) Information or documents other than key investor information referred to in Article 78 shall be translated into the official language,
       or one of the official languages, of the UCITS host Member State or into a language approved by the competent authorities of the
       UCITS host Member State or into a language customary in the sphere of international finance, at the choice of the UCITS;
  (d) Translations of information and/or documents under points (b) and (c) shall be produced under the responsibility of the UCITS and
       shall faithfully reflect the content of the original information.


2. The requirements set out in paragraph 1 shall also be applicable to any changes to the information and documents referred therein.


3. The frequency of the publication of the issue, sale, purchase or redemption price of units of UCITS according to Article 76 shall be
  subject to the laws, regulations and administrative provisions of the UCITS home Member State.




Article 95


1. The Commission may adopt implementing measures specifying:
  (a) The scope of the information as referred to in Article 91(3);
  (b) The facilitation of access for the competent authorities of the UCITS host Member States to the information and/or documents
       referred to in Article 93(1), (2) and (3) as required by Article 93(7).
  Those measures, designed to amend non-essential elements of this Directive by supplementing it, shall be adopted in accordance with
  the regulatory procedure with scrutiny referred to in Article 112(2).


2. The Commission may also adopt implementing measures specifying:
  (a) The form and contents of a standard model of the notification letter to be used by a UCITS for the purpose of notification, as referred
       to in Article 93(1), including an indication as to which documents the translations refer;
  (b) The form and contents of a standard model of attestation to be used by competent authorities of Member States, as referred to in
       Article 93(3);
  (c) The procedure for the exchange of information and the use of electronic communication between competent authorities for the
       purpose of notification under the provisions of Article 93.
  These measures shall be adopted in accordance with the regulatory procedure referred to in Article 112(3).




Article 96

For the purpose of carrying on its activities, a UCITS may use the same reference to its legal form (such as investment company or com-
mon fund) in its designation in a UCITS host Member State as it uses in its home Member State.




UCITS IV - PE 418.771 - page 62
                                                        CHAPTER XII
                     Provisions concerning the authorities responsible for authorisation and supervision


Article 97


1. Member States shall designate the competent authorities which are to carry out the duties provided for in this Directive. They shall
  inform the Commission thereof, indicating any division of duties.


2. The competent authorities shall be public authorities or bodies appointed by public authorities.


3. The authorities of the UCITS home Member State shall be competent to supervise that UCITS including, where relevant, pursuant to
 Article 19. However, the authorities of the UCITS host Member State shall be competent to supervise compliance with the provisions
 falling outside the field governed by this Directive and requirements set out in Articles 92 and 94




Article 98

1. Competent authorities shall be given all supervisory and investigatory powers that are necessary for the exercise of their functions.
  Such powers shall be exercised in any of the following ways:
  (a) Directly; Or
  (b) In collaboration with other authorities; Or
  (c) Under their responsibility by delegation to entities to which tasks have been delegated; Or
  (d) By application to the competent judicial authorities.


2. The powers referred to in paragraph 1 shall include, at least, the rights to:
  (a) Have access to any document in any form and to receive a copy of it;
  (b) Demand information from any person and if necessary to summon and question a person with a view to obtaining information;
  (c) Carry out on-site inspections;
  (d) Require existing telephone and existing data traffic records;
  (e) Require the cessation of any practice that is contrary to the provisions adopted in the implementation of this Directive;
  (f) Request the freezing and/or the sequestration of assets;
  (g) Request temporary prohibition of prof essional activity;
  (h) Require authorised investment companies, management companies and depositaries to provide information;
  (i) Adopt any type of measure to ensure that investment companies, management companies or depositaries continue to comply with
      the requirements of this Directive;
  (j) Require the suspension of the issue, repurchase or redemption of units in the interest of the unit holders or of the public;
  (k) Withdraw the authorisation granted to a UCITS, a management company or a depositary;
  (l) Refer matters for criminal prosecution;
  (m) Allow auditors or experts to carry out verifications or investigations.




Article 99

1. Member States shall lay down the rules on measures and penalties applicable to infringements of the national provisions adopted pur-
  suant to this Directive and shall take all measures necessary to ensure that they are implemented. Without prejudice to the procedures
  for the withdrawal of authorisation or to the right of Member States to impose criminal sanctions, Member States shall in particular
  ensure, in conformity with their national law, that the appropriate administrative measures can be taken or administrative sanctions be


page 63                                                                                               | Cross-border distribution of UCITS | January 2009
  imposed against the persons responsible where the provisions adopted in the implementation of this Directive have not been complied
  with.
  The measures and penalties provided for must be effective, proportionate and dissuasive.


2. Without precluding rules on measures and penalties applicable to infringements of the other national provisions adopted pursuant to
  this Directive, Member States shall in particular lay down effective, proportionate and dissuasive measures and penalties concerning
  the duty to present key investor information in a way that is likely to be understood by retail investors according to Article 78(5).


3. Member States shall provide that the competent authorities may disclose to the public any measure or sanction that will be imposed
  for infringement of the provisions adopted in the implementation of this Directive, unless such disclosure would seriously jeopardise
  the financial markets, be detrimental to the interests of investors or cause disproportionate damage to the parties involved.




Article 100


1. Member States shall ensure that efficient and effective complaints and redress procedures are in place for the out-of court settlement
  of consumer disputes concerning the activity of UCITS using existing bodies where appropriate.


2. Member States shall ensure that the bodies referred to in paragraph 1 are not prevented by legal or regulatory provisions from coop-
  erating effectively in the resolution of cross-border disputes




Article 101


1. The competent authorities of the Member States shall cooperate with each other whenever necessary for the purpose of carrying out
  their duties under this Directive or of exercising their powers under this Directive or under national law.
  Member States shall take the necessary administrative and organisational measures to facilitate the cooperation provided for in this
  paragraph.
  Competent authorities shall use their powers for the purpose of cooperation, even in cases where the conduct under investigation
  does not constitute an infringement of any regulation in force in that Member State.


2. The competent authorities of the Member States shall immediately supply one another with the information required for the purposes
  of carrying out their duties under this Directive.


3. Where a competent authority of one Member State has good reasons to suspect that acts contrary to the provisions of this Directive,
  carried out by entities not subject to its supervision, are being or have been carried out on the territory of another Member State, it shall
  notify this to the competent authority of the other Member State in as specific a manner as possible. The latter authority shall take ap-
  propriate action. It shall inform the notifying competent authority of the outcome of the action and, to the extent possible, of significant
  interim developments. This paragraph shall be without prejudice to the competences of the competent authority that has forwarded
  the information.


4. The competent authorities of one Member State may request the cooperation of the competent authorities of another Member State in
  a supervisory activity or for an on-the-spot verification or in an investigation on the territory of the latter within the framework of their
  powers pursuant to this Directive. Where a competent authority receives a request with respect to an on-the-spot verification or an
  investigation, it shall:
  (a) Carry out the verification or investigation itself,
  (b) Allow the requesting authority to carry out the verification or investigation, or


UCITS IV - PE 418.771 - page 64
  (c) Allow auditors or experts to carry out the verification or investigation.


5. If the verification or investigation is carried out on the territory of one Member State by the competent authority of the same Member
  State, the competent authority of the Member State which has requested cooperation, may ask that members of its own personnel
  accompany the personnel carrying out the verification or investigation. The verification or investigation shall, however, be subject to
  the overall control of the Member State on whose territory it is conducted.
  If the verification or investigation is carried out on the territory of one Member State by the competent authority of another Member
  State, the competent authority of the Member State on whose territory the verification or investigation is carried out may request that
  members of its own personnel accompany the personnel carrying out the verification or investigation.


6. Competent authorities may refuse to exchange information as provided for in paragraph 2 or to act on a request for cooperation in
  carrying out an investigation or on-the-spot verification as provided for in paragraph 4 only where:
  (a) Such an investigation, on-the-spot verification or exchange of information might adversely affect the sovereignty, security or public
      policy of the Member State addressed;
  (b) Judicial proceedings have already been initiated in respect of the same actions and the same persons before the authorities of the
      Member State addressed;
  (c) Final judgment has already been delivered in the Member State addressed in respect of the same persons and the same actions.


7. The competent authorities shall notify the requesting competent authorities of any decision taken under paragraph 6. That notification
  shall contain information about the motives of their decision.


8. Competent authorities may bring the following situations to the attention of the Committee of European Securities Regulators1:
  (a) Situations where a request to exchange information as provided for in Article 109 has not been acted upon within a reasonable time
      or has been rejected;
  (b) Situations where an application to carry out an investigation or a verification as provided for in Article 110 has not been acted upon
      within a reasonable time or has been rejected; or
  (c) Situations where a request for authorisation for its officials to accompany those of the competent authority of the other Member
      State has not been acted upon within a reasonable time or has been rejected.


9. The Commission may adopt implementing measures concerning procedures for on-the-spot verifications and investigations.
  Those measures shall be adopted in accordance with the regulatory procedure referred to in Article 112(3).




Article 102


1. Member States shall provide that all persons who work or who have worked for the competent authorities, as well as auditors and
  experts instructed by the competent authorities, be bound by the obligation of professional secrecy. Such obligation implies that no
  confidential information which they receive in the course of their duties may be divulged to any person or authority whatsoever, save
  in summary or aggregate form such that UCITS and management companies and depositaries (hereinafter referred to as undertakings
  contributing towards their business activity) cannot be individually identified, without prejudice to cases covered by criminal law.
  However, when a UCITS or an undertaking contributing towards its business activity has been declared bankrupt or is being compul-
  sorily wound up, confidential information which does not concern third parties involved in rescue attempts may be divulged in civil or
  commercial proceedings.




(1) As established by Commission Decision 2001/527/EC of 6 June 2001, OJ L 191, 13.7.2001, p 43.


page 65                                                                                             | Cross-border distribution of UCITS | January 2009
2. Paragraph 1 shall not prevent the competent authorities of the Member States from exchanging information in accordance with this
  Directive or other directives applicable to UCITS or to undertakings contributing towards their business activity. That information shall
  be subject to the conditions of professional secrecy laid down in paragraph 1.
  Competent authorities exchanging information with other competent authorities under this Directive may indicate at the time of com-
  munication that such information must not be disclosed without their express agreement, in which case such information may be
  exchanged solely for the purposes for which those authorities gave their agreement.


3. Member States may conclude cooperation agreements providing for exchange of information with the competent authorities of third
  countries, or with authorities or bodies of third countries, as determined in paragraph 5 of this Article and Article 103(1) only if the infor-
  mation disclosed is subject to guarantees of professional secrecy at least equivalent to those referred to in this Article. Such exchange
  of information shall be intended for the performance of the supervisory task of those authorities or bodies.
  Where the information originates in another Member State, it may not be disclosed without the express agreement of the competent
  authorities which have disclosed it and, where appropriate, solely for the purposes for which those authorities gave their agreement.


4. Competent authorities receiving confidential information under paragraphs 1 or 2 may use it only in the course of their duties for the ║
  purposes of:
  (a) Checking that the conditions governing the taking-up of business of UCITS or of undertakings contributing towards their business
       activity are met and to facilitate the monitoring of the conduct of that business, administrative and accounting procedures and
       internal-control mechanisms;
  (b) Imposing sanctions;
  (c) Administrative appeals against decisions by the competent authorities; and
  (d) Court proceedings initiated under Article 107(2).


5. Paragraphs 1 and 4 shall not preclude the exchange of information within a Member State or between Member States, between com-
  petent authorities, and:
  (i) Authorities with public responsibility for the supervision of credit institutions, investment undertakings, insurance undertakings and
       other financial organisations and the authorities responsible for the supervision of financial markets;
  (ii) Bodies involved in the liquidation or bankruptcy of UCITS and other similar procedures and of undertakings contributing towards
       their business activity;
  (iii) Persons responsible for carrying out statutory audits of the accounts of insurance undertakings, credit institutions, investment
       undertakings and other financial institutions.
  In particular, paragraph 1 and 4 shall not preclude the performance by the competent authorities listed above of their supervisory
  functions, or the disclosure to bodies which administer compensation schemes of information necessary for the performance of their
  functions.
  Information exchanged pursuant to the first subparagraph shall be subject to the conditions of professional secrecy imposed in para-
  graph 1.




Article 103


1. Notwithstanding Article 102 (1) to (4), Member States may authorise exchanges of information between the competent authorities
  and
  (a) the authorities responsible for overseeing the bodies involved in the liquidation and bankruptcy of UCITS or undertakings contribut-
       ing towards their business activity and other similar procedures;
  (b) the authorities responsible for overseeing persons charged with carrying out statutory audits of the accounts of insurance under-
       takings, credit institutions, investment firms and other financial institutions.




UCITS IV - PE 418.771 - page 66
2. Member States which have recourse to the derogation provided for in paragraph 1 shall require that at least the following conditions
  are met:
  (a) The information is used for the purpose of performing the task of overseeing referred to in paragraph 1;
  (b) The information received is subject to the conditions of prof essional secrecy imposed in Article 102 (1);
  (c) Where the information originates in another Member State, it may not be disclosed without the express agreement of the
      competent authorities which have disclosed it and, where appropriate, solely for the purposes for which those authorities
      gave their agreement.


3. Member States shall communicate to the Commission and to the other Member States the names of the authorities which may receive
  information pursuant to paragraph 1.


4. Notwithstanding Article 102 (1) to (4), Member States may, with the aim of strengthening the stability, including integrity, of the financial
  system, authorise the exchange of information between the competent authorities and the authorities or bodies responsible under the
  law for the detection and investigation of breaches of company law.


5. Member States which have recourse to the derogation provided for in paragraph 4 shall require that at least the following conditions
  are met:
  (a) The information is used for the purpose of performing the task referred to in paragraph 4;
  (b) The information received is subject to the conditions of prof essional secrecy imposed in Article 102 (1);
  (c) Where the information originates in another Member State, it may not be disclosed without the express agreement of the
      competent authorities which have disclosed it and, where appropriate, solely for the purposes for which those authorities
      gave their agreement.
  For the purposes of point (c), the authorities or bodies referred to in paragraph 4 shall communicate to the competent authorities which
  have disclosed the information the names and precise responsibilities of the persons to whom it is to be sent.


6. Where, in a Member State, the authorities or bodies referred to in paragraph 4 perform their task of detection or investigation
  with the aid, in view of their specific competence, of persons appointed for that purpose and not employed in the public sector
  the possibility of exchanging information provided for in that paragraph may be extended to such persons under the conditions
  stipulated in paragraph 5.


7. Member States shall communicate to the Commission and to the other Member States the names of the authorities or bodies which
  may receive information pursuant to paragraph 4.




Article 104


1. Articles 102 and 103 shall not prevent a competent authority from transmitting to central banks and other bodies with a similar function
  in their capacity as monetary authorities information intended for the performance of their tasks, nor shall those articles prevent such
  authorities or bodies from communicating to the competent authorities such information as they may need for the purposes of Arti-
  cle 102 (4). Information received in this context shall be subject to the conditions of prof essional secrecy imposed in Article 102 (1).


2. Articles 102 and 103 shall not prevent the competent authorities from communicating the information referred to in Article 102 (1) to
  (4) to a clearing house or other similar body recognised under national law for the provision of clearing or settlement services for one
  of their Member State’s markets if they consider that it is necessary to communicate the information in order to ensure the proper
  functioning of those bodies in relation to defaults or potential defaults by market participants.
  The information received in this context shall be subject to the conditions of prof essional secrecy imposed in Article 102 (1).




page 67                                                                                                | Cross-border distribution of UCITS | January 2009
  Member States shall, however, ensure that information received under Article 102 (2) may not be disclosed in the circumstances
  referred to in the first subparagraph of this paragraph without the express consent of the competent authorities which disclosed it.


3. Notwithstanding Article 102 (1) and (4), Member States may, by virtue of provisions laid down by law, authorise the disclosure of certain
  information to other departments of their central government administrations responsible for legislation on the supervision of UCITS
  and of undertakings contributing towards their business activity, credit institutions, financial institutions, investment undertakings and
  insurance undertakings and to inspectors instructed by those departments.
  Such disclosures may, however, be made only where necessary for reasons of prudential control.
  Member States shall, however, provide that information received under Article 102 (2) and (5) may never be disclosed in the cir-
  cumstances referred to in this paragraph except with the express agreement of the competent authorities which disclosed the
  information.




Article 105


The Commission may adopt implementing measures relating to the procedures for exchange of information between competent
authorities.
Those measures shall be adopted in accordance with the regulatory procedure referred to in Article 112 (3).




Article 106


1. Member States shall provide at least that:
  (a) Any person authorised within the meaning of Directive 2006/43/EC, performing in a UCITS or an undertaking contributing towards
       its business activity the statutory audit referred to in Article 73 of Directive 78/660/EEC, Article 37 of Directive 83/349/EEC or Arti-
       cle 68 of this Directive or any other statutory task, shall have a duty to report promptly to the competent authorities any fact or
       decision concerning that undertaking of which he has become aware while carrying out that task and which is liable to bring about
       any of the following:
       (i) A material breach of the laws, regulations or administrative provisions which lay down the conditions governing authorisation or
          which specifically govern pursuit of the activities of UCITS or undertakings contributing towards their business activity;
       (ii) Impairment of the continuous functioning of the UCITS or an undertaking contributing towards its business activity;
       (iii) A refusal to certify the accounts or to the expression of reservations;
  (b) The person referred to in point (a) shall have a duty to report any facts and decisions of which he becomes aware in the course of
       carrying out a task as described in (a) in an undertaking having close links resulting from a control relationship with the UCITS or
       an undertaking contributing towards its business activity within which he is carrying out that task.


2. The disclosure in good faith to the competent authorities, by persons authorised within the meaning of Directive 2006/43/EC of any fact
  or decision referred to in paragraph 1 shall not constitute a breach of any restriction on disclosure of information imposed by contract
  or by any legislative, regulatory or administrative provision and shall not involve such persons in liability of any kind.




Article 107


1. The competent authorities shall give, in writing, reasons for any decision to refuse authorisation, and any negative decision taken in
  implementation of the general measures adopted in application of this Directive, and communicate them to applicants.


2. Member States shall provide that any decision taken under laws, regulations or administrative provisions adopted in accordance with


UCITS IV - PE 418.771 - page 68
  this Directive is properly reasoned and is subject to the right to apply to the courts. That right to apply to the courts shall apply also
  where, in respect of an ║application for authorisation which provides all the information required, no decision is taken within six months
  of its submission.


3. Member States shall provide that one or more of the following bodies, as determined by national law, may, in the interests of consum-
  ers and in accordance with national law, take action before the courts or competent administrative bodies to ensure that the national
  provisions for the implementation of this Directive are applied:
  (a) Public bodies or their representatives;
  (b) Consumer organisations having a legitimate interest in protecting consumers;(
  c) Professional organisations having a legitimate interest in acting to protect their members.




Article 108


1. Only the authorities of the UCITS home Member State shall have the power to take action against it if it infringes any law, regula-
  tion or administrative provision or any regulation laid down in the fund rules or in the instruments of incorporation of the invest-
  ment company.
  However, the authorities of the UCITS host Member State may take action against it if it infringes the laws, regulations and admin-
  istrative provisions in force on their territory and falling outside the field governed by the Directive or the requirements set out in
  Articles 92 and 94.


2. Any decision to withdraw authorisation, or any other serious measure taken against a UCITS, or any suspension of the issue, re-
  purchase or redemption imposed upon it, shall be communicated without delay by the authorities of the UCITS home Member State to
  the authorities of the UCITS host Member States and, if the management company of a UCITS is situated in another Member State, to
  the competent authorities of the management company’s home Member State.


3. The competent authorities of the management company’s home Member State and those of the UCITS home Member State shall, re-
  spectively, have the ability to take action against the management company if it infringes rules under their respective responsibility.


4. If the competent authorities of the UCITS host Member State have clear and demonstrable grounds for believing that a UCITS whose
  units are marketed within their territory is in breach of the obligations arising from the provisions adopted pursuant to this Directive
  which do not confer powers on the competent authorities of the UCITS host Member State, they shall refer those findings to the com-
  petent authorities of the UCITS home Member State, which shall take the appropriate measures.


5. If, despite the measures taken by the competent authorities of the UCITS home Member State or because such measures prove
  inadequate, or because the UCITS home Member State fails to act within a reasonable timeframe, the UCITS persists in acting in a
  manner that is clearly prejudicial to the interests of the UCITS host Member State’s investors, the competent authorities of the UCITS
  host Member State, may take consequently either of the following actions:
  (a) After informing the competent authorities of the UCITS home Member State, take all the appropriate measures needed in order to
      protect investors, including the possibility of preventing the UCITS concerned from carrying on any further marketing of its units
      within their territory;
  (b) If necessary, bring the matter to the attention of the Committee of European Securities Regulators.
  The Commission shall be informed without delay of any measure taken pursuant to point (a) of the first subparagraph.


6. Member States shall ensure that within their territories it is legally possible to serve the legal documents necessary for the measures
  which may be taken by the UCITS host Member State on UCITS pursuant to paragraphs 2 to 5.




page 69                                                                                             | Cross-border distribution of UCITS | January 2009
Article 109


1. Where, through the provision of services or by the establishment of branches, a management company operates in one or more
  management company’s host Member States, the competent authorities of all the Member States concerned shall collaborate
  closely.
  They shall supply one another on request with all the information concerning the management and ownership of such manage-
  ment companies that is likely to facilitate their supervision and all information likely to facilitate the monitoring of such companies.
  In particular, the authorities of the management company’s home Member State shall cooperate to ensure that the authorities of
  the management company’s host Member State collect the particulars referred to in Article 21 (2).


2. Insofar as it is necessary for the purpose of exercising their powers of supervision, the competent authorities of the management com-
  pany’s home Member State shall be informed by the competent authorities of the management company’s host Member State of any
  measures taken by the management company’s host Member State pursuant to Article 21 (6) which involve measures and penalties
  imposed on a management company or restrictions on a management company’s activities.


3. The competent authorities of the management company’s home Member State shall notify, without delay, the competent authorities of
  the UCITS home Member State of any problem identified at the level of the management company and which would materially affect
  the ability of the management company to properly perform its duties with respect to the UCITS or of any breach of the requirements
  under Chapter III.


4. The competent authorities of the UCITS home Member State shall notify, without delay, the competent authorities of the management
  company’s home Member State of any problem identified at the level of the UCITS and which may materially affect the ability of the
  management company to properly perform its duties or to comply with the requirements of this Directive which fall within the remit of
  the UCITS home Member State.




Article 110


1. Each management company’s host Member State shall ensure that, where a management company authorised in another Member
  State carries on business within its territory through a branch, the competent authorities of the management company’s home Member
  State may, after informing the competent authorities of the management company’s host Member State, themselves or through the
  intermediary of persons they instruct for the purpose, carry out on-the-spot verification of the information referred to in Article 109.


2. Paragraph 1 shall not affect the right of the competent authorities of the management company’s host Member State, in discharging
  their responsibilities under this Directive, to carry out on-the-spot verifications of branches established within their territory.




                                                             CHAPTER XIII
                                                     European Securities Committee


Article 111


The Commission may adopt technical amendments to this Directive in the following areas:
(a) Clarification of the definitions in order to ensure uniform application of this Directive throughout the Community;
(b) Alignment of terminology and the framing of definitions in accordance with subsequent acts on UCITS and related matters.
Those measures, designed to amend non-essential elements of this Directive, shall be adopted in accordance with the regulatory proce-
dure with scrutiny referred to in Article 112 (2).


UCITS IV - PE 418.771 - page 70
Article 112


1. The Commission shall be assisted by the European Securities Committee established by Commission Decision 2001/528/EC1.


2. Where reference is made to this paragraph, Article 5a(1) to (4) and Article 7 of Decision 1999/468/EC shall apply, having regard to the
  provisions of Article 8 thereof.


3. Where reference is made to this paragraph, Articles 5 and 7 of Decision 1999/468/EC shall apply, having regard to the provisions of
  Article 8 thereof.


  The period laid down in Article 5(6) of Decision 1999/468/EC shall be set at three months.




                                                           CHAPTER XIV
                                           Derogations, transitional and final provisions

                                                               SECTION 1
                                                             DEROGATIONS


Article 113


1. Solely for the purpose of Danish UCITS, pantebreve issued in Denmark shall be treated as equivalent to the transferable securities
  referred to in Article 50 (1) (b).


2. By way of derogation from Articles 22 (1) and 32 (1), the competent authorities may authorise those UCITS which, on 20 December 1985,
  had two or more depositaries in accordance with their national law to maintain that number of depositaries if those authorities have
  guarantees that the functions to be performed under Articles 22 (3) and 32 (3) will be performed in practice.


3. By way of derogation from Article 16, the Member States may authorise management companies to issue bearer certificates repre-
  senting the registered securities of other companies.




Article 114


1. Investment firms, as defined in Article 4 (1) of Directive 2004/39/EC, authorised to carry out only the services provided for in Section
  A (4) and (5) of the Annex to that Directive, may obtain authorisation under this Directive to manage common funds and investment
  companies and to qualify themselves as “management companies”. In that case, such investment firms must give up the authorisation
  obtained under Directive 2004/39/EC.


2. Management companies already authorised before 13 February 2004 in their home Member State under this Directive to manage
  UCITS in the form of common funds and investment companies shall be deemed to be authorised for the purposes of this Article if the
  laws of those Member States provide that to take up such activity they must comply with conditions equivalent to those imposed in
  Articles 7 and 8.




(1) OJ L 191, 13.7.2001, p.45.


page 71                                                                                            | Cross-border distribution of UCITS | January 2009
                                                                     SECTION 2
                                                    TRANSITIONAl AND fINAl PROVISIONS


Article 115


By 1 July 2013, the Commission shall submit to the European Parliament and the Council a report on the application of this Directive.




Article 116


1. Member States shall adopt and publish by 1 July 2011 at the latest, the laws, regulations and administrative provisions necessary to
  comply with Articles 1(2) second subparagraph, 1(3)(b), 2(1)(e), ║2(1)(m), 2(5), 4, 5(1) to 5(4), 5(6), 5(7), 6(1), 12(1), 12(3), 13(1) introductory
  phrase, 13(1)(a), 13(1)(i), 14(2), 15, 16(1) second subparagraph, 16(3), 17(1), 17(3) first and third subparagraphs, 17(4) to (7), 17(9) second
  subparagraph, 18(1) introductory phrase, 18(2) second to fourth subparagraphs, 18(3), 18(4), 19, 20, 21(2), 21(3), 21(5), 21(6), 21(8), 21(9),
  22(1), 22(3)(a), 22(3)(d), 22(3)(e), 23(1), 23(2), 23(4), 23(5), 24 first paragraph, 27 third paragraph, 29(2), 33(2), 33(4), 33(5), , 37 to 49, 50(1)
  introductory phrase, 50(3), 51(1) third subparagraph, 51(4), 54(3), 56(1), 56(2) first subparagraph, introductory phrase, 58 to 67, 68(1), 69(1)
  and (2), 70(2), 70(3), 71, 72, 74, 75, 77, 78 to 82, 83(1)(b), 83(2)(a) second indent, 86, 88(1)(b), 89(b), 90, 91 to 101, 102(2) second subpara-
  graph, 102(5), 107, 108, 109(2) to (4), 110 and Annex I. They shall forthwith inform the Commission thereof.
  They shall apply those provisions from the date referred to in the first subparagraph.
  When Member States adopt those provisions, they shall contain a reference to this Directive or be accompanied by such a reference
  on the occasion of their official publication. They shall also include a statement that references in existing laws, regulations and ad-
  ministrative provisions to the directive[s] repealed by this Directive shall be construed as references to this Directive. Member States
  shall determine how such reference is to be made and how that statement is to be formulated.


2. Member States shall communicate to the Commission the text of the main provisions of national law which they adopt in the field
  covered by this Directive.




Article 117


Directive 85/611/EEC, as amended by the Directives listed in ║nnex III, Part A, is repealed with effect from the date set out in Article 116(1),
without prejudice to the obligations of the Member States relating to the time limits for transposition into national law and application
of the Directives set out in Annex III, Part B. References to the repealed Directive shall be construed as references to this Directive and
shall be read in accordance with the correlation table in Annex IV.
References to the simplified prospectus shall be construed as references to the key investor information referred to in Article 78.




Article 118


This Directive shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.
Articles 1(1), 1(2) except the second subparagraph, 1(3)(a), 1(4) to 1(7), 2(1)(a) to (d), 2(1)(f) to (l), 2(1)(n), 2(1)(o), 2(2) to (4), 2(6), 2(7), 3,
5(5), 6(2) to (4), 7 to 11, 12(2), 13(1)(b) to (h), 13(2), 14(1), 16(1) first subparagraph, 16(2), 17(2), 17(3) second subparagraph, 17(8), 17(9) first
subparagraph, 18(1) except the introductory phrase, 18(2) first subparagraph, 21(1), 21(4), 21(7), 22(2), 22(3)(b), 22(3)(c), 23(3), 24 second
paragraph, 25, 26, 27 first and second paragraphs, 28, 29(1), 29(3), 29(4), 30 to 32, 33(1), 33(3), 34 to 36, 50(1)(a) to (h), 50(2), 51(1) first and
second subparagraphs, 51(2), 51(3), 52, 53, 54(1), 54(2), 55, 56(2) first subparagraph points (a) to (c), 56(2) second subparagraph, 56(3), 57,
68(2), 69(3) and (4), 70(1), 70(4), 73, 76, 83(1) except 83(1)(b), 83(2)(a) except second indent, 84, 85, 87, 88(1) except 88(1)(b), 88(2), 89 except




UCITS IV - PE 418.771 - page 72
89(b), 102(1), 102(2) first subparagraph, 102(3), 102(4), 103 to 106, 109(1), 111, 112, 113, 117 and Annexes II, III and IV shall apply from the
date set out in the second subparagraph of Article 116(1).


2. Member States shall ensure that UCITS replace their simplified prospectus drawn up in accordance with the provisions of Directive
  85/611/EEC with key investor information drawn up in accordance with Article 78 as soon as possible and in any event no later than
  12 months after the deadline for implementing, in national laws, all the implementing measures referred to in Article 78(7) has expired.
  During that period, the competent authorities shall continue to accept the simplified prospectus for UCITS marketed on their territory.




Article 119


This Directive is addressed to the Member States.


Done at


For the European Parliament                            For the Council
The President                                          The President




page 73                                                                                                | Cross-border distribution of UCITS | January 2009
ANNEX I - SCHEDULE A


 1. Information concerning the common fund           1. Information concerning                          1.Information concerning
                                                        the management company1                           the investment company

 1.1 Name                                            1.1 Name or style, form in law, registered         1.1 Name or style, form in law, registered
                                                         office and head office if different from the       office and head office if different from the
                                                         registered office                                  registered office

 1.2 Date of establishment of the common fund.       1.2 Date of incorporation of the company.          1.2 Date of the incorporation of the company.
     Indication of duration, if limited                  Indication of duration, if limited.                Indication of duration,
                                                                                                            if limited.
                                                     1.3 If the company manages other common            1.3 In the case of investment companies
                                                         funds, indication of those other funds             having different investment compartments,
                                                                                                            the indication of the compartments.

 1.4 Statement of the place where the fund                                                              1.4 Statement of the place where the
     rules, if they are not annexed, and periodic                                                           instruments of incorporation, if they are
     reports may be obtained.                                                                               not annexed, and periodical reports may
                                                                                                            be obtained.

 1.5 Brief indications relevant to unit-holders of                                                      1.5 Brief indications relevant to unit-holders of
     the tax system applicable to the common                                                                the tax system applicable to the company.
     fund. Details of whether deductions are                                                                Details of whether deductions are made at
     made at source from the income and                                                                     source from the income and capital gains
     capital gains paid by the common fund to                                                               paid by the company to unit-holders.
     unit-holders.


 1.6 Accounting and distribution dates                                                                  1.6. Accounting and distribution dates.

 1.7 Names of the persons responsible for                                                               1.7 Names of the persons responsible for
     auditing the accounting information                                                                    auditing the accounting information
     referred to in Article 73.                                                                             referred to in Article 73.
                                                     1.8 Names and positions in the company             1.8 Names and positions in the company
                                                         of the members of the administrative,              of the members of the administrative,
                                                         management and supervisory bodies.                 management and supervisory bodies.
                                                         Details of their main activities outside the       Details of their main activities outside the
                                                         company where these are of significance            company where these are of significance
                                                         with respect to that company                       with respect to that company.


                                                     1.9 Amount of the subscribed capital with an       1.9 Capital
                                                         indication of the capital paid-up

 1.10 Details of the types and main                                                                     1.10 Details of the types and main
      characteristics of the units and in                                                                    characteristics of the units and in
      particular:                                                                                            particular:
 . The nature of the right (real, personal or                                                           . Original securities or certificates providing
   other) represented by the unit,                                                                        evidence of title; Entry in a register or in an
 . Original securities or certificates providing                                                          account,
   evidence of title; Entry in a register or in an                                                      . Characteristics of the units: Registered or
   account,                                                                                               bearer. Indication of any denominations
 . Characteristics of the units: Registered or                                                            which may be provided for,
   bearer. Indication of any denominations                                                              . Indication of unit-holders’ voting rights,
   which may be provided for,                                                                           . Circumstances in which winding-up of the
 . Indication of unit-holders’ voting rights if                                                           investment company can be decided on
   these exist,                                                                                           and winding-up procedure, in particular as
 . Circumstances in which winding-up of                                                                   regards the rights of unit-holders.
   the common fund can be decided on and
   winding-up procedure, in particular as
   regards the rights of unit-holders.


 1.11 Where applicable, indication of stock                                                             1. 11 Where applicable, indication of stock
      exchanges or markets where the units                                                                    exchanges or markets where the units
      are listed or dealt in.                                                                                 are listed or dealt in.
 1.12 Procedures and conditions of issue and                                                            1.12 Procedures and conditions of issue and
      sale of units                                                                                          sale of units


   1   including an indication whether the management company is domiciled in another Member State than in the UCITS home Member State

UCITS IV - PE 418.771 - page 74
 1.13 Procedures and conditions for re-                                                                      1.13 Procedures and conditions for re-
      purchase or redemption of units, and                                                                        purchase or redemption of units, and
      circumstances in which re-purchase or                                                                       circumstances in which re-purchase or
      redemption may be suspended.                                                                                redemption may be suspended. In the
                                                                                                                  case of investment companies having
                                                                                                                  different investment compartments,
                                                                                                                  information on how a unit-holder may
                                                                                                                  pass from one compartment into another
                                                                                                                  and the charges applicable in such
                                                                                                                  cases.
 1.14 Description of rules for determining and                                                               1.14 Description of rules for determining and
     applying income.                                                                                            applying income.

 1.15 Description of the common fund’s                                                                       1.15 Description of the company’s
      investment objectives, including                                                                            investment objectives, including
      its financial objectives (e.g. capital                                                                      its financial objectives (e.g. capital
      growth or income), investment policy                                                                        growth or income), investment policy
      (e.g. specialisation in geographical or                                                                     (e.g. specialisation in geographical or
      industrial sectors), any limitations on                                                                     industrial sectors), any limitations on
      that investment policy and an indication                                                                    that investment policy and an indication
      of any techniques and instruments or                                                                        of any techniques and instruments or
      borrowing powers which may be used in                                                                       borrowing powers which may be used in
      the management of the common fund                                                                           the management of the company
 1.16 Rules for the valuation of assets                                                                      1.16 Rules for the valuation of assets

 1.17 Determination of the sale or issue price                                                               1.17 Determination of the sale or issue price
       and the re-purchase or redemption price                                                                     and the re-purchase or redemption price
       of units, in particular:                                                                                    of units, in particular:
 - The method and frequency of the calculation                                                               - The method and frequency of the calculation
   of those prices,                                                                                            of those prices,
 - Information concerning the charges relating                                                               - Information concerning the charges relating
   to the sale or issue and the re-purchase or                                                                 to the sale or issue and the re-purchase or
   redemption of units,                                                                                        redemption of units,
 - The means, places and frequency of the                                                                    - The means, places and frequency of the
   publication of those prices.                                                                                publication of those prices.


 1.18 Information concerning the manner,                                                                     1.18 Information concerning the manner,
      amount and calculation of remuneration                                                                      amount and calculation of remuneration
      payable by the common fund to the                                                                           paid by the company to its directors,
      management company, the depositary or                                                                       and members of the administrative,
      third parties, and reimbursement of costs                                                                   management and supervisory bodies, to
      by the common fund to the management                                                                        the depositary, or to third parties, and
      company, to the depositary or to third                                                                      reimbursement of costs by the company
      parties.                                                                                                    to its directors, to the depositary or to
                                                                                                                  third parties.



1 Investment companies within the meaning of Article 32 (5) of the Directive shall also indicate:
  - The method and frequency of calculation of the net asset value of units,
  - The means, place and frequency of the publication of that value,
  - The stock exchange in the country of marketing the price on which determines the price of transactions effected outwith stock exchanges in that
    country.


2. Information concerning the depositary:
   2.1. Name or style, form in law, registered office and head office if different from the registered office;
   2.2. Main activity.


3. Information concerning the advisory firms or external investment advisers who give advice under contract which is paid for out of the assets of the
   UCITS:
   3.1. Name or style of the firm or name of the adviser;
   3.2. Material provisions of the contract with the management company or the investment company which may be relevant to the unit-holders,
        excluding those relating to remuneration;
   3.3. Other significant activities.




page 75                                                                                                            | Cross-border distribution of UCITS | January 2009
4. Information concerning the arrangements for making payments to unit-holders, re-purchasing or redeeming units and making available information
   concerning the UCITS. Such information must in any case be given in the Member State in which the UCITS is established. In addition, where units
   are marketed in another Member State, such information shall be given in respect of that Member State in the prospectus published there.


5. Other investment information:
   5.1. Historical performance of the common fund or of the investment company (where applicable) — such information may be either included in or
        attached to the prospectus;
   5.2. Profile of the typical investor for whom the common fund or the investment company is designed.


6. Economic information:
   6.1. Possible expenses or fees, other than the charges mentioned in point 1.17., distinguishing between those to be paid by the unit-holder and those
        to be paid out of the common fund’s or of the investment company’s assets.



ANNEX I - SCHEDULE B
Information to be included in the periodic reports


I. Statement of assets and liabilities:
   - Transferable securities,
   - Bank balances,
   - Other assets,
   - Total assets,
   - Liabilities,
   - Net asset value.


II. Number of units in circulation


III. Net asset value per unit


IV. Portfolio, distinguishing between:
  (a) Transferable securities admitted to of ficial stock exchange listing;
  (b) Transferable securities dealt in on another regulated market;
   (c) Recently issued transferable securities of the type referred to in Article 50 (1) (d);
   (d) Other transferable securities of the type referred to in Article 50 (2) (a);
   and analysed in accordance with the most appropriate criteria in the light of the investment policy of the UCITS (e.g. in accordance with
   economic, geographical or currency criteria) as a percentage of net assets; for each of the above investments the proportion it represents of the total
   assets of the UCITS should be stated.


  Statement of changes in the composition of the portfolio during the reference period.


V. Statement of the developments concerning the assets of the UCITS during the reference period including the following:
   - Income from investments,
   - Other income,
   - Management charges,
   - Depositary’s charges,
   - Other charges and taxes,
   - Net income,
   - Distributions and income reinvested,
   - Changes in capital account,
   - Appreciation or depreciation of investments,
   - Any other changes affecting the assets and liabilities of the UCITS,
   - Transaction costs, which are costs incurred by a UCITS in connection with transactions on its portfolio.


VI. A comparative table covering the last three financial years and including, for each financial year, at the end of the financial year:
    The total net asset value,
   The net asset value per unit.


VII. Details, by category of transaction within the meaning of Article 51 carried out by the UCITS during the reference period, of the resulting amount of
     commitments.


UCITS IV - PE 418.771 - page 76
ANNEX II


Functions included in the activity of collective portfolio management:
- Investment management.


- Administration:
 (a) Legal and fund management accounting services;
 (b) Customer inquiries;
 (c) Valuation and pricing (including tax returns);
 (d) Regulatory compliance monitoring;
 (e) Maintenance of unit-holder register;
 (f) Distribution of income;
 (g) Unit issues and redemptions;
 (h) Contract settlements (including certificate dispatch);
 (i) Record keeping.


- Marketing.



ANNEX 3 - PART A


Repealed Directive with list of its successive amendments (referred to in Article 117)


Council Directive 85/611/EEC (OJ L 375, 31.12.1985, p. 3)
Council Directive 88/220/EEC (OJ L 100, 19.4.1988, p. 31)
Directive 95/26/EC of the European Parliament and of the Council (OJ L 168, 18.7.1995, p. 7)       Article 1 fourth indent, Article 4(7) and
                                                                                                   Article 5 fifth indent only
Directive 2000/64/EC of the European Parliament and of the Council (OJ L 290, 17.11.2000, p. 27)   Article 1 only
Directive 2001/107/EC of the European Parliament and of the Council (OJ L 41, 13.2.2002, p. 20)
Directive 2001/108/EC of the European Parliament and of the Council (OJ L 41, 13.2.2002, p. 35)
Directive 2004/39/EC of the European Parliament and of the Council (OJ L 145, 30.4.2004, p. 1)     Article 66 only
Directive 2005/1/EC of the European Parliament and of the Council (OJ L 79, 24.3.2005, p. 9)       Article 9 only
Directive 2008/18/EC of the European Parliament and of the Council (OJ L 76, 19.3.2008, p.42)




page 77                                                                                                | Cross-border distribution of UCITS | January 2009

				
DOCUMENT INFO
Description: Border Business Model Architecture document sample