S.I. No. 352/2011 - European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011

• (ii) information on delegation arrangements regarding functions of investment management and administration referred to in Schedule 1.

• (b) Where a management company already manages other UCITS of the same type in the UCITS home Member State, reference to the documentation already provided shall be sufficient.

• (2) Upon request and in so far as it is necessary to ensure compliance with the rules for which they are responsible, the Bank may provide clarification and information regarding the documentation referred to in paragraph (1) and, based on the attestations referred to in Regulations 27(3) and 28(2), as to whether the type of UCITS for which authorisation is requested falls within the scope of the management company’s authorisation to the competent authority of the UCITS home Member State. Where applicable, the Bank shall provide its opinion within 10 working days of the initial request.

• (3) Any subsequent material modifications of the documentation referred to in paragraph (1) shall be notified by the management company concerned to the competent authority of the UCITS home Member State.

Provision of documentation to Bank

• (i) the agreement in writing with the trustee referred to in Regulations 35(6) and 51(3); and

• (ii) information on delegation arrangements regarding functions of investment management and administration referred to in Schedule 1.

• (b) Where a management company already manages other UCITS of the same type in the State, reference to the documentation already provided shall be sufficient.

• (2) In so far as it is necessary to ensure compliance with the rules for which it is responsible, the Bank may ask the competent authority of the management company’s home Member State for clarification and information regarding the documentation referred to in paragraph (1) and, based on the attestations referred to in Regulations 27(3) and 28(2), as to whether the type of UCITS for which authorisation is requested falls within the scope of the management company’s authorisation. The competent authority of the management company’s home Member State shall provide their opinion within 10 working days of the initial request.

(3)(a) The Bank may refuse the application of the management company only where—

• (i) the management company does not comply with the rules falling under their responsibility pursuant to Regulation 29,

• (ii) the management company is not authorised by the competent authority of the management company’s home Member State to manage the type of UCITS for which authorisation is requested, or

• (iii) the management company has not provided the documentation referred to in paragraph (1).

• (b) Before refusing an application, the Bank shall consult the competent authority of the management company’s home Member State.

• (4) Any subsequent material modifications of the documentation referred to in paragraph (1) shall be notified by the management company concerned to the Bank.

Provisions applicable to management company authorised in another Member State

(2)(a) The Bank may require a management company, authorised in another Member State which carries on business within the State, to provide information necessary to monitor its compliance with these Regulations.

• (b) Management companies shall provide information on the procedures and arrangements in relation to investor complaints as required under Regulation 25 to the Bank upon request.

• (3) Where the Bank ascertains that a management company that has a branch or provides services within the State is in breach of one of the rules under the Bank’s responsibility, it shall require the company to put an end to that breach and inform the competent authority of the management company’s home Member State of the breach.

• (4) Where the management company concerned refuses to provide the Bank with information falling under its responsibility, or fails to take the necessary steps to put an end to the breach referred to in paragraph (3), the Bank, acting as the competent authority of the host Member State, shall inform the competent authority of the management company’s home Member State accordingly.

• (5) Where the management company continues to refuse to provide the information requested by the Bank pursuant to paragraph (2), or persists in breaching the legal or regulatory provisions in force in the State, the Bank may, after informing the competent authority of the management company’s home Member State, take appropriate measures, including under Regulations 126 and 127, to prevent or to penalise further irregularities and, in so far as is necessary, to prevent that management company from initiating any further transaction within the State. Where the service provided within the State is the management of a UCITS, the Bank may require the management company to cease managing the UCITS.

• (6) Any measure adopted pursuant to paragraphs (4) or (5) involving measures or penalties shall be properly justified and communicated to the management company concerned. Every such measure shall be subject to the right to apply to the court as provided for in Regulation 135.

• (7) Before following the procedure laid down in paragraph (3), (4) or (5), the Bank may, in emergencies, take any precautionary measures necessary to protect the interests of investors and others for whom services are provided. The Bank shall inform the Commission and the competent authority of the other Member States concerned of such measures at the earliest opportunity.

• (8) Having been consulted by the competent authority of the management company’s home Member State before the withdrawal of that management company’s authorisation, the Bank, as competent authority of the UCITS home Member State, shall take appropriate measures to safeguard investors’ interests. Those measures may include decisions preventing the management company concerned from initiating any further transactions within the State.

• (9) The Bank shall inform the Commission of the number and type of cases in which they refuse authorisation under Regulation 27 or an application under Regulation 30 and of any measures taken in accordance with paragraph (5).

PART 5 Obligations Regarding Trustee

Safe-keeping of assets

• (2) A trustees liability as referred to in Regulation 36 shall not be affected by the fact that it has entrusted to a third party some or all of the assets in its safe-keeping.

Obligations of trustee

• (a) ensure that the sale, issue, repurchase, redemption and cancellation of units effected on behalf of a unit trust, common contractual fund or by a management company are carried out in accordance with these Regulations and the trust deed or the deed of constitution, as the case may be,

• (b) ensure that the value of units is calculated in accordance with these Regulations and the trust deed in the case of a unit trust or the deed of constitution in the case of a common contractual fund,

• (c) carry out the instructions of the management company unless they conflict with these Regulations or the trust deed in the case of a unit trust or the deed of constitution in the case of a common contractual fund,

• (d) ensure that in transactions involving the assets of a unit trust or of a common contractual fund any consideration is remitted to it within the usual time limits, and

• (e) ensure that the income of a unit trust or of a common contractual fund is applied in accordance with these Regulations and, as the case may be, the trust deed or the deed of constitution.

• (2) The trustee shall enquire into the conduct of the management company in the management of the unit trust or common contractual fund, as the case may be, in each annual accounting period and report thereon to the unit-holders. The trustee’s report shall be delivered to the management company in good time to enable it to include a copy of the report in the annual report required under Regulation 88. The report shall state whether in the trustees opinion the management has managed the unit trust or the common contractual fund, as the case may be, in that period—

• (a) in accordance with the limitations imposed on the investment and borrowing powers of the manager and trustee by the trust deed or deed of constitution, as the case may be, and these Regulations, and

• (b) otherwise in accordance with the provisions of the trust deed or deed of constitution, as the case may be, and these Regulations,

and, if it has not done so, in what respects it has not done so and the steps which the trustee has taken in respect thereof.

Trustee

• (2) A trustee shall—

• (a) be a credit institution authorised in the State with paid-up share capital which is not less than the limit specified in the Bank’s Licensing Requirements, or

• (b) be a branch, established in the State, of a credit institution with a paid-up share capital which is not less than the limit specified in the Bank’s Licensing Requirements,

• (c) be a company incorporated in the State which—

• (i) is wholly owned by a credit institution, provided the liabilities of the trustee are guaranteed by the credit institution and the credit institution has a paid-up share capital which is not less than the limit specified in the Bank’s Licensing Requirements,

• (ii) is wholly owned by an institution in a third country which is deemed by the Bank to be the equivalent of a credit institution, provided the liabilities of the trustee are guaranteed by the credit institution and that credit institution has a paid-up share capital which is not less than the limit specified in the Bank’s Licensing Requirements, or

• (iii) is wholly owned by an institution or company either in a Member State or in a third country which is deemed by the Bank to be an institution or company which provides unit-holders with protection equivalent to that provided by a trustee under subparagraph (a), (b) or (c)(i) or (ii) and provided the liabilities of the company acting as trustee are guaranteed by the said institution or company and that institution or company has a paid-up share capital which is not less than the limit specified in the Bank’s Licensing Requirements.

• (3) A trustee shall satisfy the Bank that it has the appropriate expertise and experience to carry out its functions under these Regulations.

• (4) In this Regulation, the Bank’s Licensing Requirements means the Banks Licensing and Supervision Requirements and Standards for Credit Institutions as issued by the Bank from time to time.

• (5) The trustee shall enable the Bank to obtain, on request, all information that the trustee has obtained while discharging its duties and that is necessary for the Bank to supervise the UCITS compliance with these Regulations.

• (6) Where the management company’s home Member State is not the State, the trustee shall sign an agreement in writing with the management company regulating the flow of information deemed necessary to allow it to perform the functions set out in Regulation 34 and in other laws, regulations or administrative provisions which are relevant for trustees in the State.

• (7) The requirements specified in Schedule 6 shall have effect for the purposes of this Regulation.

Liability of trustee

• (2) Liability to unit-holders may be invoked either directly or indirectly through the management company, depending on the legal nature of the relationship between the trustee, the management company and the unit-holders.

Prohibition against single company acting as both management company and trustee

• (2) The assets of a UCITS established as either a unit trust or common contractual fund shall belong exclusively to the UCITS. The assets shall be segregated from the assets of the trustee or its agents or both and shall not be used to discharge directly or indirectly liabilities or claims against any other undertaking or entity and shall not be available for any such purpose.

• (3) Where a UCITS established as a unit trust or common contractual fund is constituted as an umbrella fund, the assets shall belong exclusively to the relevant sub-fund and shall not be used to discharge directly or indirectly the liabilities of or claims against any other sub-fund and shall not be available for any such purpose.

• (4) The liabilities of a unit-holder shall be limited to the amount agreed to be contributed by him or her for the subscription of units. The provisions of the trust deed or the deed of constitution shall be binding on the unit-holders and all persons claiming through the unit-holders as if such persons had been party to the trust deed or to the deed of constitution, as the case may be.

Trust deed, etc. to lay down conditions for replacement of management company, etc

PART 6 Obligations Regarding Investment Companies

Chapter 1 Conditions for taking up business

Investment companies with fixed capital

• (2) A company to which this Regulation applies shall include the words “investment company” or “cuideachta infheistíochta” on all its deeds, announcements, publications, letters and other documents.

(3)(a) Subject to this Regulation, a company to which this Regulation applies may, if so authorised by its articles, issue redeemable preference shares which are liable at the option of the shareholder to be redeemed, and redeem them accordingly.

• (b) The issue and redemption of shares by a company pursuant to subparagraph (a) shall be subject to the following conditions:

• (i) no redeemable shares shall be redeemed unless they are fully paid;

• (ii) no such shares shall be redeemed except out of profits available for distribution or out of the proceeds of a fresh issue of shares made for the purposes of redemption; and

• (iii) the premium, if any, payable on redemption shall have been provided for out of the profits of the company or out of the companys share premium account before the shares are redeemed.

• (c) Shares redeemed under this paragraph shall be treated as cancelled on redemption and the amount of the companys issued share capital shall be reduced by the nominal value of those shares accordingly but no such cancellation shall be taken as reducing the amount of the companys authorised share capital.

• (d) Where redeemable shares are—

• (i) redeemed wholly out of profits available for distribution, or

• (ii) redeemed wholly or partly out of the proceeds of a fresh issue and the aggregate amount of those proceeds is less than the aggregate nominal value of the shares redeemed (“the aggregable difference”)

then a sum equal to, in the case of clause (i) of this paragraph, the nominal amount of the shares redeemed and, in the case of clause (ii), the aggregable difference, shall be transferred to a reserve fund ("the capital redemption reserve fund") and the provisions of the Companies Acts relating to the reduction of the share capital of a company shall, except as provided in this section, apply as if the capital redemption reserve fund were paid-up share capital of the company.

• (e) Subject to this paragraph and Regulation 104, the redemption of shares may be effected on such terms and in such manner as may be provided by the articles of the company.

• (4) The following provisions of the Companies Acts shall, in so far as the redemption of shares is made in accordance with these Regulations, not apply to a company to which this Regulation applies:

• (a) the Companies Act 1963 —

section 53 (minimum subscription and amount payable on application),

section 58 (return as to allotments),

section 60 (giving of financial assistance by a company for the purchase of its shares),

section 69 (notice to registrar of certain alterations in share capital),

section 70 (notice of increase in share capital),

section 72 (power of company to reduce its share capital),

section 119 (inspection of register and index),

section 125 (annual return to be made by a company having a share capital);

• (b) the Companies (Amendment) Act 1983 (No. 13 of 1983)—

section 5(2) (minimum amount of share capital),

section 6 (restriction on the commencement of business by a public limited company),

section 19 (meaning of “authorised minimum”),

sections 20(3) and 20(4) (duration of authority to allot securities),

section 22 (document containing offer to state whether shares will be allotted where issue not fully subscribed),

sections 23 to 25 (pre-emption rights),

sections 30 to 33 (experts’ reports on non-cash consideration before allotment of shares),

section 40 (obligation to convene extraordinary general meeting in event of serious loss of capital),

section 41(1) (restriction on company acquiring its own shares),

Part IV (restrictions on distribution of profits and assets);

• (c) the Companies (Amendment) Act 1986 (No. 25 of 1986)—

section 14 (information to be included in directors’ report regarding acquisition by company of own shares);

• (d) the Companies Act 1990 —

chapters 2 to 4 of Part IV,

section 140 (company may be required to contribute to debt of related company, whether as regards a case in which the investment company is being wound up or a case in which it is a related company within the meaning of that section),

Part XI.

Investment companies with variable capital

• (2) A company to which this Regulation applies shall include the words “investment company with variable capital” or “cuideachta infheistíochta le caipiteal athraitheach” on all its deeds, announcements, publications, letters and other documents.

(3)(a) Subject to this Regulation, a company to which this Regulation applies may, if so authorised by its articles, repurchase its own shares provided that no such shares shall be repurchased unless they are fully paid.

• (b) Subject to this Regulation, the repurchase of shares may be effected on such terms and in such a manner as may be provided for by the articles of the company.

(4)(a) Subject to this paragraph and Regulation 104, a company to which this Regulation applies shall, if requested to do so by a shareholder, repurchase such of the shareholders shares as may be requested by the shareholder.

• (b) Shares which have been repurchased under subparagraph (a) shall be treated as cancelled and the amount of the companys issued share capital shall be reduced accordingly.

(5)(a) A company to which this Regulation applies and which is established as an umbrella fund may acquire by way of subscription or transfer for consideration shares in one sub-fund of the company for the account of another sub-fund of the company in accordance with Regulation 73.

• (b) Units acquired under Regulation 73 may be held for the account of the sub-fund for which they were acquired and need not be cancelled.

• (6) For the avoidance of doubt, nothing in the Companies Acts or in these Regulations shall require a company to which this Regulation applies to create a legal reserve.

(7)(a) The following provisions of the Companies Acts shall not apply to a company to which this Regulation applies:

• (i) the Companies Act 1963 —

section 53 (minimum subscription and amount payable on application),

section 58 (return as to allotments),

section 60 (giving of financial assistance by a company for the purchase of its shares),

section 69 (notice to registrar of certain alterations in share capital),

section 70 (notice of increase in share capital),

section 72 (power of company to reduce its share capital),

section 119 (inspection of register and index),

section 125 (annual return to be made by a company having a share capital);

• (ii) the Companies (Amendment) Act 1983 —

section 5(2) (minimum amount of share capital),

section 6 (restriction on the commencement of business by a public limited company),

section 19 (meaning of “authorised minimum”),

section 20(3) and (4) (duration of authority to allot securities),

section 22 (document containing offer to state whether shares will be allotted where issue not fully subscribed),

sections 23 to 25 (pre-emption rights),

sections 30 to 33 (experts’ reports on non-cash consideration before allotment of shares),

section 40 (obligation to convene extraordinary general meeting in event of serious loss of capital),

section 41 (restriction on company acquiring its own shares),

section 43 (treatment of shares held by or on behalf of a public limited company,

section 43A (accounting for own shares)),

Part IV (restrictions on distribution of profits and assets);

• (iii) the Companies (Amendment) Act 1986 —

section 14 (information to be included on directors’ report regarding acquisition by company of own shares);

• (iv) the Companies Act 1990 —

chapters 2 to 4 of Part IV,

section 140 (company may be required to contribute to debt of related company, whether as regards a case in which the investment company is being wound up or a case in which it is a related company within the meaning of that section),

Part XI.

• (b) Section 6(4)(a) of the Companies Act 1963 shall have effect in relation to a company to which this Regulation applies as if the words “and the division thereof into shares of a fixed amount” were omitted.

Provisions supplementary to Regulations 39 and 40

• (2) The registered office of an investment company to which Regulation 39 or 40 applies shall be situated in the State.

Authorisation of investment company

• (b) The investment company shall communicate to the Bank the names of its directors and of every person succeeding them in office.

• (2) An investment company may start business as soon as authorisation has been granted.

• (3) An investment company shall only manage assets of its portfolio and shall not, under any circumstances, receive any mandate to manage assets on behalf of a third party.

(4)(a) The Bank shall not authorise an investment company which has not appointed a management company unless—

• (i) the investment company has an initial capital of at least €300,000,

• (ii) the investment company has submitted a programme of activity to the Bank setting out at least its organisational structure in the application for authorisation, and

• (iii) the conduct of the investment company’s business is decided by at least 2 persons who meet the conditions laid down by the Bank in accordance with paragraph (a).

• (b) Where close links exist between the investment company and other natural or legal persons, the Bank shall grant authorisation only if those close links do not prevent the effective exercise of its supervisory functions.

• (c) The Bank shall refuse authorisation if the laws, regulations or administrative provisions of a third country governing one or more natural or legal persons with whom the investment company has close links, or difficulties involved in their enforcement, prevent the effective exercise of its supervisory functions.

• (d) A proposed investment company shall be informed within 6 months of the date of receipt of a complete application whether or not authorisation has been granted. Reasons shall be given whenever an authorisation is refused.

Chapter 2 Operating conditions

Application of Regulations 23 and 24

• (2) For the purpose of paragraph (1), references in regulations 23 and 24 (including Schedule 5) to “management company” mean “investment company”.

Prudential rules for investment companies

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

Application of segregated liability to investment companies established as UCITS

Chapter 3 Obligations regarding trustee

Safe-keeping of assets

• (2) A trustees liability as referred to in Regulation 52 shall not be affected by the fact that it has entrusted to a third party some or all of the assets in its safekeeping.

• (3) The assets of an investment company shall belong exclusively to the investment company. The assets shall be segregated from the assets of the trustee or its agents or both and shall not be used to discharge directly or indirectly liabilities or claims against any other undertaking or entity and shall not be available for any such purpose.

Obligations of trustee

• (a) ensure that the sale, issue, repurchase, redemption and cancellation of shares effected by or on behalf of an investment company are carried out in accordance with these Regulations and with its memorandum and articles,

• (b) ensure that the value of units is calculated in accordance with these Regulations and the investment company’s memorandum and articles,

• (c) carry out the instructions of the investment company unless they conflict with these Regulations or its memorandum and articles,

• (d) ensure that in transactions involving an investment company’s assets any consideration is remitted to it within the usual time limits, and

• (e) ensure that an investment company’s income is applied in accordance with these Regulations and its memorandum and articles.

• (2) A trustee shall enquire into the conduct of the investment company in each annual accounting period and report thereon to the shareholders. The trustees report shall be delivered to the investment company in good time to enable it to include a copy of the report in the annual report required under Regulation 88. The report shall state whether in the trustees opinion the investment company has been managed in that period—

• (a) in accordance with the limitations imposed on the investment and borrowing powers of the investment company by the memorandum and articles and these Regulations, and

• (b) otherwise in accordance with the provisions of the memorandum and articles and these Regulations,

and, if it has not been so managed, in what respects it has not been so managed and the steps which the trustee has taken in respect thereof.

Exemption from requirement to have trustee

• (2) Regulations 96, 104 and 108 shall not apply to such companies. The rules for the valuation of such companies assets shall be stated in their articles.

Further exemption

• (2) In exercising this discretion, the Bank shall be satisfied that unit-holders in the investment companies referred to in paragraph (1) have equivalent protection to that of unit-holders of UCITS which have a trustee within the meaning of these Regulations. In particular, such investment companies and the companies referred to in Regulation 48 shall—

• (a) state in their articles the methods of calculation of the net asset value of their units,

• (b) intervene on the market to prevent the stock exchange value of their units from deviating by more than 5% from their net asset value, and

• (c) establish the net asset values of their units and communicate them to the Bank at least twice a week and publish them at least twice a month.

• (3) At least twice a month, an independent auditor, being a person empowered to audit accounts in accordance with the Companies Acts, shall ensure that the calculation of the value of the units is effected in accordance with the investment companys articles. On such occasions, the auditor shall ensure that the companys assets are invested in accordance with the provisions in these Regulations and in the company’s articles.

Requirement on Bank to inform EC Commission regarding exemptions

Application of Regulation 35(1) to (3) and (7)

• (2) The trustee shall enable the Bank to obtain, on request, all information that the trustee has obtained while discharging its duties and that is necessary for the Bank to supervise compliance of the UCITS with these Regulations.

• (3) Where the management company’s home Member State is not the State and the management company proposes to act as manager to a UCITS authorised by the Bank, the trustee shall sign an agreement in writing with the management company regulating the flow of information deemed necessary to allow it to perform the functions set out in Regulations 46 to 50 and in other laws, regulations or administrative provisions which are relevant for trustees in the State.

Liability of trustee

Company shall not act as both investment company and trustee

• (2) In carrying out its role as trustee, the trustee shall act solely in the interests of the unit-holders.

Articles to lay down conditions for replacement of trustee

PART 7 Mergers of UCITS

Interpretation — Part 7

Permitted mergers

Authorisation by Bank of merger

(2)(a) The merging UCITS shall provide the following information (the “File”) to the Bank:

• (i) the common draft terms of the proposed merger (the “Terms”) duly approved by the management of the merging UCITS and the management of the receiving UCITS, as set out in Regulation 58;

• (ii) an up-to-date version of the prospectus and the key investor information, referred to in Regulation 98 of the receiving UCITS, if it is established in another Member State;

• (iii) a statement by each of the trustees of the merging UCITS and the receiving UCITS confirming that, in accordance with Regulation 59, they have verified compliance of the particulars set out in clauses (i), (vi) and (vii) of subparagraph (a) of Regulation 58(1) with the requirements of these Regulations and the trust deed, deed of constitution or articles of their respective UCITS; and

• (iv) the information on the proposed merger that each of the merging UCITS and the receiving UCITS intend to provide to their respective unit-holders, referred to in Regulation 61.

• (b) The information required under clause (a) shall be provided in such a manner as to enable the Bank to read it in one of the State’s languages or in a language acceptable to the Bank.

(3)(a) Once the File is complete, the Bank shall immediately transmit copies of the File to the competent authority of the receiving UCITS home Member State. The Bank and the competent authority of the receiving UCITS home Member State shall consider the potential impact of the proposed merger on unit-holders of the merging and the receiving UCITS to assess whether appropriate information under clause (iv) of subparagraph (a) of paragraph (2) is being provided to unit-holders. If the Bank considers it necessary, it may require, in writing, that the information to unit-holders of the merging UCITS be clarified.

• (b) Where the competent authority of the receiving UCITS home Member State consider it necessary, they may require, in writing, and no later than 15 working days of receipt of the copies of the File, that the receiving UCITS modify the information to be provided to its unit-holders.

• (c) In such a case, the competent authority of the receiving UCITS home Member State shall send an indication of their dissatisfaction to the Bank and inform the Bank whether they are satisfied with the modified information to be provided to the unit-holders of the receiving UCITS within 20 working days of being notified thereof.

• (4) The Bank shall authorise the proposed merger if the following conditions are met:

• (a) the proposed merger complies with all of the requirements of this Regulation and Regulations 58 to 60;

• (b) the receiving UCITS has been notified, in accordance with Regulation 117, to market its units in the State and in all Member States where the merging UCITS has been notified to market its units in accordance with that Regulation; and

• (c) the Bank and the competent authority of the receiving UCITS home Member State are satisfied with the proposed information to be provided to unit-holders, or no indication of dissatisfaction from the competent authorities of the receiving UCITS home Member State has been received under paragraph (3).

(5)(a) Where the Bank considers that the File is not complete, it shall request additional information within 10 working days of receiving the File.

• (b) The Bank shall inform the merging UCITS, within 20 working days of submission of the File, in accordance with paragraph (2), whether or not the merger has been authorised. The Bank shall also inform the competent authority of the receiving UCITS home Member State of its decision.

• (6) The Bank may allow recently authorised UCITS to derogate from Regulations 70 to 73 for 6 months following the date of their authorisation, provided they observe the principle of risk-spreading.

Terms of merger

• (i) an identification of the type of merger and of the UCITS involved;

• (ii) the background to and rationale for the proposed merger;

• (iii) the expected impact of the proposed merger on the unit-holders of both the merging UCITS and the receiving UCITS;

• (iv) the criteria adopted for valuation of the assets and, where applicable, the liabilities on the date for calculating the exchange ratio as referred to in Regulation 65(1);

• (v) the calculation method of the exchange ratio;

• (vi) the planned effective date of the merger;

• (vii) the rules applicable, respectively, to the transfer of assets and the exchange of units; and

• (viii) in the case of a merger pursuant to paragraph (b) of the definition in Regulation 3(1) of “merger” and, where applicable, paragraph (c) of that definition, the trust deed, deed of constitution or articles of the newly constituted receiving UCITS.

• (b) The Bank shall not require that any additional information is included in the Terms.

• (2) The merging UCITS and the receiving UCITS may decide to include further items in the Terms.

Verification

Validation of certain matters

• (a) the criteria adopted for valuation of the assets and, where applicable, the liabilities on the date for calculating the exchange ratio, as referred to in Regulation 65(1);

• (b) where applicable, the cash payment per unit; and

• (c) the calculation method of the exchange ratio as well as the actual exchange ratio determined at the date for calculating that ratio, as referred to in Regulation 65(1).

• (2) The statutory auditor of the merging UCITS or the statutory auditor of the receiving UCITS shall be considered independent auditors for the purposes of paragraph (1).

• (3) A copy of the reports of the independent auditor, or, where applicable, the trustee shall be made available on request and free of charge to the unit-holders of both the merging UCITS and the receiving UCITS and to their respective competent authorities.

Information on merger

(b)(i) The information to be provided to unit-holders pursuant to sub-paragraph (a) shall be written in a concise manner and in non-technical language that enables unit-holders to make an informed judgement of the impact of the proposed merger on their investment. In the case of a proposed cross-border merger, the merging UCITS and the receiving UCITS, respectively, shall explain in plain language any terms or procedures relating to the other UCITS which differ from those commonly used in the other Member State.

• (ii) The information to be provided to the unit-holders of the merging UCITS shall meet the needs of investors who have no prior knowledge of the features of the receiving UCITS or of the manner of its operation. It shall draw their attention to the key investor information of the receiving UCITS and emphasise the desirability of reading it.

• (iii) The information to be provided to the unit-holders of the receiving UCITS shall focus on the operation of the merger and its potential impact on the receiving UCITS.

(2)(a) That information shall be provided to unit-holders of the merging UCITS and of the receiving UCITS only after the Bank has authorised the proposed merger under Regulation 57.

• (b) It shall be provided at least 30 days before the last date for requesting repurchase or redemption or, where applicable, conversion without additional charge as set out in Regulation 63(1).

(3)(a) The information to be provided to unit-holders of the merging UCITS and of the receiving UCITS, shall include appropriate and accurate information on the proposed merger such as to enable them to take an informed decision on the possible impact thereof on their investment and to exercise their rights under Regulations 62 and 63.

• (b) The information shall include the following:

• (i) the background to and the rationale for the proposed merger;

• (ii) the possible impact of the proposed merger on unit-holders, including but not limited to any material differences in respect of investment policy and strategy, costs, expected outcome, periodic reporting, possible dilution in performance, and, where relevant, a prominent warning to investors that their tax treatment may be changed following the merger;

• (iii) any specific rights unit-holders have in relation to the proposed merger, including but not limited to the right to obtain additional information, the right to obtain a copy of the report of the independent auditor or the trustee on request, and the right to request the repurchase or redemption or, where applicable, the conversion of their units without charge as specified in Regulation 63(1) and the last date for exercising that right;

• (iv) the relevant procedural aspects and the planned effective date of the merger, and

• (v) a copy of the key investor information, referred to in Regulation 98, of the receiving UCITS.

• (4) Where the merging UCITS or the receiving UCITS has been notified in accordance with Regulation 117, the information referred to in paragraph (3) shall be provided to unit holders in the State in one of the State’s languages. Where notified in other Member States in accordance with Regulation 115, the information referred to in paragraph (3) shall be provided to unit-holders in each UCITS host Member State in the official language, or one of the official languages, of the relevant UCITS host Member State.

• (5) The requirements specified in Schedules 7 and 8 shall have effect for the purposes of this Regulation.

Maximum percentage of votes cast to approve merger

Purchase or redemption of units

• (2) Without prejudice to paragraph (1), for mergers between UCITS and by way of derogation from Regulation 104(1), the Bank may require or allow the temporary suspension of the subscription, repurchase or redemption of units provided that such suspension is justified for the protection of the unit-holders.

Legal, advisory and administrative costs of merger

Law applicable to merger

• (b) For cross-border mergers, the laws of the receiving UCITS home Member State shall determine those dates. Where the State is the receiving UCITS home Member States, the Bank shall ensure that, where applicable, those dates are after the approval of the merger by unit-holders of the receiving UCITS or the merging UCITS.

• (2) The entry into effect of the merger shall be made public through all appropriate means in the manner prescribed by the laws of the receiving UCITS home Member State, and shall be notified to the competent authorities of the home Member States of the merging UCITS and the receiving UCITS.

• (3) A merger which has taken effect as provided for in paragraph (1) shall not be declared void.

Consequences of different kinds of merger

• (a) all the assets and liabilities of the merging UCITS are transferred to the receiving UCITS or, where applicable, to the trustee of the receiving UCITS;

• (b) the unit-holders of the merging UCITS become unit-holders of the receiving UCITS and, where applicable, they are entitled to a cash payment not exceeding 10 % of the net asset value of their units in the merging UCITS; and

• (c) the merging UCITS cease to exist on the entry into effect of the merger.

• (2) A merger effected in accordance with paragraph (b) of the definition in Regulation 3(1) of “merger” shall have the following consequences:

• (a) all the assets and liabilities of the merging UCITS are transferred to the newly constituted receiving UCITS or, where applicable, to the trustee of the receiving UCITS;

• (b) the unit-holders of the merging UCITS become unit-holders of the newly constituted receiving UCITS and, where applicable, they are entitled to a cash payment not exceeding 10 % of the net asset value of their units in the merging UCITS; and

• (c) the merging UCITS cease to exist on the entry into effect of the merger.

• (3) A merger effected in accordance with paragraph (c) of the definition in Regulation 3(1) of “merger” shall have the following consequences:

• (a) the net assets of the merging UCITS are transferred to the receiving UCITS or, where applicable, the trustee of the receiving UCITS;

• (b) the unit-holders of the merging UCITS become unit-holders of the receiving UCITS; and

• (c) the merging UCITS continues to exist until the liabilities have been discharged.

(4)(a) The management company of the receiving UCITS shall confirm to the trustee of the receiving UCITS that transfer of assets and, where applicable, liabilities is complete.

• (b) Where the receiving UCITS has not designated a management company, it shall give that confirmation to the trustee of the receiving UCITS.

PART 8 Obligations concerning Investment Policies of UCITS

Sub-funds of UCITS to be regarded as separate UCITS

Permitted investments

• (a) transferable securities and money market instruments admitted to or dealt in on a regulated market within the meaning of Regulation 3(1) of the MIFID Regulations;

• (b) transferable securities and money market instruments dealt in on another regulated market in a Member State, which operates regularly and is recognised and open to the public;

• (c) transferable securities and money market instruments admitted to official listing on a stock exchange in a third country or dealt in on another regulated market in a third country which operates regularly and is recognised and open to the public provided that the choice of stock exchange or market has been approved by the competent authorities or is provided for in law or the fund rules or the instruments of incorporation of the investment company;

• (d) recently issued transferable securities, provided that—

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

• (ii) the admission referred to in clause (i) is secured within a year of issue;

• (e) units of UCITS authorised according to the Directive or other collective investment undertakings within the meaning of Regulation 4(3), whether or not established in a Member State, provided that—

• (i) such other collective investment undertakings are authorised under laws which provide that they are subject to supervision considered by the Bank to be equivalent to that laid down in Community law, and that cooperation between authorities is sufficiently ensured,

• (ii) the level of protection for unit-holders in the other collective investment undertakings is equivalent to that provided for unit-holders in a UCITS, and in particular that the rules on asset segregation, borrowing, lending, and uncovered sales of transferable securities and money market instruments are equivalent to the requirements of the Directive,

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

• (iv) not more than 10 % of the assets of the UCITS or of the other collective investment undertakings, whose acquisition is contemplated, can, according to their trust deed, deed of constitution or articles, be invested in aggregate in units of other UCITS or other collective investment undertakings;

• (f) deposits with credit institutions which are repayable on demand or have the right to be withdrawn, and maturing in not more than 12 months, provided that the credit institution has its registered office in a Member State or, if the credit institution has its registered office in a third country, provided that it is subject to prudential rules considered by the Bank as equivalent to those laid down in Community law;

• (g) financial derivative instruments, including equivalent cash-settled instruments, dealt in on a regulated market referred to in sub-paragraph (a), (b) or (c) or financial derivative instruments dealt in OTC derivatives, provided that—

• (i) the underlying of the derivative consists of instruments covered by this paragraph, financial indices, interest rates, foreign exchange rates or currencies, in which the UCITS may invest according to its investment objectives as stated in its trust deed, deed of constitution or articles,

• (ii) the counterparties to OTC derivative transactions are institutions subject to prudential supervision, and belonging to the categories approved by the Bank, and

• (iii) the OTC derivatives are subject to reliable and verifiable valuation on a daily basis and can be sold, liquidated or closed by an offsetting transaction at any time at their fair value at the UCITS’ initiative;

or

• (h) money market instruments (other than those dealt in on a regulated market) where the issue or issuer of such instruments is itself regulated for the purpose of protecting investors and savings, provided that they are—

• (i) issued or guaranteed by a central, regional or local authority or central bank of a Member State, the European Central Bank, the Community or the European Investment Bank, a third country or, in the case of a Federal State, by one of the members making up the federation, or by a public international body to which one or more Member States belong,

• (ii) issued by an undertaking any securities of which are dealt in on a regulated market referred to in subparagraph (a), (b) or (c),

• (iii) issued or guaranteed by an establishment subject to prudential supervision, in accordance with criteria defined by Community law, or by an establishment which is subject to and complies with prudential rules considered by the Bank to be at least as stringent as those laid down by Community law, or

• (iv) issued by other bodies belonging to the categories approved by the Bank provided that investments in such instruments are subject to investor protection equivalent to that laid down in clause (i), (ii) or (iii) and provided that the issuer is a company the capital and reserves of which amount to at least €10,000,000 and which presents and publishes its annual accounts in accordance with the Fourth Council Directive 78/660/EEC of 25 July 1978¹³ based on Article 54(3)(g) of the Treaty on the annual accounts of certain types of companies, is an entity which, within a group of companies which includes one or several listed companies, is dedicated to the financing of the group or is an entity which is dedicated to the financing of securitisation vehicles which benefit from a banking liquidity line.

• (2) A UCITS may hold ancillary liquid assets but shall not—

• (a) invest more than 10 % of its assets in transferable securities or money market instruments other than those referred to in paragraph (1), or

• (b) acquire either precious metals or certificates representing them.

• (3) An investment company may acquire movable or immovable property which is essential for the direct pursuit of its business.

Risk-management

• (b) A management company or an investment company shall employ a process for accurate and independent assessment of the value of OTC derivatives.

• (c) A management company or an investment company shall communicate to the Bank regularly and in accordance with particular requirements the Bank shall specify for that purpose the types of derivative instruments, the underlying risks, the quantitative limits and the methods which are chosen in order to estimate the risks associated with transactions in derivative instruments regarding each managed UCITS.

(2)(a) A UCITS may employ techniques and instruments relating to transferable securities and money market instruments under and in accordance with conditions or requirements imposed by the Bank for the purpose of this Regulation (whether generally or in relation to the particular UCITS) provided that such techniques and instruments are used for the purpose of efficient portfolio management. When those operations concern the use of derivative instruments, those conditions and requirements shall comply with these Regulations.

• (b) Those operations shall not, in any case, cause the UCITS to diverge from its investment objectives as laid down in the trust deed, deed of constitution, memorandum and articles of incorporation or prospectus.

• (3) The reference in paragraph (2)(a) to techniques and instruments which relate to transferable securities or money market instruments and which are used for the purpose of efficient portfolio management shall be understood as a reference to techniques and instruments which fulfil the following criteria:

• (a) they are economically appropriate in that they are realised in a cost-effective way;

• (b) they are entered into for one or more of the following specific aims:

• (i) reduction of risk;

• (ii) reduction of costs;

• (iii) generation of additional capital or income for the UCITS with a level of risk which is consistent with the risk profile of the UCITS and the risk diversification rules set out in Regulations 70 and 71;

and

• (c) their risks are adequately captured by the risk management process of the UCITS.

(4)(a) A UCITS shall ensure that its global exposure relating to derivative instruments does not exceed the total net asset value of its portfolio.

• (b) A UCITS may invest, as a part of its investment policy and within the limit specified in Regulation 70(6), in financial derivative instruments provided that the exposure to the underlying assets does not exceed in aggregate the investment limits specified in Regulation 70. Where a UCITS invests in index-based financial derivative instruments, these investments do not have to be combined with the limits specified in Regulation 70.

• (c) When a transferable security or money market instrument contains an embedded derivative, the latter shall be taken into account when complying with the requirements of this Regulation.

(5)(a) A transferable security or money market instrument embedding a derivative shall be understood as a reference to financial instruments which fulfil the criteria for transferable securities or money market instruments set out in Schedule 3 and which contain a component which fulfils the following criteria:

• (i) by virtue of that component some or all of the cash flows that otherwise would be required by the transferable security or money market instrument which functions as host contract can be modified according to a specified interest rate, financial instrument price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other variable, and therefore vary in a way similar to a stand-alone derivative;

• (ii) its economic characteristics and risks are not closely related to the economic characteristics and risks of the host contract; and

• (iii) it has a significant impact on the risk profile and pricing of the transferable security or money market instrument.

• (b) A transferable security or a money market instrument shall not be regarded as embedding a derivative where it contains a component which is contractually transferable independently of the transferable security or the money market instrument. Such a component shall be deemed to be a separate financial instrument.

• (6) For the purposes of paragraph (2), exposure is calculated taking into account the current value of the underlying assets, the counterparty risk, future market movements and the time available to liquidate the positions.

• (7) The requirements specified in Schedule 9—

• (a) shall have effect for the purposes of this Regulation, and

• (b) shall, in addition to applying to management companies, also apply to investment companies that have not designated a management company pursuant to these Regulations.

• (8) Any reference in Schedule 9 to a management company or management companies shall, for the purposes of subparagraph (b) of paragraph (7), be construed to include a reference to investment company or investment companies respectively.

Investments in one issuer’s securities

• (b) A UCITS shall not invest more than 20% of its assets in deposits made with the same body.

• (c) The risk exposure to a counterparty of a UCITS in an OTC derivative transaction shall not exceed—

• (i) in case the counterparty is a credit institution referred to in Regulation 68(1)(f), 10% of its assets,

• (ii) in any other case, 5% of its assets.

• (2) Notwithstanding subparagraphs (a), (b) and (c) of paragraph (1), a UCITS shall not, in excess of 20% of its assets, combine 2 or more of the following issued by, or made or undertaken with, the same body:

• (a) investments in transferable securities or money market instruments,

• (b) deposits;

• (c) exposures arising from OTC derivative transactions.

(3)(a) Notwithstanding paragraphs (1)(a) and (2), a UCITS may invest up to 25% of its assets in bonds that are issued by a credit institution which has its registered office in a Member State and is subject by law to special public supervision designed to protect bond-holders. In particular, sums deriving from the issue of those bonds shall be invested, in accordance with the law, in assets which, during the whole period of validity of the bonds, are capable of covering claims attaching to the bonds and which, in the event of failure of the issuer, will be used on a priority basis for the reimbursement of the principal and payment of the accrued interest.

• (b) When a UCITS invests more than 5% of its assets in the bonds referred to in subparagraph (a) and issued by one issuer, the total value of those investments shall not exceed 80% of the value of the assets of the UCITS.

• (c) The Bank shall send to the Commission a list of categories of issuers authorised, in accordance with the laws and supervisory arrangements referred to in subparagraph (a) that are in force in the State, to issue bonds complying with the requirements of that subparagraph. A notice specifying the status of the guarantees offered shall be attached to those lists.

• (4) Notwithstanding paragraphs (1)(a) and (2), a UCITS may invest up to 35% of its assets in transferable securities or money market instruments that are issued or guaranteed by a Member State, by its local authorities, by a third country or by public international bodies of which one or more Member States are members.

• (5) The transferable securities and money market instruments referred to in paragraphs (3) and (4) shall not be taken into account for the purpose of applying the limit of 40% referred to in paragraph (1)(a).

• (6) The limits provided for in paragraphs (1) to (4) shall not be combined, and thus exposure to the same body arising from investments in 2 or more of the following, namely—

• (a) transferable securities,

• (b) money market instruments,

• (c) deposits,

• (d) derivative instruments,

carried out in accordance with paragraphs (1) to (4) shall under no circumstances exceed in total 35% of the assets of the UCITS.

• (7) Companies which are included in the same group for the purposes of consolidated accounts, as defined in accordance with Directive 83/349/EEC or in accordance with recognised international accounting rules, shall be regarded as a single body for the purpose of calculating the limits contained in this Regulation. In this context, a UCITS may combine investment in transferable securities and money market instruments within the same group up to a limit of 20% of its assets provided those investments comply with the other limits specified in this Regulation.

Index funds

• (i) the index’s composition is sufficiently diversified, which shall be understood as a reference to an index which complies with the risk diversification rules set out in this paragraph and paragraph (2);

• (ii) the index represents an adequate benchmark for the market to which it refers, which shall be understood as a reference to an index whose provider uses a recognised methodology which generally does not result in the exclusion of a major issuer of the market to which it refers; and

• (iii) the index is published in an appropriate manner which shall be understood as a reference to an index which fulfils the following criteria:

• (I) it is accessible to the public; and

• (II) the index provider is independent from the index replicating UCITS.

• (b) Subparagraph (a)(iii)(II) shall not preclude index providers and the UCITS forming part of the same economic group, provided that effective arrangements for the management of conflicts of interest are in place.

• (2) The Bank may raise the limit in Regulation 70(1)(a) to a maximum of 35% where that proves to be justified by exceptional market conditions in particular in regulated markets where certain transferable securities or money market instruments are highly dominant. The investment up to this limit is only permitted for a single issuer.

• (3) The reference in paragraph (1) to replication of the composition of a stock or debt securities index shall be understood as replication of the composition of the underlying assets of the index, including the use of derivatives or other techniques and instruments as referred to in Regulation 69(2).

Securities issued or guaranteed by States, etc

• (2) Such a UCITS shall be required to—

• (a) hold securities from at least 6 different issues, but securities from any one issue may not account for more than 30% of its total assets,