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									                              CIS
 Collective
Investment
  Schemes


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       CIS                                                                                CIS Sourcebook − Transitional Provisions




                      (1)           (2)                  (3)                       (4)                            (5)             (6)

                               Material to                               Transitional provision              Transitional      Handbook
                             which the tran-                                                                  provision:       provision:
                             sitional provi-                                                                 dates in force   coming into
                              sion applies                                                                                       force
                     17     CIS 2.2.2R               R         A scheme which has an authorisation or-       from 1/11/02       1/11/02
                            CIS 2.2.6R                         der in force before 12 February 2004,         until date of
                            CIS 2.2.7G                         which is to switch from operating under         revision
                                                               CIS 5A to CIS 5 and whose instrument
                                                               constituting the scheme refers to the effi-
                                                               cient portfolio management rules in CIS
                                                               5A.13 (either generally or specifically),
                                                               may deem the rules in CIS 5A.13 to con-
                                                               tinue to apply until the instrument consti-
                                                               tuting the scheme is amended for any
                                                               other reason.
                     18     CIS 5A.13                R         An authorised fund manager may use ef-        from 1/11/02
                                                               ficient portfolio management techniques       until revoked
                                                               in relation to a scheme provided that this     by the FSA.
                                                               use of derivatives is disclosed in the most
                                                               recently published prospectus.
                     19     CIS                      R         The requirement to state maximum re-             1/11/02         1/11/02
                            3.4.2R(2)(d)                       muneration in the prospectus does not ap-
                                                               ply until the prospectus is first amended
                            and                                following 1 November 2002. The inser-
                                                               tion of this maximum level of remunera-
                            CIS                                tion in the prospectus for the first time
                            3.5.2R(13)(2),                     will not require a resolution of holders.
                            (3)

                     20     CIS 16.5.1(4) to         R         A UCITS management company may not            From 13 Feb-     13 February
                            (6)                                carry on any of the activities specified in   ruary 2004 to        2004
                                                               CIS 16.5.1(4) to (6) unless it is a UCITS      12 February
                                                               investment firm:                                   2007

                                                               (a) whose permission to carry on any
                                                                   such activity was given before 13
                                                                   February 2004; or

                                                               (b) which complies with Chapter 7 of
                                                                   IPRU(INV).
                     21     CIS 16.5.1(4) to         G         A UK firm will not be able to act as such
                            (6)                                and exercise an EEA right under the
                                                               UCITS Directive unless it complies with
                                                               Chapter 7 of IPRU(INV).




PAGE
 7




       FSA Handbook H Release 029   D   March 2004
CIS                                                                               CIS Sourcebook − Transitional Provisions




             (1)             (2)                (3)                      (4)                            (5)             (6)

                      Material to                              Transitional provision              Transitional      Handbook
                    which the tran-                                                                 provision:       provision:
                    sitional provi-                                                                dates in force   coming into
                     sion applies                                                                                      force
            22     CIS 7.6.1R(2),          R          (1) Subject to (2), in relation to a UCITS   From 13 Feb-     13 February
                   (4) and (5)                            management company which became          ruary 2004 to        2004
                                                          authorised before 13 February 2004,       12 February
                   CIS 7.10.4R(1),                        CIS 7.6.1R(2), (4) and (5) and CIS            2007
                   (5) and (6)                            7.10.4R(1), (5) and (6) have effect as
                                                          they applied before 12 February
                                                          2004.


                                                      (2) Paragraph (1) does not apply in rela-
                                                          tion to any UK firm which exercises
                                                          an EEA right under the UCITS Di-
                                                          rective
            23     CIS 10.1.4G(2),         R          Reports for any half–yearly accounting        From 1 Feb-     From com-
                   CIS                                period or annual accounting period com-      ruary 2004 for   mencement
                                           and
                   10.3.3R(1)(a),                     mencing before 1 December 2003 can             12 months          but
                   CIS                     G          comply with the Statement of Recom-                           amended as
                   10.3.4R(1)(a),                     mended Practice, Financial Statements                         at 1 Febru-
                   CIS 10.3.6R(3),                    of authorised open–ended investment                            ary 2004
                   CIS 10.4.8R(1),                    companies, issued by the FSA in Novem-
                   and CIS                            ber 2000) or with the Statement of Rec-
                   10.4.9R(2)(a)                      ommended Practice, Financial State-
                                                      ments of authorised unit trust schemes,
                                                      issued by IMRO in January 1997.




                                                                                                                                  PAGE
                                                                                                                                   8




FSA Handbook H Release 029    D    March 2004
                                                             Collective Investment Schemes
                                                                                                                                     1



                                                                    Chapter 1

                                                             Introduction −
                                                     Collective investment
                                                      schemes sourcebook                          CIS 1: Introduction − Collective
                                                                                                 investment schemes sourcebook
                                                                                                                        1
                                                                                  FSA Handbook H Release 029 D March 2004




PAGE
 1




       FSA Handbook H Release 029   D   March 2004
    CIS 1: Introduction − Collective                                                            Section 1.1: Application
    investment schemes sourcebook



1

                                                        1.1        Application




                                                                                                                Section 1.1: Application




        1.1.1                   This sourcebook applies to investment companies with variable capital (ICVCs),
                 01.12.01/001   directors and depositaries of ICVCs and managers and trustees of authorised unit
                                   trusts (AUTs), except for H CIS 16 which includes provisions that also apply to
                                operators of collective investment schemes and H CIS 17 which applies only to
                                operators of collective investment schemes which are recognised schemes. H CIS 10
                                also applies to auditors of ICVC’s and AUTs.



                                Right to elect to comply with COLL

        1.1.1A                  (1)                CIS does not apply to any relevant party in relation to an
                 01.04.04/001             authorised fund if the authorised fund manager of such fund
                                          with the consent of each of the other relevant parties has elected
                                          on behalf of the fund to comply with the rules in COLL instead of
                                          CIS, provided the authorised fund manager notifies the FSA in
                                          writing of such election and of the date from which such election
                                          is to take effect.

                                (2)       For the purposes of (1) a relevant party in relation to:

                                          (a)   any AUT, is its manager and trustee; and

                                          (b)   any ICVC, is:

                                                (i)     the ICVC;

                                                (ii)    its ACD;

                                                (iii)   any other directors of the ICVC; and

                                                (iv)    its depositary.



                                Operators of recognised schemes
                                                                                                                                           PAGE
        1.1.1B                        CIS 16 (Application and notification) and CIS 17 (Recognised                                          2
                 01.04.04/001   schemes) do not have any effect in relation to an operator of a
                                recognised scheme or to any person seeking recognition in the United
                                Kingdom for such a scheme after 1 April 2004.




    FSA Handbook H Release 029        D     March 2004                                                       1.1.1B
       CIS 1: Introduction − Collective                                                                 Section 1.1: Application
       investment schemes sourcebook


                                     Purpose
                                                                                                                                   1
             1.1.2                   The general purpose of this sourcebook is to contribute to the FSA meeting its
                      01.12.01/001   regulatory objective of the protection of consumers (see section 2 and 5 of the Act)
                                     by providing a regime of product regulation for ICVCs and AUTs. This regime is
                                     intended to ensure a high and uniform standard of protection for investors in those
                                     products by specifying a number of features of those products and how they are to
                                     be operated. More specific purpose statements covering how the requirements meet
                                     the FSA’s regulatory objective of the protection of consumers are, where
                                     appropriate, given in subsequent chapters.



                                     The products covered

             1.1.3                   Under section 238 of the Act only certain collective investment schemes may be
                      01.12.01/001   promoted to the public. These are:

                                     (1)           ICVCs and AUTs: these are constituted in the United Kingdom and are
                                           described in more detail in H CIS 1.1.4G to H CIS 1.1.6G; and

                                     (2)          collective investment schemes constituted outside the United Kingdom
                                           and recognised by the FSA under:

                                           (a)   section 264 of the Act (Schemes constituted in other EEA States): these are
                                                 schemes that qualify under the UCITS directive;

                                           (b)   section 270 of the Act (Schemes authorised in designated countries or
                                                 territories); and

                                           (c)   section 272 of the Act (Individually recognised overseas schemes).



                                     ICVCs

             1.1.4                   Section 262 of the Act empowers the Government to make provisions relating to
                      01.12.01/001   open−ended investment companies (as defined by section 236 of the Act) and they
                                     have made the OEIC regulations to permit establishment of ICVCs in Great Britain.
                                     Schedule 5.1(3) of the Act states that authorised open−ended investment companies
                                     are authorised persons, hence an ICVC is an authorised person.

             1.1.5                   The ICVC is constituted by an instrument of incorporation, drawn up by its
                      01.12.01/001   directors. At least one director must be an authorised corporate director (’ACD’). A
                                     depositary is also required which is responsible for the safekeeping of the scheme
                                     property. In order to comply with section 19 of the Act, the ACD and the
                                     depositary must each be authorised persons. The FSA has the power under
                                     regulation 14 of the OEIC regulations to authorise the ICVC by making an
                                     authorisation order. H CIS 16provides additional guidance on the process of applying
                                     to the FSA for authorisation of an ICVC.

PAGE
 3

                                     AUTs

             1.1.6                   Under section 237 of the Act, an AUT is a collective investment scheme under
                      01.12.01/001   which the property is held on trust for the participants by the trustee and which is
                                     authorised by an authorisation order (made by the FSA) in force under section 243



       FSA Handbook H Release 029    D     March 2004                                                                 1.1.6
    CIS 1: Introduction − Collective                                                                  Section 1.1: Application
    investment schemes sourcebook


                                of the Act. The AUT will be constituted by a trust deed, entered into by the
1                               manager and trustee, both of whom must, under section 243(7) of the Act, be
                                authorised persons and have permission to act in their respective capacities. H CIS
                                16provides more detail on the process of applying to the FSA for the authorisation
                                of an AUT.



                                Recognised schemes

        1.1.7                   For collective investment schemes constituted outside the United Kingdom and
                 01.12.01/001   referred to in H CIS 1.1.3G(2), this sourcebook brings together the material relating
                                to the admission to marketing in the United Kingdom of such schemes,
                                complementing material in Chapter V of Part XVII of the Act (Recognised overseas
                                schemes).



                                Functions of the CIS sourcebook

        1.1.8                   The sourcebook performs three main functions in respect of ICVCs and AUTs, by
                 01.12.01/001   providing material:

                                (1)       relating to their constitution and management (including rules and guidance on
                                          pricing arrangements, investment powers and on certain information to be
                                          provided to investors);

                                (2)       relating to the process of authorising them; and

                                (3)       which satisfies the requirements of the UCITS directive (which sets minimum
                                          standards for schemes on a basis agreed by all EEA States) thereby enabling
                                          ICVCs and AUTs which meet those standards to market elsewhere in the EEA.

        1.1.9                   Together, the material in Chapters 2 to 15 forms a major part of the product
                 01.12.01/001   regulation regime for ICVCs and AUTs, complementing material in the OEIC
                                regulations and Chapter III of Part XVII of the Act (for Authorised unit trust
                                schemes).




                                                                                                                                 PAGE
                                                                                                                                  4




    FSA Handbook H Release 029        D    March 2004                                                              1.1.9
       CIS 3: Prospectus                                                                     Section 3.5: Information to be
                                                                                               contained in the prospectus



                                           (11)   Where a UCITS scheme invests principally in collective investment
                                                  scheme units, deposits, or derivatives or replicates an index in accord-
                                                  ance with CIS 5.2.32R (Schemes replicating an index) a prominent
                                                  statement regarding this investment policy.
                                           (12) Where derivatives transactions may be used in a UCITS scheme, a
                                                  prominent statement as to whether these transactions are for the pur-
                                                  poses of hedging or meeting the investment objectives or both and the
                                                  possible outcome of the use of derivatives on the risk profile of the
                                                  scheme.
                                           (13) In the case of a UCITS scheme which invests a substantial proportion           3
                                                  of its assets in other collective investment schemes, a statement of the
                                                  maximum level of management fees that may be charged to that
                                                  UCITS scheme and to the collective investment schemes in which it
                                                  invests.
                                           (14) In the case of a UCITS scheme, a statement that the investor may ob-
                                                  tain on request the types of information (which must be listed) referred
                                                  to in CIS 3.2.2R(3).
                                           (15) In the case of a UCITS scheme, information concerning the historical
                                                  performance of the scheme presented in accordance with COB
                                                  3.8.11R (specific non real time financial promotions: past perform-
                                                  ance)..
                                           (16) In the case of a UCITS scheme, the profile of the typical investor for
                                                  whom the scheme is designed.
                                    4      Distributions
                                           Information as to:
                                           (1)    the date on which the authorised fund’s annual accounting period is to
                                                  end in each year;
                                           (2)    if there are interim accounting periods, what they are, and the policy in
                                                  relation to interim distributions (for example, whether interim distribu-
                                                  tions will be made and, if so, the policy on smoothing of income dis-
                                                  tributions within an annual accounting period);
                                           (3)    the date or dates in each year on or before which payment or accu-
                                                  mulation of income is to be made or take place and, if there are
                                                  holders of bearer certificates, how they are to identify themselves for
                                                  the purposes of receiving payment of income;
                                           (4)    if applicable, the policy on payment of income equalisation;
                                           (5)    how distributable income is determined and paid; and
                                           (6)    if applicable, that unclaimed distributions may be forfeited and a state-
                                                  ment how such unclaimed distributions will be dealt with.
                                    5      The characteristics of units in the authorised fund
                                           Give information as to:
                                           (1)    where there is more than one class of unit in issue or available for
                                                  issue, the name of each such class and the rights attached to each
                                                  class in so far as they vary from the rights attached to other classes;
                                           (2)    where the instrument constituting the scheme provides for the issue of
                                                  bearer certificates, that fact and, in the case of an ICVC, in what mul-
                                                  tiples bearer certificates may be issued;
                                           (3)    how holders may exercise their voting rights and what these are;
                                           (4)    where a mandatory redemption, cancellation or conversion of units
                                                  from one class to another may be required (for instance, if an investor
                                                  does not satisfy the residence condition for income to be paid or accu-
PAGE
                                                  mulated without tax being deducted), in what circumstances it may be
 13                                               required;
                                           (5)    in the case of an AUT, the fact that the nature of the right represented
                                                  by units is that of a beneficial interest under a trust; and
                                           (6)    in the case of a class of limited issue shares or limited issue units, the
                                                  restrictions on the issue and sale of those shares or units.
                                    6      The authorised fund manager



       FSA Handbook H Release 029   D   March 2004                                                                3.5.1
    CIS 3: Prospectus                                                                           Section 3.5: Information to be
                                                                                                  contained in the prospectus



                                          The following particulars of the authorised fund manager:
                                          (1)     its name;
                                          (2)     the nature of its corporate form;
                                          (3)     the country or territory of its incorporation;
                                          (4)     the date of its incorporation;
                                          (5)     if it is a subsidiary, the name of its ultimate holding company and the
                                                  country or territory in which that holding company is incorporated;
                                          (6)     the address of its registered office;
                                          (7)     the address of its head office if that is different from the address of its
3                                                 registered office;
                                          (8)     if neither its registered office nor its head office is in the United King-
                                                  dom, the address of its principal place of business in the United King-
                                                  dom;
                                          (9)     if the duration of its corporate status is limited, when that status will or
                                                  may cease;
                                          (10)    the amount of its issued share capital and how much of it is paid up;
                                          (11)    in what capacity, if any, it acts in relation to any other regulated col-
                                                  lective investment schemes and the name of such schemes;
                                          (12)    in the case of an ICVC, a summary of the material provisions of the
                                                  contract between the ICVC and the authorised fund manager which
                                                  may be relevant to shareholders including provisions (if any) relating
                                                  to termination, compensation on termination and indemnity; and
                                          (13)    in the case of an AUT, the names of the directors of the manager
                                                  and, in each case, any significant business activities of the director
                                                  not connected with the business of the manager.
                                          (14)    In the case of a UCITS scheme, which functions the authorised fund
                                                  manager may delegate.
                                 7        Directors of an ICVC, other than the ACD
                                          Other than for the ACD:
                                          (1)   the names and positions in the ICVC of the directors;
                                          (2)   the main business activities of each of the directors (other than those
                                                connected with the business of the ICVC) where these are significant
                                                to the ICVC’s business;
                                          (3)   the manner, amount and calculation of the remuneration of directors;
                                          (4)   the main terms of each contract of service between the ICVC and a
                                                director in summary form; and
                                          (5)   if the director is a body corporate in a group of which any other corpor-
                                                ate director of the ICVC is a member, a statement of that fact.
                                 8        The depositary
                                          The following particulars of the depositary:
                                          (1)   its name;
                                          (2)   the nature of its corporate form;
                                          (3)   the country or territory of its incorporation;
                                          (4)   if it is a subsidiary, the name of its ultimate holding company and the
                                                country or territory in which that holding company is incorporated;
                                          (5)   the address of its registered office;
                                          (6)   the address of its head office if that is different from the address of its
                                                registered office;
                                          (7)   if neither its registered office nor its head office is in the United King-
                                                dom, the address of its principal place of business in the United King-
                                                dom;
                                                                                                                                 PAGE
                                          (8)   a description of its principal business activity; and                             14

                                          (9)   a summary of the material provisions of the contract between the
                                                ICVC or the manager of the AUT and the depositary which may be
                                                relevant to unitholders, including provisions relating to the remuner-
                                                ation of the depositary.
                                 9        The investment adviser



    FSA Handbook H Release 029       D   March 2004                                                                   3.5.1
       CIS 3: Prospectus                                                                       Section 3.5: Information to be
                                                                                                 contained in the prospectus



                                            If an investment adviser is retained in connection with the business of the
                                            authorised fund:
                                            (1)     its name;
                                            (2)     whether or not it is authorised by the FSA;
                                            (3)     if it is a body corporate in a group of which any director of the ICVC or
                                                    the manager of the AUT is a member;
                                            (4)     where its principal activity is not providing services to the authorised
                                                    fund as an investment adviser, what the principal activity is;
                                            (5)     a summary of the material provisions of any contract between the au-
                                                    thorised fund manager or the ICVC and any investment adviser which           3
                                                    may be relevant to holders and, if the investment adviser has the auth-
                                                    ority of the authorised fund manager or the ICVC to make decisions on
                                                    behalf of the authorised fund manager or the ICVC, that fact and a de-
                                                    scription of the matters in relation to which it has that authority.
                                    10      The auditor
                                            Details of the name and address of the auditor of the authorised fund.
                                    11      The register of holders
                                            Details of:
                                            (1)     the address in the United Kingdom where the register of holders is
                                                    kept and can be inspected by holders and the address where the plan
                                                    register can be inspected; and
                                            (2)     in the case of an AUT, (unless the depositary is the registrar), the reg-
                                                    istrar’s name and address.
                                    12      Payments to the authorised fund manager
                                            The payments that may be made to the authorised fund manager (whether
                                            as such or in any other capacity) out of the scheme property whether by way
                                            of remuneration for its services, or reimbursement of expenses. For each
                                            category of remuneration, specify:
                                            (1)     the maximum and current rates or amounts of such remuneration;
                                            (2)     how it will be calculated and accrue and when it will be paid;
                                            (3)     if notice has been given to holders of the authorised fund manager’s
                                                    intention to introduce a new category of remuneration for its services
                                                    or to increase any rate or amount currently charged, particulars of that
                                                    introduction or increase and when it will take place;
                                            (4)     if, in accordance with CIS 8.3.5R (Allocation of payments to capital or
                                                    to income (for ICVCs)) or CIS 8.5.7R (Allocation of payments to capital
                                                    or to income (for AUTs)), all or part of the remuneration is to be treated
                                                    as a capital charge:
                                                    (a)       that fact; and
                                                    (b)       the actual or maximum amount of the charge which may be so
                                                              treated; and
                                            (5)     if notice has been given to holders of an intention to propose an in-
                                                    crease in the maximum amount of that charge at a meeting of holders,
                                                    particulars of that proposal.
                                    13      Other payments out of the scheme property
                                            Provide details of:
                                            (1)     any payment to be made out of the scheme property to reimburse
                                                    costs incurred by the depositary, any of the directors of an ICVC or
                                                    any third party;
                                            (2)     any remuneration (including a statement of the maximum level current-
                                                    ly permitted) payable out of the scheme property to the depositary or
PAGE                                                any third party;
 15
                                            (3)     any remuneration (including a statement of the maximum level current-
                                                    ly permitted) to which (2) does not apply, payable out of the scheme
                                                    property for services provided by an affected person;
                                            (4)     the types of any other charges and expenses that may be taken out of
                                                    the scheme property; and




       FSA Handbook H Release 029   D    March 2004                                                                 3.5.1
    CIS 3: Prospectus                                                                      Section 3.5: Information to be
                                                                                             contained in the prospectus



                                       (5)    if, in accordance with CIS 8.3.5R(4) (Allocation of payments to capital
                                              or income (for ICVCs)) or CIS 8.5.7R(4) (Allocation of payments to
                                              capital or income (for AUTs)), the authorised fund manager and the
                                              depositary have agreed that all or part of any payments permitted (ex-
                                              cluding any stated under CIS 3.5.2R(12)(4) (Payments to the autho-
                                              rised fund manager)) and any other charges or expenses of the autho-
                                              rised fund may be treated as a capital expense:
                                              (a)     that fact; and
                                              (b)     the policy for the amount of the payments which may be so
3                                                     treated.
                                 14    Movable and immovable property (ICVC only)
                                       Give an estimate of any expenses likely to be incurred by the ICVC in re-
                                       spect of movable and immovable property in which the ICVC has an interest.
                                 15    Amortisation (ICVC only)
                                       As at the date of the prospectus:
                                       (1)    the amount of any set–up costs (including any of the type described in
                                              CIS 8.3.4R (Set–up costs) remaining to be reimbursed out of the
                                              scheme property whether to the ACD or any other person, and
                                       (2)    the amount of any costs remaining to be amortised under CIS 8.3.4R
                                              and the method of amortisation.
                                 16    Sale and redemption of units
                                       Details as to:
                                       (1)    the dealing days and times in the dealing day on which the authorised
                                              fund manager will be available to receive requests for the sale and
                                              redemption of units;
                                       (2)    the procedures for effecting the sale and redemption of units and the
                                              settlement of transactions;
                                       (3)    whether certificates will be issued in respect of registered units;
                                       (4)    the steps required to be taken by a holder in redeeming units before
                                              he can receive the proceeds;
                                       (5)    the circumstances in which the redemption of units may be sus-
                                              pended;
                                       (6)    the days and times in the day on which recalculation of the price will
                                              commence;
                                       (7)    the amounts of the following minima (if they apply) for each class of
                                              unit in the authorised fund:
                                              (a)     the minimum number or value of units which any one person
                                                      may hold; and
                                              (b)     the minimum number or value of units which may be the subject
                                                      of any one transaction of sale or redemption;
                                       (8)    the circumstances in which the authorised fund manager may arrange
                                              for, and the procedure for, a cancellation of units in specie;
                                       (9)    when and in which UK national newspaper the most recent price will
                                              be published;
                                       (10) the investment exchanges (if any) on which units in the scheme are
                                              listed or dealt; and
                                       (11) for a dual–priced scheme or a scheme being valued on an historic
                                              price basis, the amount which constitutes a large deal in units.
                                 17    Valuation of scheme property
                                       Details as to:
                                       (1)    how frequently and at what time or times of the day the scheme prop-
                                              erty will be regularly valued for the purpose of determining the price at     PAGE
                                                                                                                             16
                                              which units in the scheme may be purchased from or redeemed by the
                                              authorised fund manager and a description of any circumstance in
                                              which the scheme property may be specially valued;
                                       (2)    in relation to each purpose for which the scheme property must be va-
                                              lued, the basis on which it will be valued; and




    FSA Handbook H Release 029    D   March 2004                                                               3.5.1
       CIS 4: Single−pricing                                                         Section 4.3: Issue and cancellation
       and dealing


                                          AUT) changing an instruction to issue or cancel units which has
                                          been complied with, provided that:

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

                                          (b)   the requirements of (3) are satisfied.

                                    (3)   The authorised fund manager may only make a modification
                                          under (2) with the agreement of the depositary and the depositary
                                          may not agree unless it has taken reasonable care to determine:
                                                                                                                           4
                                          (a)   that the purpose of the modification is to rectify the
                                                consequences of an error relating to the number of units held
                                                by the authorised fund manager, or issued or cancelled in
                                                connection with the sale or redemption of units by the
                                                authorised fund manager; and

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

                                    (4)   A modification under (2) is of no effect unless the corrected
                                          number of units is calculated by the end of the business day next
                                          following the valuation point for the issue or cancellation in
                                          question or, if the depositary agrees, within the payment period
                                          applicable to that issue or cancellation under H CIS
                                          4.3.7R(3)(Payment for units issued) or H CIS 4.3.10R(7) (Cancellation
                                          and payment for cancelled units).




PAGE
 15




       FSA Handbook H Release 029   D     March 2004                                                        4.3.12
    CIS 4: Single−pricing                                                                        Section 4.4: Sale and redemption
    and dealing




                                                      4.4      Sale and redemption




                                                                                                                        Section 4.4: Sale and redemption




4
                                Application

        4.4.1                   (1)       This section (H CIS 4.4) applies to authorised fund managers. H CIS
                 01.12.01/001                     (Payment on redemption) also applies to ICVCs and
                                          4.4.5R(4)
                                          depositaries.

                                (2)       This section (H CIS 4.4) applies to the sale and redemption of units
                                          after the close of any initial offer. However, the following rules
                                          also apply to the sale of a unit during an initial offer:

                                          (a)             H CIS 4.4.3R(1), (2) and (3) (other than the provision in
                                                (2)(a) relating to a sale at a forward price); and

                                          (b)               H CIS 4.4.8R   (but as if H CIS 4.4.8R(2) related to the initial
                                                price).



                                Purpose

        4.4.2                   (1)       This section (H CIS 4.4) protects investors by means of rules intended to ensure
                 01.12.01/001             the authorised fund manager deals fairly with investors when they purchase or
                                          redeem units. Accordingly, this section lays down the basic procedures for the
                                          sale and redemption of units in an authorised fund and sets out how the
                                          resulting payments should be calculated and by when they should be made.

                                (2)               Sales and redemptions of units in futures and options schemes or geared
                                          futures and options schemes are, in addition, subject to the special rules in H CIS
                                          12.2.1R (Special rules for sales and redemptions).




                                Authorised fund manager’s obligation to sell

        4.4.3                   (1)       The authorised fund manager must, at all times during the
                 01.04.04/003             dealing day, be willing to sell        units in the authorised fund                                              PAGE
                                                                                                                                                            16
                                          and, subject to (2), must, at the request in writing of any person,
                                          agree to sell to that person        units of at least one class or, in
                                          the case of an umbrella scheme, one class for each of its
                                          sub−funds.



    FSA Handbook H Release 029        D     March 2004                                                                 4.4.3
       CIS 4: Single−pricing                                                              Section 4.4: Sale and redemption
       and dealing


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

                                          (a)   if it has not received payment for the units of an amount
                                                complying with (4) or (if the sale was at a forward price of a
                                                stated number of shares) if it has not received payment of an
                                                amount it estimated to be required; or

                                          (b)   if the number or value of the units sought to be purchased is
                                                less than any number or value stated in the prospectus as the
                                                minimum number or value of units, or units of the class
                                                concerned, that may be purchased or held; or                                 4
                                          (c)   for a property scheme if the authorised fund manager, having
                                                taken reasonable care, determines that the number or value of
                                                units sought to be purchased would lead to any one person (or
                                                any one person and any other person who appears to the
                                                authorised fund to be acting in concert with that person)
                                                holding more than any number or value stated in the
                                                prospectus as the maximum number or value to be purchased
                                                or held; or

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

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

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

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

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

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

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

                                    (4)   The authorised fund manager must not sell a unit for more than
                                          the price of a unit of the relevant class notified, or to be notified,
PAGE
                                          to the depositary for the last valuation point (or, for a sale at a
 17                                       forward price, to be notified for the next valuation point) to
                                          which may be added any preliminary charge permitted under H CIS
                                          8.2.2R (Preliminary charge: ICVCs and single−priced AUTs) and
                                          any payment required under H CIS 4.6.3R (Dilution levy and SDRT
                                          provision).



       FSA Handbook H Release 029   D     March 2004                                                             4.4.3
    CIS 4: Single−pricing                                                                   Section 4.4: Sale and redemption
    and dealing


                                (5)               Units must be sold in the base currency, or, for a currency
                                          class share, in the currency of designation of that class, unless the
                                          person concerned requests and the authorised fund manager
                                          agrees that the units should be sold in another currency.



                                Authorised fund manager’s obligation to redeem

        4.4.4                   (1)       The authorised fund manager must at all times during the dealing
                 01.12.01/001             day be willing to redeem units in the authorised fund; and,
                                          accordingly, must at the request in writing of any holder agree to
4                                         redeem units owned by that holder for the amount to be paid
                                          under H CIS 4.4.6R (Proceeds of redemption).

                                (2)       Paragraph (1) does not apply:

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

                                                (i)    less than the entirety of the holder’s holding of units of the
                                                       class concerned, and

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

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

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

                                          (d)   where units are redeemed in return for property transferred or
                                                sold under H CIS 4.5.4R (In specie redemption);

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

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



                                Payment on redemption                                                                          PAGE
                                                                                                                                18

        4.4.5                   (1)       On agreeing to redeem units, the authorised fund manager must,
                 01.12.01/001             within the period specified in (2):




    FSA Handbook H Release 029        D     March 2004                                                           4.4.5
       CIS 4: Single−pricing                                                           Section 4.4: Sale and redemption
       and dealing


                                           (a)   (except where (b) applies) pay the holder the appropriate
                                                 proceeds of redemption under H CIS 4.4.6R (less, where
                                                 applicable, the cost of remitting the sum abroad) ; or

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

                                     (2)   The period expires at the close of business on the fourth business
                                           day following the later of:                                                    4
                                           (a)   the valuation point immediately after the authorised fund
                                                 manager received the request to redeem; or

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

                                     (3)   Neither this rule nor H CIS 4.4.6R (Proceeds of redemption) applies
                                           where the authorised fund manager is not redeeming units in
                                           accordance with this chapter but is buying them as principal on
                                           an investment exchange (in the case of an AUT, in accordance
                                           with a power in the trust deed) and settlement will be in
                                           accordance with the rules of that exchange.

                                     (4)   Nothing in this rule or H CIS 4.3.10R(5) and (6) (Cancellation and
                                           payment for cancelled units) requires an ICVC, a depositary or an
                                           authorised fund manager to part with money for a cancellation
                                           or redemption of units where any money due on the earlier issue
                                           or sale of those units has not been received by the person entitled
                                           to it under this chapter.



                                     Proceeds of redemption

             4.4.6                   The amount to be paid by the authorised fund manager as the
                      01.12.01/001   proceeds of redemption of a unit must not be less than the price of a
                                     unit of the relevant class notified or to be notified to the depositary
                                     at the last valuation point (or, for a redemption at a forward price,
                                     to be notified in respect of the next valuation point) less any
                                     redemption charge permitted under H CIS 8.2.7R (Redemption charge:
PAGE
                                     ICVCs) or H CIS 8.5.2R (Redemption charge: single−priced AUTs) and
 19                                  any deduction required under H CIS 4.6.3R (Dilution levy and SDRT
                                     provision).




       FSA Handbook H Release 029    D     March 2004                                                       4.4.6
    CIS 4: Single−pricing                                                                  Section 4.4: Sale and redemption
    and dealing


                                Notification of price to the depositary

        4.4.7                   (1)       Immediately after completing a valuation under H CIS 4.8
                 01.08.02/002             (Valuation) (whether regular or otherwise) the authorised fund
                                          manager must notify the depositary of:

                                          (a)   the price, in the base currency (or, in the case of a currency
                                                class share, the currency of designation) of a unit of each class
                                                in issue as determined for the relevant valuation point; and

                                          (b)   (i)    the amount or rate of any dilution            levy which
                                                       applies to any issue or cancellation of units made by
4                                                      reference to that valuation; or

                                                (ii)   the amount or rate of any dilution adjustment taken into
                                                       account in calculating that price and whether it was an
                                                       addition or deduction.

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

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



                                Publication of prices

        4.4.8                   (1)       Where the authorised fund manager holds itself out as willing:
                 01.12.01/001

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

                                          (b)   to issue or cancel units of any class under H CIS 4.5.3R (Issues
                                                and cancellations through the authorised fund manager);

                                          it must make public the prices of units of each of those classes.

                                (2)       The prices made public under (1) are to be the price or prices last
                                          notified to the depositary under H CIS 4.4.7R or, in the case of
                                          publication in a newspaper, last notified before the relevant
                                          newspaper ceased to accept material for publication in the
                                          relevant edition.                                                                   PAGE
                                                                                                                               20


                                (3)       The prices to be made public under (1) must be published in at
                                          least one national newspaper in the United Kingdom, except for
                                          any class of units marketed predominantly outside the United
                                          Kingdom.


    FSA Handbook H Release 029        D     March 2004                                                          4.4.8
       CIS 4: Single−pricing                                                       Section 4.4: Sale and redemption
       and dealing


                                    (4)   Where the authorised fund manager holds itself out as willing to
                                          sell and redeem units (or, as the case may be, to issue or cancel
                                          units under H CIS 4.5.3R) in any other EEA State, it must also
                                          comply with (1) in the manner provided for by the law of that
                                          EEA State.

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


                                                                                                                      4




PAGE
 21




       FSA Handbook H Release 029   D     March 2004                                                    4.4.8
    CIS 4: Single−pricing                                                   Section 4.5: Issues and cancellations through the authorised
    and dealing                                                                      fund manager and in specie cancellations




                                                   4.5       Issues and cancellations through the
                                                             authorised fund manager and in specie
                                                             cancellations




4
                                                                                                                     Section 4.5: Issues and cancellations through the authorised
                                                                                                                                         fund manager and in specie cancellations




                                Application

        4.5.1                   This section (H CIS 4.5) applies to authorised fund managers. H CIS
                 01.12.01/001           and H CIS 4.5.4R(4) also apply to ICVCs and depositaries.
                                4.5.3R(6)




                                Purpose

        4.5.2                   (1)       H CIS 4.5.3R ensures investors are able, in certain circumstances, to require
                 01.12.01/001             direct issues or cancellations of units by an ICVC, or by the trustee of an AUT,
                                          as an alternative to buying units from, or redeeming them with, the authorised
                                          fund manager.

                                (2)       H CIS 4.5.4R protects investors in the authorised fund by enabling an authorised
                                          fund manager, subject to the conditions in that rule, to require a holder who
                                          wishes to redeem or cancel his units to take, instead of the usual proceeds of
                                          redemption or cancellation, a transfer of assets of the authorised fund or, if the
                                          holder requires, to take the net proceeds of the sale of those assets.



                                Issues and cancellations through the authorised fund manager

        4.5.3                   (1)       At the request of any person, the authorised fund manager is
                 01.11.02/002             obliged to arrange for the ICVC, or instruct the trustee, to issue
                                          units to that person where the authorised fund manager would
                                          otherwise be obliged to sell them under H CIS 4.4.3R (Authorised
                                          fund manager’s obligation to sell).

                                (2)       At the request of any holder, the authorised fund manager is
                                          obliged to arrange for the ICVC, or instruct the trustee, to cancel
                                          units held by that holder where the authorised fund manager
                                          would otherwise be obliged to redeem them under H CIS 4.4.4R                                                                              PAGE
                                                                                                                                                                                     22
                                          (Authorised fund manager’s obligation to redeem).

                                (3)       The price of a unit issued or cancelled under this rule (H CIS 4.5.3R)
                                          must be the price of a unit of the relevant class notified to the
                                          depositary at the next valuation point after the request referred to


    FSA Handbook H Release 029        D    March 2004                                                                                     4.5.3
       CIS 4: Single−pricing                                                                                 Section 4.8: Valuation
       and dealing


                                     (5)   To determine the price at which units of any class in an
                                           authorised fund may be issued, cancelled, sold or redeemed, the
                                           authorised fund manager           must carry out a valuation of
                                           the scheme property or of the scheme property attributable to a
                                           sub−fund at each valuation point for the authorised fund or the
                                           sub−fund (as the case may be).



                                     Valuation: method

             4.8.4                   (1)           H CIS 4.8.3R(4) requires that, subject to the exceptions in it, the value of
                      01.04.04/002         the scheme property of an authorised fund must be determined in accordance                 4
                                           with the instrument constituting the scheme. Accordingly, the method of
                                           valuing scheme property should be set out in this instrument.

                                     (2)   In accordance with H CIS 4.8.3R(1), where different buying and selling prices are
                                           quoted for an investment, it should be valued at its mid−market price. The
                                           instrument constituting the scheme should set out the valuation method that
                                           will apply where a single price for buying and selling a security is quoted and
                                           where separate buying and selling prices are quoted.

                                     (3)   In the context of SETS, The London Stock Exchange publishes an ‘official
                                           mid−market price’ for each security, calculated as the average of the best bid and
                                           best offer price, unweighted by deal size. Either the official mid−market price or
                                           the last trade price should provide an appropriate basis of valuation. The
                                           authorised fund manager should, however, document the choice of
                                           methodology and ensure the procedures are applied consistently and fairly. The
                                           basis on which the scheme property is to be valued must also be set out in an
                                           authorised fund’s         prospectus as required by H CIS 3.5.2R(17)(2).

                                     (4)   Where the authorised fund manager has reasonable grounds to believe that:

                                           (a)   no reliable price exists for a security at a valuation point; or

                                           (b)   the most recent price available does not reflect the authorised fund
                                                 manager’s best estimate of the value of a security at the valuation point;

                                           he should value the investment at a price which, in his opinion, reflects a fair
                                           and reasonable price for that investment (the fair value price).

                                     (5)   The circumstances which may give rise to a fair value price being used include:

                                           (a)   no recent trade in the security concerned; or

                                           (b)   the occurrence of a significant event since the most recent closure of the
                                                 market where the price of the security is taken.

                                           In (b), a significant event is one that means the most recent price of a security or
                                           a basket of securities is materially different to the price that it is reasonably
PAGE                                       believed would exist at the valuation point had the relevant market been open.
 33

                                     (6)   In determining whether to use such a fair value price, the authorised fund
                                           manager should include in his consideration:

                                           (a)   the type of authorised fund concerned;




       FSA Handbook H Release 029    D     March 2004                                                                  4.8.4
    CIS 4: Single−pricing                                                                                      Section 4.8: Valuation
    and dealing


                                          (b)   the securities involved;

                                          (c)   the basis and reliability of the alternative price used; and

                                          (d)   the authorised fund manager’s policy on the valuation of scheme property
                                                as disclosed in the prospectus.

                                (7)       The authorised fund manager should document the basis of valuation (including
                                          any fair value pricing policy) and, where appropriate, the basis of any
                                          methodology and ensure that the procedures are applied consistently and fairly.

                                (8)       Where a unit price is determined using properly applied fair value prices in
                                          accordance with policies in (7), subsequent information that indicates the price
4                                         should have been different from that calculated will not normally give rise to an
                                          instance of incorrect pricing.



                                Regular valuation points

        4.8.5                   (1)       There must be at least two valuation points in each calendar
                 01.12.01/001             month and if there are only two valuation points in any calendar
                                          month they must be two weeks or more apart.

                                (2)       Paragraph (1) does not apply to geared futures and options
                                          schemes or to warrant schemes or to a sub−fund which is
                                          permitted to invest entirely in warrants and there must be at least
                                          one valuation point for them on each business day.

                                (3)       The frequency of regular valuation points must be specified in the
                                          prospectus.

                                (4)       Despite (1) and (2), no valuation points are required during the
                                          period of any initial offer.



                                Additional valuation points

        4.8.6                   The authorised fund manager must inform the depositary if the
                 01.12.01/001   authorised fund manager determines to have an additional valuation
                                point for the authorised fund or any sub−fund, but this does not
                                prevent the authorised fund manager carrying out a valuation at a
                                time that is not a valuation point.



                                Market movement
                                                                                                                                        PAGE
        4.8.7                   (1)       This rule (H CIS 4.8.7R) applies when an authorised fund manager is                            34

                 01.12.01/001             operating on the basis of historic prices and decides to carry out
                                          an additional valuation for the purpose of paragraph (9) (Market
                                          movement) of H CIS 4.7.5R (Forward or historic pricing).

                                (2)       When the rule applies:


    FSA Handbook H Release 029        D     March 2004                                                                   4.8.7
       CIS 4: Single−pricing                                                                Section 4.8: Valuation
       and dealing


                                        (a)   the valuation must be at an additional valuation point and the
                                              authorised fund manager must inform the depositary of that
                                              valuation point;

                                        (b)   the valuation may be made by reference to fluctuations in an
                                              index of property whose composition is reflected by the
                                              scheme property, if the authorised fund manager having taken
                                              reasonable care determines, and the depositary agrees, that an
                                              adequate valuation may be obtained in that way.


                                                                                                                     4




PAGE
 35




       FSA Handbook H Release 029   D   March 2004                                                    4.8.7
       CIS 5: Investment and                                                          Section 5.2: General investment powers
       borrowing powers                                                                         and limits for UCITS schemes



                                            (d)   for a dual−priced AUT, when applying H CIS 15.8.4R (Valuation):

                                                  (i)    the cancellation basis only is required; and

                                                  (ii)   paragraphs 1 to 8, 11 and 23 are not applicable.



                                      Valuation

             5.2.6                    It should be noted that for the purpose of H CIS 5.2.5R, H CIS 4.8 or H CIS 15.8 may
                      01.11.02 /002   be affected by specific provisions in this chapter such as, for example, H CIS 5.4.6R
                                      (Stock lending: treatment of collateral) or H CIS 12 (Special provisions for certain
                                      types of scheme).



                                      Chapter to be construed as a whole                                                       5

             5.2.7                    (1)   Where a rule in this chapter allows a transaction to be entered
                      01.11.02 /002         into or an investment to be retained only if possible obligations
                                            arising out of the investment transactions or out of the retention
                                            would not cause any breach of any limits in this chapter, it must
                                            be assumed that the maximum possible liability of the authorised
                                            fund under any other of those rules has also to be provided for.

                                      (2)   Where a rule in this chapter permits an investment transaction to
                                            be entered into or an investment to be retained only if that
                                            investment transaction, or the retention, or other similar
                                            transactions, are covered:

                                            (a)   it must be assumed that in applying any of those rules, the
                                                  authorised fund must also simultaneously satisfy any other
                                                  obligation relating to cover; and

                                            (b)   no element of cover must be used more than once.



                                      Examples

             5.2.8                    Examples of the "provisions" referred to in H CIS 5.2.7R are: H CIS 5.2.19R
                      01.11.02 /002   (Investment in warrants and nil and partly paid securities) and H CIS 5.5.7R (General
                                      power to accept or underwrite placings).



                                      Transferable securities
PAGE
 7           5.2.9                    (1)   Subject to this rule (H CIS 5.2.9R), a transferable security is an
                      01.11.02 /002         investment falling within article 76 (Shares etc), article 77
                                            (Instruments creating or acknowledging indebtedness), article 78
                                            (Government and public securities), article 79 (Instruments giving
                                            entitlement to investments) and article 80 (Certificates
                                            representing certain securities) of the Regulated Activities Order.

       FSA Handbook H Release 029     D     March 2004                                                               5.2.9
    CIS 5: Investment and                                                            Section 5.2: General investment powers
    borrowing powers                                                                           and limits for UCITS schemes



                                 (2)       An investment is not a transferable security if the title to it cannot
                                           be transferred, or can be transferred only with the consent of a
                                           third party.

                                 (3)       In applying (2) to an investment which is issued by a body
                                           corporate, and which is an investment falling within articles 76
                                           (Shares, etc) or 77 (Instruments creating or acknowledging
                                           indebtedness) of the Regulated Activities Order, the need for any
                                           consent on the part of the body corporate or any members or
                                           debenture holders of it may be ignored.

                                 (4)       An investment is not a transferable security unless the liability of
                                           the holder of it to contribute to the debts of the issuer is limited to
                                           any amount for the time being unpaid by the holder of it in
                                           respect of the investment.
5

                                 UCITS schemes: general

        5.2.10                   (1)       The scheme property of a UCITS scheme must, except where
                 01.11.02 /002             otherwise provided in the rules in this chapter, only consist of any
                                           or all of:

                                           (a)            transferable securities;

                                           (b)   money market instruments permitted under H CIS
                                                 5.2.20R(Investment in money market instruments);

                                           (c)              derivatives and forward transactions permitted under
                                                 H CIS 5.2.22R(Permitted transactions (derivatives and forwards));

                                           (d)            deposits permitted under H CIS 5.2.28R(Investment in
                                                 deposits); and

                                           (e)            units in collective investment schemes permitted
                                                 under H CIS 5.2.15R (Investment in collective investment
                                                 schemes).

                                 (2)               Transferable securities and money market instruments
                                           held within a scheme must (subject to (3) and (4)) be;

                                           (a)   admitted to or dealt on an eligible market within H CIS
                                                 5.2.12R(1)(a) (Eligible markets: requirements); or

                                           (b)            dealt on an eligible market within H CIS 5.2.12(1)(b).
                                                                                                                              PAGE
                                                                                                                               8
                                 (3)       Not more than 10% in value of the scheme property of a UCITS
                                           scheme is to consist of transferable securities, which are not
                                           approved securities.




    FSA Handbook H Release 029         D     March 2004                                                        5.2.10
       CIS 5: Investment and                                                           Section 5.2: General investment powers
       borrowing powers                                                                          and limits for UCITS schemes



                                      (4)   Not more than 10% in value of the scheme property is to consist
                                            of money market instruments, which do not fall within H CIS 5.2.20R
                                            (Investment in money market instruments).

                                      (5)            H CIS 5.2.13R (Spread: general) and H CIS 5.2.14R (Spread:
                                            government and public securities) do not apply until the expiry of
                                            a period of six months after the date of effect of the authorisation
                                            order in respect of the authorised fund (or on which the initial
                                            offer commenced if later) provided that H CIS 5.2.3R (Prudent spread
                                            of risk) is complied with.

                                      (6)   The following sections also apply to UCITS schemes:

                                            (a)            H CIS 5.3   (Derivatives exposure)

                                            (b)            H CIS 5.4   (Stock lending); and                                     5
                                            (c)            H CIS 5.5   (Cash, borrowing, lending and other
                                                  provisions).



                                      Eligible markets regime: purpose

             5.2.11                   (1)   To protect investors, this sourcebook provides that markets on which
                      01.11.02 /002         investments of authorised funds are dealt in or traded on should be of an
                                            adequate quality ("eligible") at the time of acquisition of the investment and
                                            until it is sold. This section specifies criteria based on those in the UCITS
                                            Directive, as to the nature of the markets in which the property of an authorised
                                            fund may be invested.

                                      (2)   Where a market ceases to be eligible, investments on that market cease to be
                                            approved securities. The 10% restriction in H CIS 5.2.10R(3), (4) (UCITS
                                            schemes: general) applies and exceeding this limit because a market ceases to be
                                            eligible will generally be regarded as an inadvertent breach.



                                      Eligible markets regime

             5.2.12                   (1)   A market is eligible for the purposes of the rules in this
                      01.11.02 /002         sourcebook if it is:

                                            (a)   a regulated market; or

                                            (b)   a market in an EEA State which is regulated, operates
                                                  regularly and is open to the public.
PAGE
 9
                                      (2)   A market not falling within (1) is eligible for the purposes of the
                                            rules in this sourcebook if:

                                            (a)   the authorised fund manager, after consultation and
                                                  notification with the depositary (and in the case of an ICVC,



       FSA Handbook H Release 029     D     March 2004                                                              5.2.12
    CIS 5: Investment and                                                            Section 5.2: General investment powers
    borrowing powers                                                                           and limits for UCITS schemes



                                                any other directors), decides that market is appropriate for
                                                investment of, or dealing in, the scheme property;

                                          (b)   the market is included in a list in the prospectus; and

                                          (c)   the depositary has taken reasonable care to determine that:

                                                (i)    adequate custody arrangements can be provided for the
                                                       investment dealt in on that market; and

                                                (ii)   all reasonable steps have been taken by the authorised fund
                                                       manager in deciding whether that market is eligible.

                                (3)       In (2), a market must not be considered appropriate unless it:

                                          (a)   is regulated;
5
                                          (b)   operates regularly;

                                          (c)   is recognised;

                                          (d)   is open to the public;

                                          (e)   is adequately liquid; and

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



                                Spread: general

        5.2.13                  (1)       This rule (H CIS 5.2.13R) does not apply to government and public
                 01.04.04/003             securities.

                                (2)       For the purposes of this rule       H CIS 5.2.13R) companies
                                          included in the same group for the purposes of consolidated
                                          accounts as defined in accordance with Directive 83/349/EEC or
                                          in the same group in accordance with international accounting
                                          standards are regarded as a single body.

                                (3)       Not more than 20% in value of the scheme property is to consist
                                          of deposits with a single body.

                                (4)       Not more than 5% in value of the scheme property is to consist of
                                          transferable securities or money market instruments issued by any
                                          single body.
                                                                                                                              PAGE
                                                                                                                               10
                                (5)       The limit of 5% in (4) is raised to 10% in respect of up to 40% in
                                          value of the scheme property.

                                (6)       In applying (4) and (5) certificates representing certain securities
                                          are treated as equivalent to the underlying security.


    FSA Handbook H Release 029        D     March 2004                                                         5.2.13
       CIS 5: Investment and                                                        Section 5.2: General investment powers
       borrowing powers                                                                       and limits for UCITS schemes



                                     (7)    The exposure to any one counterparty in an OTC derivative
                                            transaction must not exceed 5% in value of the scheme property.
                                            This limit is raised to 10% where the counterparty is an approved
                                            bank.

                                     (8)    Not more than 20% in value of the scheme is to consist of
                                            transferable securities and money market instruments issued by
                                            the same group (as referred to in (2)).

                                     (9)    Not more than 20% in value of the scheme is to consist of the
                                            units of any one collective investment scheme.

                                     (10)   In applying the limits in (3),(4),(5), (6) and (7), not more than
                                            20% in value of the scheme property is to consist of any
                                            combination of two or more of the following:
                                                                                                                             5
                                            (a)            transferable securities or money market instruments
                                                  issued by; or

                                            (b)            deposits made with; or

                                            (c)   exposures from OTC derivatives transactions made with;

                                            a single body.

                                     (11)   [deleted]



                                     Spread: government and public securities

             5.2.14                  (1)    This rule (H CIS 5.2.14R) applies to government and public securities
                      01.04.04/003          ("such securities").

                                     (2)    Where no more than 35% in value of the scheme property is
                                            invested in such securities issued by any one body, there is no limit
                                            on the amount which may be invested in such securities or in any
                                            one issue.

                                     (3)    An authorised fund may invest more than 35% in value of the
                                            scheme property in such securities issued by any one body
                                            provided that:

                                            (a)   the authorised fund manager has before any such investment
                                                  is made consulted with the depositary and as a result onsiders
                                                  that the issuer of such securities is one which is appropriate in
PAGE                                              accordance with the investment objectives of the authorised
 11
                                                  fund;

                                            (b)   no more than 30% in value of the scheme property consists of
                                                  such securities of any one issue;




       FSA Handbook H Release 029    D      March 2004                                                        5.2.14
    CIS 5: Investment and                                                             Section 5.2: General investment powers
    borrowing powers                                                                            and limits for UCITS schemes



                                          (c)   the scheme property includes such securities issued by that or
                                                another issuer, of at least six different issues; and

                                          (d)   the disclosures in (4) have been made.

                                (4)       Where it is intended that (3) may apply, the instrument
                                          constituting the scheme, and the most recently published
                                          prospectus, must clearly state:

                                          (a)   the fact that more than 35% of the scheme property is or may
                                                be invested in such securities issued by one issuer;

                                          (b)   the names of the States, the local authorities or public
                                                international bodies issuing such securities in which the
                                                authorised fund may invest over 35% of its assets.
5
                                (5)       In this rule         H CIS 5.2.14R)   in relation to such securities:

                                          (a)   issue, issued and issuer include guarantee, guaranteed and
                                                guarantor; and

                                          (b)   an issue differs from another if there is a difference as to
                                                repayment date, rate of interest, guarantor or other material
                                                terms of the issue.



                                Investment in collective investment schemes

        5.2.15                  A scheme may invest in units in a collective investment scheme
                 01.04.04/004   provided that no more than 30% of the value of that investing
                                scheme is in collective investment schemes which are not UCITS
                                schemes and only if the second scheme is permitted under (1) − (4):

                                (1)       it is a scheme which:

                                          (a)   Complies with the conditions necessary for it to enjoy the
                                                rights conferred by the UCITS Directive; or

                                          (b)   is recognised under the provisions of section 270 of the Act
                                                (Schemes authorised in designated countries or territories); or

                                          (c)   is authorised as a non−UCITS retail scheme (provided the
                                                requirements of article 19(1)(e) of the UCITS Directive are
                                                met); or

                                          (d)   is authorised in another EEA State (provided the requirements                  PAGE

                                                of article 19(1)(e) of the UCITS Directive are met);                            12




                                (2)       the second scheme must comply where relevant with H CIS 5.2.18R
                                          (Investment in other group schemes);




    FSA Handbook H Release 029        D     March 2004                                                            5.2.15
       CIS 5: Investment and                                                             Section 5.2: General investment powers
       borrowing powers                                                                            and limits for UCITS schemes



                                      (3)   the second scheme must have terms which prohibit more than
                                            10% in value of the scheme property consisting of units in
                                            collective investment schemes; and

                                      (4)   for the purposes of this rule (H CIS 5.2.15R) and H CIS 5.2.13R (Spread:
                                            general) each sub−fund of an umbrella scheme is to be treated as if
                                            it were a separate scheme but no sub−fund of an umbrella scheme
                                            may invest in another sub−fund of that umbrella scheme.



                                      Qualifying non−UCITS collective investment schemes

             5.2.16                   (1)           H CIS 17.3 gives further detail as to the recognition of a scheme under
                      01.04.04/003          section 270 of the Act.

                                      (2)   Article 19 of the UCITS Directive sets out the general investment limits. So, a       5
                                            non−UCITS retail scheme, or its equivalent EEA scheme which has the power to
                                            invest in gold or immovables would not meet the criteria set in H CIS 5.2.15R(1)
                                            (c) and (d).



                                      Investment in associated collective investment schemes

             5.2.17                           Units in a collective investment scheme do not fall within H CIS
                      01.11.02 /002   5.2.15R (Investment in collective investment schemes) if that collective
                                      investment scheme is managed or operated by (or, if it is an ICVC,
                                      has as its ACD) the authorised fund manager of the investing
                                      authorised fund or an associate of that authorised fund manager,
                                      unless:

                                      (1)   the prospectus of the investing authorised fund clearly states that
                                            the property of that investing fund may include such units; and

                                      (2)                H CIS 5.2.18R   (Investment in other group schemes) is
                                            complied with.



                                      Investment in other group schemes

             5.2.18                   An authorised fund must not invest in or dispose of units in another
                      01.11.02 /002      collective investment scheme (the second scheme), which is
                                      managed or operated by (or in the case of an ICVC, whose ACD is),
                                      the authorised fund manager of such authorised fund, or an
                                      associate of that authorised fund manager, unless;
PAGE
 13                                   (1)   the authorised fund manager of the authorised fund is under a
                                            duty to pay to the authorised fund by the close of business on the
                                            fourth business day next after the agreement to buy or to sell the
                                            amount referred to in (3) and (4);




       FSA Handbook H Release 029     D     March 2004                                                               5.2.18
    CIS 5: Investment and                                                          Section 5.2: General investment powers
    borrowing powers                                                                         and limits for UCITS schemes



                                (2)       there is no charge in respect of the investment in or the disposal of
                                          units in the second scheme;

                                (3)       on investment, either:

                                          (a)   any amount by which the consideration paid by the authorised
                                                fund for the units in the second scheme exceeds the price that
                                                would have been paid for the benefit of the second scheme had
                                                the units been newly issued or sold by it; or

                                          (b)   if such price cannot be ascertained by the authorised fund
                                                manager of the authorised fund, the maximum amount of any
                                                charge permitted to be made by the seller of units in the
                                                second scheme;

5                               (4)       on disposal, the amount of any charge made for the account of the
                                          authorised fund manager or operator of the second scheme or an
                                          associate of any of them in respect of the disposal; and

                                (5)       In (1), (2), (3) and (4):

                                          (a)   any addition to or deduction from the consideration paid on
                                                the acquisition or disposal of units in the second scheme,
                                                which is applied for the benefit of the second scheme and is, or
                                                is like, a dilution levy made in accordance with H CIS 4.6.3R (for
                                                ICVCs and single−priced AUTs) or SDRT provision made in
                                                accordance with H CIS 4.6.3R (for ICVCs and single−priced
                                                AUTs) or H CIS 15.6.3R (for dual−priced AUTs) is to be treated as
                                                part of the price of the units and not as part of any charge;
                                                and

                                          (b)   any charge made in respect of an exchange of units in one
                                                sub−fund or separate part of the second scheme for units in
                                                another sub−fund or separate part of that scheme is to be
                                                included as part of the consideration paid for the units.



                                Investment in warrants and nil and partly paid securities

        5.2.19                  (1)       Where a UCITS scheme invests in a warrant, the exposure created
                 01.04.04/003             by the exercise of the right conferred by the warrant must not
                                          exceed the limits in H CIS 5.2.13R (Spread: general) and H CIS 5.2.14R
                                          (Spread: government and public securities).

                                (2)       A transferable security on which any sum is unpaid falls within a
                                                                                                                            PAGE
                                          power of investment only if it is reasonably foreseeable that the                  14

                                          amount of any existing and potential call for any sum unpaid
                                          could be paid by the authorised fund, at the time when payment is
                                          required, without contravening the rules in this chapter.

                                (3)       [deleted]


    FSA Handbook H Release 029        D     March 2004                                                       5.2.19
       CIS 5: Investment and                                                        Section 5.2: General investment powers
       borrowing powers                                                                       and limits for UCITS schemes



                                      Investment in money market instruments

             5.2.20                   A UCITS scheme may invest in money market instruments which are
                      01.04.04/004    normally dealt in on the money market, are liquid and whose value
                                      can be accurately determined at any time, provided:

                                      (1)   the money market instrument is listed on or normally dealt on an
                                            eligible market; or

                                      (2)   the money market instrument is:

                                            (a)   issued or guaranteed by a central, regional or local authority, a
                                                  central bank of an EEA State, the European Central Bank, the
                                                  European Union or the European Investment Bank, a
                                                  non−EEA State or, in the case of a Federal State, by one of the
                                                  members making up the federation, or by a public                           5
                                                  international body to which one or more EEA States belong;
                                                  or

                                            (b)   issued by a body, any securities of which are dealt in on an
                                                  eligible market; or

                                            (c)   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 FSA to be at least as
                                                  stringent as those laid down by Community law.



                                      Derivatives: general

             5.2.21                   (1)   A transaction in derivatives or a forward transaction must not be
                      01.11.02 /002         effected for a scheme unless:

                                            (a)   the transaction is of a kind specified in H CIS 5.2.22R (Permitted
                                                  transactions (derivatives and forwards)); and

                                            (b)   the transaction is covered, as required by H CIS 5.3.3R (Cover for
                                                  transactions in derivatives and forward transactions).

                                      (2)   Where a scheme invests in derivatives, the exposure to the
                                            underlying assets must not exceed the limits in H CIS 5.2.13R (Spread:
                                            general) and H CIS 5.2.14R (Spread: government and public
                                            securities) save as provided in (4).

PAGE                                  (3)   Where a transferable security or money market instrument
 15
                                            embeds a derivative, this must be taken into account for the
                                            purposes of complying with this section (H CIS 5.2).

                                      (4)   Where a scheme invests in an index based derivative, provided the
                                            relevant index falls within H CIS 5.2.33R (Relevant indices) the


       FSA Handbook H Release 029     D     March 2004                                                        5.2.21
    CIS 5: Investment and                                                           Section 5.2: General investment powers
    borrowing powers                                                                          and limits for UCITS schemes



                                          underlying constituents of the index do not have to be taken into
                                          account for the purposes of H CIS 5.2.13R (Spread: general) and H CIS
                                          5.2.14R (Spread: government and public securities).

                                (5)       The relaxation in (4) is subject to the authorised fund manager
                                          taking account of H CIS 5.2.3R (Prudent spread of risk).



                                Permitted transactions (derivatives and forwards)

        5.2.22                  (1)       A transaction in a derivative must
                 01.04.04/003

                                          (a)   (a) be in an approved derivative; or

                                          (b)   be one which complies with H CIS 5.2.25R (OTC transactions in
5                                               derivatives).

                                (2)       A transaction in a derivative must have the underlying consisting
                                          of any or all of the following to which the scheme is dedicated:

                                          (a)            transferable securities;

                                          (b)   money market instruments permitted under H CIS 5.2.20R
                                                (Investment in money market instruments);

                                          (c)            deposits permitted under H CIS 5.2.28R (Investment in
                                                deposits);

                                          (d)            derivatives permitted under this rule (H CIS 5.2.22R);

                                          (e)              collective investment scheme units permitted under     H
                                                CIS 5.2.15R (Investment in collective investment schemes);

                                          (f)   financial indices;

                                          (g)   interest rates

                                          (h)   foreign exchange rates; and

                                          (i)   currencies.

                                (3)       A transaction in an approved derivative must be effected on or
                                          under the rules of an eligible derivatives market.

                                (4)       A transaction in a derivative must not cause a scheme to diverge
                                          from its investment objectives as stated in the instrument
                                                                                                                             PAGE
                                          constituting the scheme and the most recently published                             16

                                          prospectus.

                                (5)       A transaction in a derivative must not be entered into if the
                                          intended effect is to create the potential for an uncovered sale of



    FSA Handbook H Release 029        D     March 2004                                                        5.2.22
       CIS 5: Investment and                                                      Section 5.2: General investment powers
       borrowing powers                                                                     and limits for UCITS schemes



                                            one or more, transferable securities, money market instruments,
                                            units in collective investment schemes, or derivatives.

                                      (6)   Any forward transaction must be with an approved counterparty
                                            under H CIS 5.2.25R(2) (OTC transactions in derivatives).



                                      Transactions for the purchase of property

             5.2.23                   A derivative or forward transaction (which is a permitted transaction
                      01.11.02 /002   under H CIS 5.2.22R (Permitted transactions (derivatives and forwards))
                                      which will or could lead to the delivery of property for the account of
                                      the ICVC or to the trustee for the account of the AUT may be entered
                                      into only if:

                                      (1)   that property can be held for the account of the ICVC or can be                5
                                            held by the AUT; and

                                      (2)   the authorised fund manager having taken reasonable care
                                            determines that delivery of the property under the transaction will
                                            not occur or will not lead to a breach of the rules in this
                                            sourcebook



                                      Requirement to cover sales

             5.2.24                   (1)   No agreement by or on behalf of an ICVC or on behalf of an AUT
                      01.11.02 /002         to dispose of property or rights may be made:

                                            (a)   unless the obligation to make the disposal and any other
                                                  similar obligation could immediately be honoured by the
                                                  authorised fund by delivery of property or the assignment (or,
                                                  in Scotland, assignation) of rights; and

                                            (b)   the property and rights at (a) are owned by the authorised
                                                  fund at the time of the agreement.

                                      (2)   Paragraph (1) does not apply to a deposit.



                                      OTC transactions in derivatives

             5.2.25                   Any transaction in an OTC derivative under H CIS 5.2.22R(1)(b) must be:
                      01.11.02 /002
PAGE
 17
                                      (1)   in a future or an option or a contract for differences;

                                      (2)   with an approved counterparty; a counterparty to a transaction in
                                            derivatives is approved only if the counterparty is:

                                            (a)   an eligible institution or an approved bank; or


       FSA Handbook H Release 029     D     March 2004                                                      5.2.25
    CIS 5: Investment and                                                         Section 5.2: General investment powers
    borrowing powers                                                                        and limits for UCITS schemes



                                          (b)   a person whose permission (including any requirements or
                                                limitations), as published in the FSA Register or whose Home
                                                State authorisation, permits it to enter into the transaction as
                                                principal off−exchange;

                                (3)       on approved terms; the terms of the transaction in derivatives are
                                          approved only if, before the transaction is entered into, the
                                          depositary is satisfied that the counterparty has agreed with the
                                          ICVC or the manager:

                                          (a)   to provide a reliable and verifiable valuation in respect of that
                                                transaction (which, for dual−priced AUTs should be on a
                                                buying and selling basis) at least daily and at any other time at
                                                the request of the ICVC or manager; and

5                                         (b)   that it will, at the request of the ICVC or manager, enter into a
                                                further transaction to close out that transaction at any time, at
                                                a fair value arrived at under the pricing model or other reliable
                                                basis agreed under (4); and

                                (4)       capable of valuation; a transaction in derivatives is capable of
                                          valuation only if the authorised fund manager having taken
                                          reasonable care determines that, throughout the life of the
                                          derivative (if the transaction is entered into), it will be able to
                                          value the investment concerned with reasonable accuracy:

                                          (a)   on the basis of the pricing model which has been agreed
                                                between the authorised fund manager and the depositary; or

                                          (b)   on some other reliable basis reflecting an up−to−date market
                                                value which has been so agreed.



                                Risk management: derivatives

        5.2.26                  (1)       An authorised fund manager must use a risk management process
                 01.04.04/003             enabling it to monitor and measure as frequently as appropriate
                                          the risk of a scheme’s derivatives and forwards positions and their
                                          contribution to the overall risk profile of the scheme.

                                (2)       The following details of the risk management process must be
                                          notified by the authorised fund manager to the FSA in advance of
                                          the use of the process as required by (1) along with advance
                                          notification of any material alteration to such details:
                                                                                                                           PAGE
                                          (a)   the methods for estimating risks in derivative and forward                  18

                                                transactions; and

                                          (b)   the types of derivatives and forwards to be used within the
                                                scheme together with their underlying risks and any relevant
                                                quantitative limits.


    FSA Handbook H Release 029        D     March 2004                                                      5.2.26
       CIS 5: Investment and                                                           Section 5.2: General investment powers
       borrowing powers                                                                          and limits for UCITS schemes



                                      Risk management process

             5.2.27                   (1)   The risk management process should take account of the investment objectives
                      01.11.02 /002         and policy of the scheme as stated in the most recent prospectus.

                                      (2)   The depositary should take reasonable care to review the appropriateness of the
                                            risk management process in line with its duties under H CIS 7.5.3R (Duties of the
                                            ACD and depositary: investment and borrowing powers) or H CIS 7.10.5R
                                            (Duties of the manager and trustee: investment and borrowing powers), as
                                            appropriate.

                                      (3)   An authorised fund manager is expected to demonstrate more sophistication in
                                            its risk management process for a scheme with a complex risk profile than for
                                            one with a simple risk profile. In particular the risk management process should
                                            take account of any characteristic of non−linear dependence in the value of a
                                            position to its underlying.

                                      (4)   An authorised fund manager should take reasonable care to establish and             5
                                            maintain such systems and controls as are appropriate to its business as
                                            required by H SYSC 3.1 (Systems and controls).

                                      (5)   The risk management process should enable the analysis required by H CIS
                                            5.2.26R to be undertaken at least daily or at each valuation point whichever is
                                            the more frequent.



                                      Investment in deposits

             5.2.28                   A UCITS scheme may invest in deposits only with an approved bank
                      01.11.02 /002   and which are repayable on demand or have the right to be
                                      withdrawn, and maturing in no more than 12 months.



                                      Significant influence for ICVCs

             5.2.29                   (1)   An ICVC must not acquire transferable securities issued by a
                      01.11.02 /002         body corporate and carrying rights to vote (whether or not on
                                            substantially all matters) at a general meeting of that body
                                            corporate if:

                                            (a)   immediately before the acquisition, the aggregate of any such
                                                  securities held by the ICVC gives the ICVC power significantly
                                                  to influence the conduct of business of that body corporate; or

                                            (b)   the acquisition gives the ICVC that power.

                                      (2)   For the purpose of (1), an ICVC is to be taken to have power
PAGE                                        significantly to influence the conduct of business of a body
 19
                                            corporate if it can, because of the transferable securities held by
                                            it, exercise or control the exercise of 20% or more of the voting
                                            rights in that body corporate (disregarding for this purpose any
                                            temporary suspension of voting rights in respect of the
                                            transferable securities of that body corporate).


       FSA Handbook H Release 029     D     March 2004                                                              5.2.29
    CIS 5: Investment and                                                          Section 5.2: General investment powers
    borrowing powers                                                                         and limits for UCITS schemes



                                 Significant influence for managers of AUTs

        5.2.30                   (1)       A manager must not acquire, or cause to be acquired for an AUT
                 01.11.02 /002             of which it is the manager, transferable securities issued by a
                                           body corporate and carrying rights to vote (whether or not on
                                           substantially all matters) at a general meeting of the body
                                           corporate if:

                                           (a)   immediately before the acquisition, the aggregate of any such
                                                 securities held for that AUT, taken together with any such
                                                 securities already held for other AUTs of which it is also the
                                                 manager, gives the manager power significantly to influence
                                                 the conduct of business of that body corporate; or

                                           (b)   the acquisition gives the manager that power.
5
                                 (2)       In (1), a manager is to be taken to have power significantly to
                                           influence the conduct of business of a body corporate if it can,
                                           because of the transferable securities held for all the AUTs of
                                           which it is the manager, exercise or control the exercise of 20% or
                                           more of the voting rights in that body corporate (disregarding for
                                           this purpose any temporary suspension of voting rights in respect
                                           of the transferable securities of that body corporate).



                                 Concentration

        5.2.31                   A UCITS scheme:
                 01.11.02 /002

                                 (1)       must not acquire transferable securities (other than debt
                                           securities) which:

                                           (a)   do not carry a right to vote on any matter at a general meeting
                                                 of the body corporate that issued them; and

                                           (b)   represent more than 10% of those securities issued by that
                                                 body corporate;

                                 (2)       must not acquire more than 10% of the debt securities issued by
                                           any single body;

                                 (3)       must not acquire more than 25% of the units in a collective
                                           investment scheme;

                                 (4)       must not acquire more than 10% of the money market
                                           instruments issued by any single body; and                                       PAGE
                                                                                                                             20


                                 (5)       need not comply with the limits in (2), (3) and (4) if, at the time of
                                           acquisition, the net amount in issue of the relevant investment
                                           cannot be calculated.




    FSA Handbook H Release 029         D     March 2004                                                      5.2.31
       CIS 5: Investment and                                                         Section 5.2: General investment powers
       borrowing powers                                                                        and limits for UCITS schemes



                                      Schemes replicating an index

             5.2.32                   (1)   A UCITS scheme may invest up to 20% in value of the scheme
                      01.11.02 /002         property in shares and debentures which are issued by the same
                                            body where the investment policy of that scheme as stated in the
                                            most recently published prospectus is to replicate the composition
                                            of a relevant index as defined in H CIS 5.2.34R (Relevant indices).

                                      (2)   The limit in (1) can be raised for a particular UCITS scheme up to
                                            35% in value of the scheme property, but only in respect of one
                                            body and where justified by exceptional market conditions.



                                      Index replication

             5.2.33                   In the case of a scheme replicating an index under H CIS 5.2.32R (Schemes replicating   5
                      01.11.02 /002   an index) the scheme property need not consist of the exact composition and
                                      weighting of the underlying in the relevant index where deviation from this is
                                      expedient for reasons of poor liquidity or excessive cost to the scheme in trading in
                                      an underlying investment.



                                      Relevant indices

             5.2.34                   The indices referred to in H CIS 5.2.32R (Schemes replicating an index)
                      01.11.02 /002   are those which satisfy the following criteria:

                                      (1)   the composition is sufficiently diversified;

                                      (2)   the index is a representative benchmark for the market to which it
                                            refers; and

                                      (3)   the index is published in an appropriate manner.




PAGE
 21




       FSA Handbook H Release 029     D     March 2004                                                            5.2.34
    CIS 5: Investment and                                                                       Section 5.3: Derivative exposure
    borrowing powers




                                                    5.3       Derivative exposure




                                                                                                                        Section 5.3: Derivative exposure




                                 Application

        5.3.1                    This section (H CIS 5.3) applies to authorised fund managers of UCITS
5                        /002    schemes except H CIS 5.3.4 R, which applies to:

                                 (1)                ICVCs which are UCITS schemes; and

                                 (2)       to trustees of AUTs in respect of UCITS schemes.



                                 Introduction

        5.3.2                    (1)       A scheme may invest in derivatives and forward transactions as long as the
                 01.11.02 /002             exposure to which the scheme is committed by that transaction itself is suitably
                                           covered from within its scheme property. Exposure will include any initial
                                           outlay in respect of that transaction.

                                 (2)       Cover ensures that a scheme is not exposed to the risk of loss of property,
                                           including money, to an extent greater than the net value of the scheme property.
                                           Therefore, a scheme must hold scheme property sufficient in value or amount to
                                           match the exposure arising from a derivative obligation to which the scheme is
                                           committed. H CIS 5.3.3R (Cover for transactions in derivatives and forward
                                           transactions) sets out detailed requirements for cover of a scheme.

                                 (3)       In applying this section (H CIS 5.3), it may help to regard a future as an
                                           obligation to which the scheme is committed (in that, unless closed out, the
                                           future will require something to be delivered, or accepted and paid for); a
                                           written option as an obligation to which the scheme is committed (in that it
                                           gives the right of potential exercise to another thereby creating exposure); and a
                                           bought option as a right (in that the purchaser can, but need not, exercise the
                                           right to require the writer to deliver and accept and pay for something).

                                 (4)       In accordance with H CIS 5.2.7R(2)(b)(Chapter to be construed as a whole), cover
                                           used in respect of one transaction in derivatives or forward transaction must not
                                           be used for cover in respect of another transaction in derivatives or a forward
                                           transaction.                                                                                                    PAGE
                                                                                                                                                            22

                                 (5)              H CIS 5.3.3R− H CIS 5.3.5Rsets out requirements for "cover" of a UCITS
                                           scheme in respect of derivative transactions.




    FSA Handbook H Release 029         D    March 2004                                                                 5.3.2
       CIS 5: Investment and                                                            Section 5.3: Derivative exposure
       borrowing powers


                                      Cover for transactions in derivatives and forward transactions

             5.3.3                    (1)   A transaction in derivatives or forward transaction is to be
                      01.04.04/003          entered into only if the maximum exposure, in terms of the
                                            principal or notional principal created by the transaction to
                                            which the scheme is or may be committed by another person is
                                            covered globally under (2).

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

                                      (3)   Cash not yet received into the scheme property but due to be
                                            received within one month is available as cover for the purposes of            5
                                            (2).

                                      (4)   Property the subject of a transaction under H CIS 5.4 (Stock lending)
                                            is only available for cover if the authorised fund manager has
                                            taken reasonable care to determine that it is obtainable (by return
                                            or re−acquisition) in time to meet the obligation for which cover is
                                            required.

                                      (5)   The total exposure relating to derivatives held in a UCITS scheme
                                            may not exceed the net value of the scheme property.



                                      Borrowing

             5.3.4                    (1)   Cash obtained from borrowing, and borrowing which the
                      01.11.02 /002         authorised fund manager reasonably regards an eligible
                                            institution or an approved bank to be committed to provide, is
                                            available for cover under H CIS 5.3.3R (Cover for transactions in
                                            derivatives and forward transactions) as long as the normal limits
                                            on borrowing (as to which see H CIS 5.5.3R (General power to
                                            borrow) and H CIS 5.5.4R (Borrowing limits)) are observed.

                                      (2)   Where, for the purposes of this section (H CIS 5.3), the ICVC or the
                                            trustee for the account of the AUT on the instructions of the
                                            manager:

                                            (a)   borrows an amount of currency from an eligible institution or
                                                  an approved bank; and
PAGE
 23
                                            (b)   keeps an amount in another currency, at least equal to the
                                                  borrowing for the time being in (a), on deposit with the lender
                                                  (or his agent or nominee);

                                            then this section (H CIS 5.3) applies as if the borrowed currency, and
                                            not the deposited currency, were part of the scheme property, and


       FSA Handbook H Release 029     D     March 2004                                                      5.3.4
    CIS 5: Investment and                                                           Section 5.3: Derivative exposure
    borrowing powers


                                       the normal limits on borrowing under H CIS 5.5.3 Rand H CIS 5.5.4R do
                                       not apply to that borrowing.



                                 Continuing nature of limits and requirements

        5.3.5                    An authorised fund manager must, (as frequently as necessary),
                 01.11.02 /002   re−calculate the amount of cover required in respect of derivatives
                                 and forward positions already in existence under this section (H CIS
                                 5.3). Derivatives and rights under forward transactions under this
                                 section may be retained in the scheme property only so long as they
                                 remain covered globally under H CIS 5.3.3R (Cover for transactions in
                                 derivatives and forward transactions).

5




                                                                                                                       PAGE
                                                                                                                        24




    FSA Handbook H Release 029     D    March 2004                                                      5.3.5
       CIS 5: Investment and                                                                          Section 5.4: Stock lending
       borrowing powers




                                                         5.4   Stock lending




                                                                                                                           Section 5.4: Stock lending




                                      Application

             5.4.1                    This section ( H CIS 5.4) applies to depositaries of authorised funds
                      01.11.02 /002   which are UCITS schemes, except:                                                                                  5

                                      (1)          H CIS 5.4.3R (Stock lending: general), which applies to
                                            ICVCs which are UCITS schemes, or to managers of AUTs which
                                            are UCITS schemes; and

                                      (2)   in the case of ICVCs, H CIS 5.4.4R (Permitted stock lending) which
                                            applies to ICVCs which are UCITS schemes if the ICVC enters
                                            into the stock lending agreement.



                                      Stock lending permitted under this section (CIS 5.4)

             5.4.2                    (1)   This section ( H CIS 5.4) permits the generation of additional income for the
                      01.11.02 /002         benefit of the authorised fund, and hence for its investors, by entry into stock
                                            lending transactions for the account of the authorised fund.

                                      (2)   The specific method of stock lending permitted in this section is in fact not a
                                            transaction which is a loan in the normal sense. Rather it is an arrangement of
                                            the kind described in section 263B of the Taxation of Chargeable Gains Act
                                            1992, under which the lender transfers securities to the borrower otherwise
                                            than by way of sale and the borrower is to transfer those securities, or securities
                                            of the same type and amount, back to the lender at a later date. In accordance
                                            with good market practice, a separate transaction by way of transfer of assets is
                                            also involved for the purpose of providing collateral to the lender" to cover
                                            him against the risk that the future transfer back of the securities may not be
                                            satisfactorily completed.



                                      Stock lending: general
PAGE
 25          5.4.3                    The stock lending permitted by this section ( H CIS 5.4) may be
                      01.11.02 /002   exercised by an authorised fund when it reasonably appears to the
                                      ICVC or to the manager to be appropriate to do so with a view to
                                      generating additional income for the authorised fund with an
                                      acceptable degree of risk.



       FSA Handbook H Release 029     D     March 2004                                                                 5.4.3
    CIS 5: Investment and                                                                            Section 5.4: Stock lending
    borrowing powers


                                 Permitted stock lending

        5.4.4                    (1)       An ICVC, or the depositary at the request of the ICVC, or a the
                 01.04.04/003              trustee at the request of the manager, may enter into a stock
                                           lending arrangement of the kind described in section 263B of the
                                           Taxation of Chargeable Gains Act 1992 (without extension by
                                           section 263C), but only if:

                                           (a)   all the terms of the agreement under which securities are to be
                                                 reacquired by the depositary for the account of the ICVC or
                                                 by the trustee, are in a form which is acceptable to the
                                                 depositary or to the trustee and are in accordance with good
                                                 market practice;

                                           (b)   the counterparty is an authorised person or a person
5                                                authorised by a Home State regulator; and

                                           (c)            collateral is obtained to secure the obligation of the
                                                 counterparty under the terms referred to in (a) and the
                                                 collateral is:

                                                 (i)     acceptable to the depositary;

                                                 (ii)    adequate within H CIS 5.4.6R(1); and

                                                 (iii)   sufficiently immediate within H CIS 5.4.6R(2).

                                 (2)       The counterparty for the purpose of (1) is the person who is
                                           obliged under the agreement referred to in (1)(a) to transfer to the
                                           depositary the securities transferred by the depositary under the
                                           stock lending arrangement or securities of the same kind.



                                 Stock lending: treatment of collateral

        5.4.5                    Where a stock lending arrangement is entered into, the scheme property remains
                 01.04.04/003    unchanged in terms of value: the securities transferred cease to be part of the scheme
                                 property, but there is obtained in return an obligation on the part of the
                                 counterparty to transfer back equivalent securities. The depositary will also receive
                                 collateral to set against the risk of default in transfer, and that collateral is equally
                                 irrelevant to the valuation of the scheme property (because it is transferred against
                                 an obligation of equivalent value by way of re−transfer). (H CIS 5.4.6R accordingly
                                 makes provision for the treatment of the collateral in that context.



                                 Treatment of collateral
                                                                                                                                  PAGE
                                                                                                                                   26
        5.4.6                    (1)                 Collateral is adequate for the purposes of this section (H
                 01.11.02 /002             CIS 5.4) only if it:

                                           (a)   is transferred to the depositary or its agent;



    FSA Handbook H Release 029         D     March 2004                                                            5.4.6
       CIS 10: Report and Accounts                                                  Section 10.5: Publication and availability
                                                                                            of annual and half−yearly reports




                                                        10.5     Publication and availability of annual and
                                                                 half−yearly reports




                                                                                                                    Section 10.5: Publication and availability
                                                                                                                            of annual and half−yearly reports




                                     Application

             10.5.1                  (1)                              (2), (4) − (6) and H CIS 10.5.3R
                                                        H CIS 10.5.2R(1),
                      01.12.01/001         H CIS 10.5.4R    apply to an authorised fund manager; and

                                     (2)         H CIS 10.5.2R(3)applies to the directors of an ICVC (for an
                                           ICVC) or to the manager (for an AUT).



                                     Publication of reports

             10.5.2                  (1)   The authorised fund manager must, within four months after the
                      01.04.04/002         end of each annual accounting period and within two months
                                           after the end of each half−yearly accounting period respectively,
                                           publish the annual report and half−yearly report in accordance
                                           with (2) and (4).

                                     (2)   (a)   The authorised fund manager must, subject to (2A) and (3)
                                                 provide free of charge:
                                                                                                                                                                 10
                                                 (i)    a copy of each annual report and each half−yearly report to
                                                        each holder (or to the first named of joint holders) entered
                                                        in or entitled to be entered in the register at the close of
                                                        business on the last day of the relevant accounting period
                                                        or half−yearly accounting period; and

                                                 (ii)   a copy of the report to each holder of bearer units at his
                                                        request.

                                           (b)   A report relating to an umbrella scheme to be provided under
                                                 (a)(i) or (ii) need not contain an aggregation of the accounts
PAGE
                                                 relating to each sub−fund, but such information must be sent,
 15                                              free of charge, to any holder who requests it.

                                     (2)A (a)    Notwithstanding (2), the authorised fund manager may
                                                 comply with H COLL 4.5.13R (Provision of short report) instead
                                                 of (2), provided that any short report prepared by the
                                                 authorised fund manager for this purpose;


       FSA Handbook H Release 029    D     March 2004                                                            10.5.2
     CIS 10: Report and Accounts                                                      Section 10.5: Publication and availability
                                                                                              of annual and half−yearly reports



                                                  (i)    meets the requirements of H COLL 4.5.3R (1) and (2)
                                                         (Preparation of long and short reports); and

                                                  (ii)   contains the information required by H COLL 4.5.5R
                                                         (Contents of a short report).

                                            (b)   In preparing a short report for the purposes of (1), the
                                                  authorised fund manager should construe references to a long
                                                  report in H COLL 4.5.5R(1)(f) and (5) and in H COLL 4.5.13R (3) as
                                                  the annual report referred to in H CIS 10.3.3R (Annual reports)
                                                  or, as the case may be, the half−yearly report in H CIS 10.3.4
                                                  (Half−yearly reports).

                                  (3)       For an umbrella scheme, if the directors of the ICVC or manager
                                            so determine for any accounting period, the reports provided to
                                            holders in accordance with (2) may be the reports complying with
                                            H CIS 10.3.3R(3)or H CIS 10.3.4R(3)(as the case may be) relating to the
                                            respective sub−fund to which their unitholdings relate. However, if
                                            requested to do so by any holder in respect of any particular
                                            accounting period, the authorised fund manager must provide to
                                            that holder (or, for joint holders, the first named), a report
                                            complying with H CIS 10.3.3R(2)or H CIS 10.3.4R(2)(as the case may be).

                                  (4)       The authorised fund manager must make available the most
                                            recent annual report (and, if more recent, the most recent
                                            half−yearly report) on the authorised fund in English prepared
                                            under H CIS 10.3.3R (Annual reports) and H CIS 10.3.4R (Half−yearly
                                            reports) for inspection by the public free of charge during ordinary
                                            office hours at a place specified for the purpose in the most
                                            recently published prospectus.

                                  (5)       The authorised fund manager must also make the reports referred
                                            to in (4) available for the same purpose at a place designated by it
10                                          in each EEA State other than the United Kingdom in which it
                                            markets units in the authorised fund, in English and in at least
                                            one of that other EEA State’s official languages.

                                  (6)       The authorised fund manager must provide a copy of each annual
                                            report and half−yearly report, any report sent or supplied in
                                            accordance with (3) and any report containing short form
                                            accounts on publication to the FSA.

         10.5.2A                         H COLL 4.5.6G which provides guidance on sufficient and significant
                   01.04.04/001   information which should be contained in short reports, applies in relation to short
                                  reports prepared for the purposes of H CIS 10.5.2R(2A). References in that guidance
                                  to a fundamental change should be regarded as a change requiring unitholder                      PAGE
                                  approval by meeting during the period. Similarly, references to a significant change              16

                                  should be regarded as a change in respect of which prior written notice of the
                                  change should be given to unitholders by the authorised fund manager.




     FSA Handbook H Release 029         D    March 2004                                                           10.5.2A
       CIS 10: Report and Accounts                                             Section 10.5: Publication and availability
                                                                                       of annual and half−yearly reports



                                     Reports to be made available

             10.5.3                  A copy of the most recent annual report of the authorised fund and
                      13.02.04/002   (if more recent) the most recent half−yearly report on the authorised
                                     fund must be sent to any person, free of charge, on request.



                                     Publication of availability of reports and prospectus

             10.5.4                  (1)   The authorised fund manager must, with every publication of
                      01.12.01/001         prices in a UK newspaper under H CIS 4.4.8R (Publications of prices)
                                           or H CIS 15.4.14R (Publications of prices), publish a statement that a
                                           copy of the most recent annual report or half−yearly report and
                                           prospectus is available free of charge to anyone who requests the
                                           ICVC or the authorised fund manager for it.

                                     (2)   It will be sufficient compliance with (1) if one of the pages in
                                           which the authorised fund manager publishes prices in the
                                           newspaper carries the statement there required in relation to all,
                                           or any relevant category of, the collective investment schemes
                                           referred to in those pages.




                                                                                                                            10




PAGE
 17




       FSA Handbook H Release 029    D     March 2004                                                       10.5.4
       CIS 15: Dual−pricing                                                               Section 15.4: Sale and redemption
       and dealing


                                                 minimum number or value of units, or units of the class
                                                 concerned, that may be purchased or held; or

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

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

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

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

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

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

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

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

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



                                     Sale price parameters

             15.4.4                  (1)   Except in the case of a large deal, the manager’s           price for
                      01.12.01/001         the sale of units must not exceed the maximum sale price of the
                                           relevant class; that is a price fixed by the manager and notified or
                                           to be notified to the trustee in respect of the last valuation point
                                           (or, for a sale at a forward price, to be notified in respect of the
                                           next valuation point) and that maximum sale price itself must not
PAGE
 17
                                           exceed the total (expressed to at least four significant figures) of:

                                           (a)   the issue price; and

                                           (b)   the current preliminary charge.
                                                                                                                              15

       FSA Handbook H Release 029    D     March 2004                                                            15.4.4
     CIS 15: Dual−pricing                                                              Section 15.4: Sale and redemption
     and dealing


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

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

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



                                 Preliminary charge

         15.4.5                  (1)       The sale price must not include a preliminary charge unless the
                  01.12.01/001             trust deed so permits.

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

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

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




                                 Increase in preliminary charge

         15.4.6                  The manager must not introduce a preliminary charge or increase
                  01.12.01/001   (within the maximum stated in the trust deed) the current amount or
                                 rate of a preliminary charge payable under H CIS 15.4.5R unless:

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

                                 (2)       the introduction or increase would not cause an infringement of H
                                           CIS 15.4.11R (Control over maximum charges on issue and
                                           redemption);                                                                    PAGE
                                                                                                                            18

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

                                           (a)   the manager gave notice in writing of that introduction or
                                                 increase and of the date of its commencement to the trustee
15                                               and to all the persons who ought reasonably to be known to


     FSA Handbook H Release 029        D     March 2004                                                     15.4.6
     CIS 15: Dual−pricing                                                                                                    Section 15.8: Valuation
     and dealing


                                                         (iii)     if any other such property            net value of margin of closing out
                                                                                                         (whether as a positive or negative figure)
                                                                                                         [Notes 7 and 8]
                                  Notes
                                              1.          The issue price is taken, instead of the maximum sale price
                                                          if the manager of the AUT whose scheme property is being valued is also the manager,
                                                          or an associate of the manager, of the AUT whose units form part of that property.
                                              2.          In this Section and in Section 6, “dealing costs” means any fiscal charges, commission
                                                          or other charges payable in the event of the AUT carrying out the transaction in ques-
                                                          tion, assuming that the commission and charges (other than fiscal charges) which would
                                                          be payable by the AUT are the least that could reasonably be expected to be paid in
                                                          order to carry out the transaction. On the issue basis, dealing costs exclude any prelimi-
                                                          nary charge on sale of units in an AUT.
                                              3.          Dealing costs under note 2. Include any dilution levy or SDRT provision which would
                                                          be added in the event of a purchase by the AUT of the units in question but, if the man-
                                                          ager of the AUT being valued, or an associate of the manager, is also the manager of
                                                          the AUT or the ACD of the ICVC whose units are held by the AUT, must not include a
                                                          preliminary charge which would be payable in the event of a purchase by the AUT of
                                                          those units.
                                              4           The buyer’s price is the consideration which would be paid by a buyer for an immedi-
                                                          ate transfer or assignment (or, in Scotland, assignation) to him at arm’s length.
                                              5.          Estimate the premium on writing an option of the same series on the best terms then
                                                          available on the most appropriate market on which such options are traded; but deduct
                                                          dealing costs.
                                              6.          Estimate the amount of profit or loss receivable or incurrable by the AUT on closing
                                                          out the contract. Deduct minimum dealing costs in the case of profit and add them in
                                                          the case of loss.
                                              7.          Estimate the amount of margin (whether receivable or payable by the AUT on closing
                                                          out the contract) on the best terms then available on the most appropriate market on
                                                          which such contracts are traded. If that amount is receivable (for example, the contract
                                                          is ”in the money”) deduct minimum dealing costs. If, however, that amount is payable
                                                          (for example, the contract is ”out of the money”) then add minimum dealing costs to
                                                          the margin and the value is that figure as a negative sum.
                                              8.         If the property is an OTC transaction in derivatives, use the relevant valuation referred
                                                         to in CIS 5.2.25 (OTC transactions in derivatives) or CIS 5A.6.6R (OTC transactions
                                                         in derivatives).
                                  Section 6: Cancellation basis
                                  24.         The valuation of property for that part of the valuation which is on a cancellation basis is as fol-
                                              lows:
                                              Property                                                   To be valued at
                                              (a)        Cash                                            nominal value
                                              (b)        Amounts held in current deposit and loan        nominal value
                                                         accounts
                                              (c)        Property which is not within (a), (b) or (d):
                                                         (i)       if units in and AUT to which CIS      except where Note 1 applies, the most re-
                                                                   15 (Dual–pricing and dealing)         cent minimum redemption price (less deal-
                                                                   applies                               ing costs) [Note 2]
                                                         (ii)      if shares in an ICVC or units in      the most recent price (less dealing costs)
                                                                   an AUT to which CIS 4 (Single–        [Notes 2 and 3]
                                                                   pricing and dealing) applies
                                                         (iii)     if any other investment               best available market dealing bid price on
                                                                                                         the most appropriate market in a standard
                                                                                                         size (less dealing costs) [Note 2]
                                                         (iv)      if other property, or no price ex-    manager’s reasonable estimate of a seller’s
                                                                   ists under (i) or (ii)                price (less dealing costs) [Notes 2 and 4]
                                              (d)        Property of the type described in 23.:
                                                         (i)       if a written option under 20.(d)      to be deducted (see 20.(d)) at a net valu-    PAGE
                                                                                                         ation of premium [Notes 5 and 8]               38

                                                         (ii)      if an off–exchange future             net value of closing out [Note 8]
                                                         (iii)     if any other such property            net value of margin on closing out
                                                                                                         (whether as a positive or negative figure)
                                                                                                         [Notes 6 and 8]
                                  Notes
15

     FSA Handbook H Release 029     D     March 2004                                                                                          15.8.3
       CIS 15: Dual−pricing                                                                                              Section 15.8: Valuation
       and dealing


                                                 1.      The cancellation price is taken instead of the minimum redemption price if the prop-
                                                         erty, if sold in one transaction, would amount to a large deal.
                                                 2.      For dealing costs see note 2. In 23.. Dealing costs include any charge payable on re-
                                                         demption of units in an AUT (taking account of any expected discount), except where
                                                         the manager of the AUT whose property is being valued is also the manager, or an
                                                         associate of the manager, of the AUT whose units form part of that property.
                                                 3.      Dealing costs under note 2. include any dilution levy or SDRT provision which would
                                                         be deducted in the event of a sale by the AUT of the units in question and, except when
                                                         the manager of the AUT being valued, or an associate of the manager, is also the man-
                                                         ager of the AUT or the ACD of the ICVC whose units are held by the AUT, include any
                                                         charge payable on the redemption of those units (taking account of any expected dis-
                                                         count).
                                                 4.      The seller’s price is the consideration which would be received by a seller for an im-
                                                         mediate transfer or assignment (or, in Scotland, assignation) from him at arm’s length,
                                                         less dealing costs.
                                                 5.      Estimate the premium on writing an option of the same series on the best terms then
                                                         available on the most appropriate market on which such options are traded, and add
                                                         dealing costs.
                                                 6.      For off–exchange futures, see note 6. In 23..
                                                 7.      For net value of margin see note 7. In 23..
                                                 8.      For over the counter transactions in derivatives, see note 8. in 23.




                                     Valuation under SETS

             15.8.5                  (1)          H CIS 15.8.4R requires certain property to be valued at the best available
                      01.04.04/002         market dealing offer or bid price (depending on whether the property is being
                                           valued on an issue or cancellation basis) for a deal of standard size on the most
                                           appropriate market, after taking account of dealing costs. If no price exists, the
                                           manager is required to use a reasonable estimate of a buying or selling price.

                                     (2)   Under the Stock Exchange Automated Quotation (SEAQ) System, the best
                                           market dealing offer or bid price in a particular security is generally understood
                                           to be the ‘touch’ price. Under SETS, the London Stock Exchange publishes an
                                           ‘official best price’ for each security, derived from the best prices displayed on
                                           the order book. It also publishes a ‘last trade price’. The best bid price is the
                                           price of the highest buy order on the order book at any given time, and the best
                                           offer price is the price of the lowest sell order on the book. The last trade price
                                           for securities traded on SETS is published throughout the day. The ‘official
                                           closing price’ is based on the last automatically executed trade taken from the
                                           order book.

                                     (3)   A manager may wish to use the last trade price as the basis for valuing SETS
                                           securities held as part of the scheme property. The last trade price will be a
                                           precise figure, not an estimate, and there will be complete certainty that the
                                           security in question has traded at that price. Alternatively, a manager may use
                                           the best bid and offer price displayed on the order book as the basis of
                                           valuation. Either method is acceptable, provided that the manager documents
                                           the choice of method and ensures that the procedures are applied consistently
                                           and fairly. The basis on which the scheme property is to be valued must be set
                                           out in the AUT’s prospectus, as required by H CIS 3.5.2R(17) (Valuation of
                                           scheme property).
PAGE
 39
                                     (4)   Circumstances may arise where the chosen method may not provide a reliable
                                           basis for valuation. Guidance on such instances is provided at H CIS 4.8.4G(4)
                                           (8). Additionally, where the manager imputes a ’spread’ in order to arrive at an
                                           estimated buying or selling price for example, in circumstances where there
                                           are no buy or sell orders on the order book, it should be able to justify any
                                           assumptions made.                                                                                       15

       FSA Handbook H Release 029    D     March 2004                                                                                  15.8.5
       CIS 16: Application                                                                Section 16.5: Restrictions of business
       and notification                                                                      for UCITS management companies




                                                                                                                                                               16

                                                         16.5      Restrictions of business for UCITS
                                                                   management companies




                                                                                                                      Section 16.5: Restrictions of business
                                                                                                                        for UCITS management companies




             16.5.1                  A UCITS management company must not engage in any activities
                      01.04.04/003   other than:

                                     (1)   acting as:

                                           (a)                authorised fund manager of an authorised fund; or

                                           (b)   an operator of any other collective investment scheme for
                                                 which the firm is subject to prudential supervision;

                                     (2)   activities for the purposes of or in connection with those in (1);

                                     (3)   collective portfolio management, including without limitation:

                                           (a)   investment management;

                                           (b)   administration:

                                                 (i)     legal and fund management accounting services;

                                                 (ii)               customer enquiries;

                                                 (iii)   valuation and pricing (including tax returns);

                                                 (iv)    regulatory compliance monitoring;

                                                 (v)     maintenance of unitholder register;

                                                 (vi)    distribution of income;

                                                 (vii)              unit issues and redemptions;

                                                 (viii) contract   settlements (including certificate dispatch); and

                                                 (ix)    record keeping; and
PAGE
 13
                                           (c)   marketing;

                                     (4)           managing investments where the relevant portfolio
                                           includes one or more ISD instruments;

                                     (5)                 advising on investments where:


       FSA Handbook H Release 029    D     March 2004                                                              16.5.1
     CIS 16: Application                                                                 Section 16.5: Restrictions of business
     and notification                                                                       for UCITS management companies



                                           (a)   the firm has a permission for the activity in (4); and
16
                                           (b)   each of the instruments is an ISD instrument; and

                                 (6)       safekeeping and administration of collective investment scheme
                                           units where the firm has a permission for the activity in (4).

         16.5.2                  (1)       Examples of the connected activities referred to in H CIS 16.5.1R(2) include
                  01.04.04/002             management of group plans, as long as they are dedicated to investments in unit
                                           trusts and OEICS for which the firm acts as manager or ACD.

                                 (2)       The restrictions of business imposed by H CIS 16.5.1R reflect the position under
                                           Article 5 of the UCITS Directive. In accordance with recital (7) of the amending
                                           UCITS Management Directive (2001/107/EC) the activities referred to at H CIS
                                           16.5.1R (3)(a) to (c) may be performed on behalf of EEA UCITS management
                                           companies.




                                                                                                                                  PAGE
                                                                                                                                   14




     FSA Handbook H Release 029        D     March 2004                                                             16.5.2
       CIS 18: Fees                                                                                  Section 18.2: Obligation
                                                                                                          to pay periodic fees




                                                        18.2   Obligation to pay periodic fees



                                                                                                                                                   18
                                                                                                                       Section 18.2: Obligation
                                                                                                                            to pay periodic fees




                                     General

             18.2.1                  A person identified in part B of H CIS 18Annex1R as the "relevant fee
                      17.01.02/001   payer" for a regulated collective investment scheme must pay each
                                     "periodic fee" applicable to it in full and without deduction.

             18.2.2                  A relevant fee payer will be required to pay a periodic fee for every year during
                      17.01.02/001   which a regulated collective investment scheme has that status. If that person is the
                                     relevant fee payer for more than one regulated collective investment scheme, he will
                                     be required to pay a fee in relation to each.



                                     Due date

             18.2.3                  The relevant fee payer must pay the amount due on or before 30
                      17.01.02/001   April.



                                     Method of payment

             18.2.4                  A periodic fee must be paid using one of the payment methods
                      01.04.04/002   specified in H SUP 20.2.7AR .



                                     Modifications for newly authorised or recognised schemes

             18.2.5                  If an authorisation order is made in relation to a scheme, or a scheme
                      17.01.02/001   becomes a recognised         collective investment scheme during the
                                     course of a financial year to which a H CIS 18Annex1R applies:

                                     (1)   the periodic fee required under H CIS 18.4 is modified in accordance
                                           with Table H CIS 18.2.6R 18.2.6R; and
PAGE
 3
                                     (2)   the due date for payment is 30 days after:

                                           (a)   the making of the authorisation order for the scheme; or

                                           (b)   the scheme becomes recognised.


       FSA Handbook H Release 029    D     March 2004                                                             18.2.5
     CIS 18: Fees                                                                               Section 18.2: Obligation
                                                                                                     to pay periodic fees



         18.2.6                  Table      Modified fees for newly authorised or recognised schemes
                  17.01.02/001              This table belongs to H CIS 18.2.5R

                                  Period in which authorisation or recognition is          a) Proportion of periodic fee
                                  granted                                                payable
                                  1 April to 30 June inclusive                           100%
                                  1 July to 30 September inclusive                       75%
                                  1 October to 31 December inclusive                     50%
18                                1 January to 31 March inclusive                        25%




                                                                                                                            PAGE
                                                                                                                             4




     FSA Handbook H Release 029    D     March 2004                                                         18.2.5
       CIS 18: Fees                                                              Section 18.3: Obligation to pay notification
                                                                                                        and application fees




                                                      18.3   Obligation to pay notification and
                                                             application fees


                                                                                                                                                                    18

                                                                                                                     Section 18.3: Obligation to pay notification
                                                                                                                                            and application fees




                                     General

             18.3.1                  The person identified in H CIS 18 Ann 2R as the relevant fee payer must
                      01.04.04/002   pay each fee applicable to any application or notification as specified
                                     in H CIS 18 Ann 2R.



                                     Due date

             18.3.2                  The relevant fee payer must pay a fee identified in H CIS 18 Ann 2R on or
                      01.04.04/002   before the date on which the relevant application or notification is
                                     made.

             18.3.3                  Any application or notification, for which a fee is payable under this section, will be
                      03.09.01/001   treated as incomplete until that fee is paid.



                                     Method of payment

             18.3.4                  A fee identified in H CIS 18 Ann 2R must be paid by bankers draft,
                      01.04.04/002   cheque or other payable order.




PAGE
 5




       FSA Handbook H Release 029    D   March 2004                                                                18.3.4
       CIS 18: Fees                                                                            Annex 2
                                                                                                                      01.04.04/001




              Application and notification fees payable

                                                                                                                                  CIS 18: Fees
                                                                                                                                     Annex 2
                                                                                                     FSA Handbook H Release 029 D March 2004
                                                                                                                                          18




             1      Table

                     Legislative        Nature and purpose of   Payable by   Amount of Umbrella                                                  18
                     provision          fee                                  fee       scheme
                                                                                       factor
                                                                                       (note 1)
                     Regulation         On application for an   An applicant   £1,200       2
                     12 of the          order declaring a       (note 2)
                     OEIC Re-           scheme to be an ICVC
                     gulations
                     Section 242 On application for an          An applicant     £1,200          2
                     of the Act  order declaring a              (note 2)
                                 scheme to be an AUT
                     Section 264 On giving notice under         The operator      £600           2
                     of the Act  section 264 of the Act         (note 3)
                     Section 270 On giving notice under         The operator      £600           2
                     of the Act  section 270 of the Act         (note 3)
                     Section 272 On application for an          An applicant     £14,000         2
                     of the Act  order declaring a              (note 2)
                                 scheme to be an individ-
                                 ually recognised over-
                                 seas scheme

             2      Table

                     Notes:

                     1. For an umbrella scheme the fee is multiplied by the factor shown in the final
                        column of the table.

                     2. The fee must accompany the application.

                     3. The fee must accompany the notice.




PAGE
 1




       FSA Handbook H Release 029   D   March 2004
       CIS                                                                                                      Schedule2
                                                                               CIS Sourcebook − Notification requirements



             Collective Investment Schemes
             Schedule2
              CIS Sourcebook − Notification requirements

                                                                                                                                                            CIS
                                                                                                                                                       Schedule2
                                                                                                                      CIS Sourcebook − Notification requirements
                                                                                                                FSA Handbook H Release 029 D March 2004




                    G

             1      This schedule sets out the notification requirements detailed in CIS in respect only of
                    notifications to be provided to the FSA.

             2                      Table    Notification requirements

                     Handbook ref-          Matter to be noti-   Contents of notifi-   Trigger             Time allowed
                     erence                 fied                 cation                event
                     CIS 1.1.1A             Election to comply   Details and date of   When election       Before election
                                            with COLL            occurrence            takes effect        takes effect

                     CIS 3.2.2 R            Prospectus           Copy provided         Marketing           Before market-
                                                                                       scheme              ing begins
                     CIS 5.2.26R(2)         Risk management       Methods of estimat- Application for      Up until autho-
                                            process and any       ing risk, types of   authorisation as    risation to
                                            material alteration   derivative their un- a scheme com-       comply with
                                            to it                 derlying risk and    plying with CIS     CIS 5 or intro-
                                                                  any quantitative li- 5 or any            duction of the
                                                                  mits                 subsequent          alteration to
                                                                                       proposed ma-        the process, as
                                                                                       terial alteration   appropriate
                                                                                       to the risk man-
                                                                                       agement pro-
                                                                                       cess
                     CIS 7.2.1 R (3)        Change to directors Details                Immediately         Immediate
                                            details or controller                      after the event
                                            of ACD
                     CIS 7.3.4 R            Capital of ICVC       Details if capital   Occurrence          Immediate
                                                                  falls below mini-
                                                                  mum or greater
                                                                  than maximum
                     CIS 7.4.3 R (1)        Mismanagement of Details                   Occurrence          Immediate
                                            ICVC
                     CIS 7.4.3.R (4)        Perceived misman- Details                  Where an in-        Immediate
                                            agement of ICVC                            vestigation by
                                                                                       the depositary
                                                                                       takes over 90
                                                                                       days
                     CIS 7.9.3 R (1)        Mismanagement of Details                   Occurrence          Immediate
PAGE                                        unit trust
 1
                     CIS 7.9.3 R (2)        Perceived misman- Details                  Where an in-        Immediate
                                            agement of unit                            vestigation by
                                            trust                                      the trustee
                                                                                       takes over 90
                                                                                       days




       FSA Handbook H Release 029   D   March 2004
CIS                                                                                                            Schedule2
                                                                              CIS Sourcebook − Notification requirements



            Handbook ref-         Matter to be noti-      Contents of notifi-      Trigger            Time allowed
            erence                fied                    cation                   event
            CIS 10.5.2 R          Annual and Half         Copies                   End of annual      Publication
            (6)                   yearly reports                                   or half– yearly
                                                                                   accounting
                                                                                   period
            CIS 11.5.1 G          Scheme of Ar-           Details                  Proposal that      One month be-
                                  rangement                                        the scheme will    fore proposed
                                                                                   be involved in a   change.
                                                                                   scheme of ar-
                                                                                   rangement
            CIS 12.5.5 R          ICVC with only one      Action to rectify        Umbrella has       24 months
                                  sub–fund                situation                only one sub–
                                                                                   fund
            CIS 13.1.3 R          Suspension of deal- Details including            Occurrence         Immediate
                                  ing                 reason for suspen-
                                                      sion
            CIS 14.2.4 R          Winding up a sol-   Solvency statement Winding up a                 Within 21 days
            (5)                   vent ICVC                              solvent ICVC                 of notice given
                                                                                                      under regula-
                                                                                                      tion 20 of
                                                                                                      OEIC regula-
                                                                                                      tions

            CIS 14.2.6 R          Winding up a sol-       Completion of wind- Winding up a            As soon as re-
            (8)                   vent ICVC               ing up              solvent ICVC            asonably
                                                                                                      practical after
                                                                                                      winding up
                                                                                                      completed.
            CIS 14.2.7 R          Winding up a sol-       Final accounts     End of final ac-         Two months
            (6)                   vent ICVC                                  counting period
            CIS 14.3.4 R          Winding up a sol-       Solvency statement Winding up a             Within 21 days
            (5)                   vent ICVC sub–                             solvent ICVC             of notice given
                                  fund                                       sub–fund                 under regula-
                                                                                                      tion 20 of
                                                                                                      OEIC regula-
                                                                                                      tions
            CIS 14.3.7 R          Winding up a sol-       Termination ac-          Termination of     Two months
            (5)                   vent ICVC sub–          count and auditor’s      sub–fund
                                  fund                    report
            CIS 14.4.3 R          Winding up of an        Completion of wind-      Winding up of      Immediate
            (5)                   AUT                     ing up                   an AUT
            CIS 16.1.4 G          Application for au-     Details                  Intention to op-   Six months be-
                                  thorisation of an                                erate an ICVC      fore launch
                                  ICVC                                                                (service stan-
                                                                                                      dard 6 weeks)
            CIS 16.1.6.G          Application for au-     Details                  Intention to       Six months be-
                                  thorisation of a unit                            manage a unit      fore launch
                                  trust                                            trust              (service stan-
                                                                                                      dards 6 weeks)
            CIS 16.1.8 G          Notification of         Details                  Wish to market     May market
                                  scheme constituted                               scheme in UK       two months
                                  in an EEA State to                                                  after appropri-      PAGE
                                                                                                                            2
                                  market in the UK                                                    ate notification
            CIS 16.1.9 G          Notification of a       Details                  Intention to       On approval or
                                  scheme constituted                               market scheme      no later than
                                  in a designated                                  in UK              two months fol-
                                  territory                                                           lowing notifica-
                                                                                                      tion



FSA Handbook H Release 029   D   March 2004

								
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