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Context

UCITS fund distribution channels and business models

Cross-border distribution of UCITS

Fund sales trends in Europe Analysis of UCITS cross-border distribution market

Fund distribution models & players
The CSD and TA models The global TA model Players’ roles and responsibilities

May 2011

Challenges & opportunities
Administrative and regulatory requirements Taxation issues Information referencing issue Operational workflow Distribution networks and trailer fee management

Regulation references

A top-ranking banking Group specialised in asset servicing

Profile
CACEIS is a global player committed to designing reliable, cutting-edge services and building longlasting relationships with clients. A member of the Crédit Agricole Group, CACEIS is rated A+/A-1 by S&P, which reflects the financial support of its principal shareholder. Through offices across Europe, North America and Asia, CACEIS delivers a comprehensive set of high quality services covering depositary/trustee and custody, clearing, transfer agency, fund administration and issuer services. CACEIS also provides a broad range of additional high-value services, notably fund distribution support, middle-office outsourcing, liquidity management & securities financing solutions. As at 31 December 2010, CACEIS ranked 1st among fund administrators in Europe with €1,150bn in assets under administration and 9th among custodians worldwide with €2,379bn in assets under custody. CACEIS’s 3,500 highly experienced employees are committed to upholding quality of service in terms of responsiveness, accuracy and expertise.

DEPOSITARY/TRUSTEE

No.1 in Europe €705bn
CUSTODY

No.9 Worldwide €2,379bn
FUND ADMINISTRATION

No.1 in Europe €1,150bn

figures as at 31 December, 2010

A+/A-1

Our clients

Asset managers Mutual funds Insurance Companies Pension funds Central banks & Sovereign institutions Hedge funds Distributors Broker-dealers Banks Corporates

Ireland Canada United States Bermuda Belgium France Switzerland

Netherlands Germany

Luxembourg

Hong Kong

International Fund Distribution Services
With its international presence - notably in France, Luxembourg, Ireland, Hong Kong and North America -, CACEIS has developed a broad range of services registered under the name of Prime TA® to support cross-border fund distribution and help clients take full advantage of new business opportunities.

CACEIS, your development partner
CACEIS can assist you at all stages of your funds’ distribution, in any market

An efficient "follow the sun" organisation
CACEIS also uses its presence in Asia, Europe and North America to exploit the differences between time zones by processing information as soon as possible and providing its clients with the best possible service. Furthermore, CACEIS favours local contact with both asset managers/fund promoters and distributors through its different offices, which allows us to circumvent time differences and overcome cultural & language barriers. > By combining local servicing and global processing, CACEIS can efficiently support its clients in their sales development and global organisation.

REGISTRATION & POST-REGISTRATION

ORDER GATEWAY & MIRRORING SERVICES

PRIME TA®

DISTRIBUTION NETWORKS, HOLDINGS & TRAILER FEE MANAGEMENT

DATA TRANSMISSION & REPORTING SOLUTIONS

The different services offered can be activated separately and progressively, following your evolving business requirements

has a local presence. enough flexibility to rapidly overcome all these new challenges and the right technical infrastructure to interact with all the industry players is now crucial for asset managers & fund promoters seeking to control their costs while being able to offer highquality services. Building a strong partnership with a service provider such as CACEIS that demonstrates expertise in these different areas. . Geographical coverage with sharpened cultural approach is also a key point to ensure close interaction with local authorities. should they be legal. CACEIS’s dedicated international fund distribution experts are committed to provide you with the best services across the whole value chain covered. as well as a sophisticated fund distribution IT platform. distributors and endinvestors. They are supported by solid and integrated back office capabilities to manage all operational aspects.Dedicated experts & robust capabilities to serve you At CACEIS. we work hard to help you successfully market your funds cross-border Distributing funds internationally requires the capacity of asset managers & fund promoters to handle new requirements. the financial strenght. operational or even technical.

players’ roles and responsibilities. information and operational workflow complexity. The new business opportunities arising in regions outside of Europe. Their flexibility for crossborder investment and their highly regulated nature has firmly established their popularity among investors. They have to face new challenges. Today crossborder distribution of UCITS spreads to a broad range of domiciliations and not only Luxembourg and Irish-domiciled funds. Laurent Majchrzak. This publication also gives details of our support services. Global Head of Fund Distribution Services .FOREWORD Since the introduction of the UCITS (Undertakings for Collective Investments in Transferable Securities) Directive in 1985. UCITS funds have become widely used by asset management companies looking to distribute fund products outside their national borders. We trust you will find this publication both relevant and informative. or references to the principal legal texts regulating the activity. notably in the context of a fast changing environment. The UCITS IV Directive is set to intensify the attractiveness of this fund brand even further. expertise and know-how. will enable European management companies to continue their expansion in both financial and geographic terms. More than ever. Furthermore. nowadays they have also become a “gold standard” recognised by a host of countries worldwide. gained through supporting many clients over the years that we share in this document. cross-border distribution is now a strategic issue for CACEIS’s clients. you will find a detailed assessment of the current market environment. such as Asia. including sales and market opportunities. although UCITS were developed originally to harmonise Europe’s fund structures and promote fund distribution between Member States. tax and regulatory issues. explaining how CACEIS can facilitate the administrative side of your operations and ensure your business complies with the rules and regulations in place in each country of distribution. and management of complex third-party distribution networks. CACEIS has a thorough understanding of this rapidly changing fund distribution environment. The combination of a fund distribution environment that is continuously increasing in complexity and a significant rise in the number of clients seeking support for their cross-border distribution plans have led CACEIS to develop this comprehensive document which covers the many different aspects of cross-border UCITS distribution (the first edition was published in November 2008). as well as copies of. technology and regulation. As an experienced player in the domain. Herein. in terms of geographic areas of distribution. Latin America and the Middle East. the industry players and the challenges and opportunities faced. It is this experience.

Since a few years. with Luxembourg and Ireland out front and other national domiciled UCITS (such as German. with the recent UCITS IV Directive being a prime example. cross-border distribution of UCITS continues to expand worldwide. major initiatives have emerged which aim to tackle these issues. The number of UCITS launched continues to grow at an unparalleled pace across Europe. as they have to ensure compliance with all fiscal obligations in countries where they distribute their products.Furthermore the industry is currently eying distribution opportunities in a few big economies that are still closed to distribution. • Some service providers have started to position themselves as intermediaries between distributors and promoters/management companies. • Access to reliable and updated information. two main competitive fund distribution models coexist: The Transfer Agent model and the Central Security Depository model. the fragmentation causes barriers to efficient order routing. as their distribution networks are increasingly complex. • Distribution agreements and trailer fee management. such as SWIFT. settlement and custody in a cross-border environment. French and British) also increasingly opening to cross-border distribution. as the growing cross-border business and open architecture trend tends to increase operational complexity in an industry where manual processes and lack of standardisation remain widespread. as registration and post-registration duties can be onerous and time-consuming in certain countries. with new countries opening to UCITS every year. and today’s most valued distribution model is guided architecture. Pan-European distribution develops in line with changing distribution models from the predominance of a vertically integrated value-chain to third party distribution. • Major tax discrimination against foreign UCITS has disappeared in the EU due to pressure from the European authorities. Within the European domestic markets. however despite functioning well at a domestic level.EXECUTIVE SUMMARY UCITS have become both a European standard and a respected global brand. • Numerous steps have been taken over the past years by market place groups. Further afield. • Operational workflow. reduced operational risk and enhanced service. as there is no pan-European fund database. Industry players must continue working closely together in order to develop and implement the necessary standards and best practices. • Taxation. a new fund distribution model has emerged to facilitate cross-border distribution: The global TA model. ICSDs and other players including transfer agents. asset managers looking to market their funds beyond domestic borders continue to face a number of key issues in terms of: • Administrative and regulatory requirements. However. Although the UCITS Directive’s objective of developing a unified regulatory framework for mutual funds across Europe is largely achieved. The key benefits for the industry are greater efficiency. to increase the levels of automation and uptake of standards. . • Under the guidance of the EFAMA. which has in turn given rise to a broad range of automated fund platforms. at least at the EU level: • European regulations are constantly adapted to steadily knock down barriers and favour the development of cross-border distribution. Each Member State has developed the model best suited to its national financial industry requirements. One of the major challenges to come is putting the theoretical model of full-STP processes for the fund industry into practice. the development of the Fund Processing Passport is opening the way for the electronic communication of operational information on funds.

..................................... 21 1...........................................3 Direct sales of funds to the retail sector.................................... 68 3..................3.. 58 3............................. an EFAMA initiative ..2 The cross-border distribution of domestic products ...........................1 The CSD model: The French example..................................................... 7 1....... 66 3..................... CONTEXT .....................................................2 Post-registration requirements ..................................................2..3...2 Players specific to the CSD model ...........................................................2.............1 Taxation of funds and investors....................1.........................................................................................................................................................................................................................1 Evolution of fund distribution channels in Europe and current trends ............... 68 BIBLIOGRAPHY ............................................... 7 1...................................................................... 33 2................... 53 3....... 47 3........................................ 15 1............................................................ 41 3........ 28 2.....1 The leadership of Luxembourg and Irish hubs .......................................3................................................. 67 3....3.......................... FUND DISTRIBUTION MODELS & PLAYERS ..........................................................1....................................... 37 2...................1 Players shared by both CSD and TA models........................................3 Analysis of UCITS cross-border distribution market ..........................................2 Taxation issues........................................1...........2 Electronic messaging initiatives ............. 10 1.........1 The lack of a pan-European fund database penalises cross-border distribution ...................................1........................3 Comparative analysis of both models ..............................................4 Distribution perspectives outside Europe ....... 37 2.. 57 3.3 Players specific to the TA model....................2 Open and guided architecture ............. 71 APPENDIX: REGULATION REFERENCES .....................................................1.......................1 Administrative and regulatory requirements ..... 33 2.............2 The TA model: The Luxembourg example..............3............................5..................................... 41 3............................................................. 53 3.................................................1...............................................................................5 Distribution networks & agreements and trailer fee management .................................................3 Information referencing issue ...................... 44 3.................................................................................................3 Trailer fee management has become a key issue ...................................1 The growth in cross-border business and open/guided architecture tends to exacerbate operational complexity .........1 Market place groups’ initiatives ............................................................................3 Top target markets for cross-border distribution in Europe ............................ 35 2............1 Recommandations issued by EFAMA...........4......2 The Fund Processing Passport.................... 49 3........................................... 49 3...................1 Open architecture has resulted in ever more complex distribution networks ............................3 Fund platforms ..... 18 1.................4...................1......................... CHALLENGES & OPPORTUNITIES .. 15 1.. 26 1..............................4.............4................................................................. 22 1.................................2...................................... 7 1....................2 DMFSA’s initiative .1 UCITS fund distribution channels and business models...... 65 3.2 The global TA model ...2........ 39 2.....................1 The CSD and TA models ......................................... 37 2.............................................................3....................1 Registration requirements for foreign funds .............................................. 39 3................... an analysis by distribution channel ................4.1 Fund sales to insurers.......................2..2.2 Tax representative appointment and reporting to local fiscal authorities .... 56 3....5.... 41 3................4 Recent initiatives to improve fund sales agreements.2 Fund sales trends in Europe ...................... 27 1....3............... pension funds and other financial intermediaries .2 The lack of standardisation in distribution agreements creates inefficiencies . 34 2..............................2 Various initiatives have emerged to increase automation and standardisation........4 Operational workflow ................................3 Players’ roles and responsibilities for the principal distribution markets ..... 65 3...............4...................... 75 • Regulation at the European Union level • Regulation at domestic level as at April 2011 Cross-border distribution of UCITS | page 5 .......5...................2 Fund sales to the retail sector .............................5..2.......................................................................................... 33 2.......4..........................................3...................1...........................5................. 66 3....... 49 3....................................5................................................................... 55 3................................................................................3............................................................. 17 1............. 48 3................................ 47 3..........2...

2008-September 2010 Cross-border distribution channels’ growth potential as viewed by Cerulli Associates survey respondents. 2008-September 2010 Total cross-border mutual fund assets under management by distribution channel. processes and components at stake for streamlining fund processing Overview of commercial offerings and market initiatives Illustration of a distribution network with 4 levels PAGE 7 10 12 12 13 15 16 17 17 18 21 23 23 24 25 26 27 28 29 30 33 34 37 41 42 45 48 50 50 54 55 55 59 66 .INDEX OF TABLES AND GRAPHS FIGURE Graph 1 Graph 2 Graph 3 Graph 4 Graph 5 Graph 6 Graph 7 Graph 8 Graph 9 Table 1 Graph 10 Graph 11 Graph 12 Graph 13 Graph 14 Table 2 Graph 15 Graph 16 Table 3 Graph 17 Graph 18 Graph 19 Graph 20 Table 4 Table 5 Table 6 Table 7 Graph 21 Table 8 Graph 22 Table 9 Graph 23 Graph 24 Graph 25 TITLE Weight of the banking distribution channel in Europe over time (including funds of funds) Key drivers contributing to the development of the open architecture business model Total European mutual fund assets under management by distribution channel. January 2011 Main financial assets of insurers and pension funds Main financial assets of other financial intermediaries Main financial assets of households in the Euro area Household direct investment fund ownership in Europe in 2009 European assets by distribution channel Number of true cross-border funds registered Evolution of Luxembourg and Ireland market share for cross-border fund registration Evolution of asset classes in the Luxembourg UCITS industry 1997-2009 Evolution of total net assets of Irish domiciled funds (2000-2010) Country of domiciliation of sophisticated UCITS Overview of the overall openness of European fund markets to the cross-border activity as at 31/12/2010 Top 25 target markets for cross-border fund distribution in Europe Luxembourg domiciled funds breakdown by distribution regions (in number of funds) Top countries for registration of foreign funds by region outside Europe in 2010 Asian markets maturity levels overview The French CSD model The Luxembourg TA model and the investment fund distribution process The global TA model Major issues faced by asset managers distributing their funds cross-border Comparison of registration requirements in the top 7 target countries as at January 2011 Comparison of post-registration requirements in the top 7 target countries Fiscal requirements for the top 7 target markets FPP initial principles FPP benefits for fund managers and fund distributors Operational challenges of third-party distribution Key drivers and benefits of automation Actors.

1 UCITS fund distribution channels and business models 1. 2011 1Excluding funds distributed via stock exchanges (e. Luxembourg or Dutch markets) 2Source: Reuters Limited. German. Clearly. However. (including fund of funds3) weight of the banking distribution channel (%) 80% 60% 90 80 75 75 40% 20% 0% 1995 2000 2005 2009 Source: CACEIS analysis on Lipper FMI. Open architecture: This business model allows clients to choose from an extensive range of funds. dominated the marketplace and shared the high revenues of this money-spinning market. the main distribution channels remain retail and private banks. and there are examples of direct selling and fund platforms’ success stories. “Euro funds look beyond traditional distributors” by Andrew Priest.1 . Indeed.2011 CONTEXT 1. these still remain few and far between and the much-announced widespread success is yet to come: Today. with the majority of players covering both the manufacturing side (fund management) and the sell side (fund distribution). Yet. Independent Financial Advisors (IFAs) and insurance wrappers.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . large international fund houses and local companies. It was the time when the wellknown expression “third-party funds” started to be replaced or accompanied by the newly coined “open architecture”. Guided open architecture or Guided architecture: This business model allows clients to choose from in-house funds as well as a complementary selection of external funds from a limited number of partners. the petrol station or through the internet”2.g. often part of larger banking groups. 2 July 1998 3Note on the data used: The funds of funds channel is considered as a subset of the banking channel Cross-border distribution of UCITS | page 7 1. as investors would switch to buying fund products at “the supermarket.1 Evolution of fund distribution channels1 in Europe and current trends Years ago. much has changed over the following decade. manufactured by competing asset management groups. more than fifteen years ago. market experts predicted that the days when distribution of investment funds in Europe was the preserve of banks and financial institutions may be drawing to an end. Graph 1 displays the weight of the banking distribution channel in Europe over time. Graph 1: Weight of the banking distribution channel in Europe over time 100% Captive distribution channel: This business model allows clients to choose only from the in-house fund range. followed by fund platforms and direct selling. data as reported by ZEW/OEE and Oxera. already back then the traditional distribution model was seen as outdated and in need of a rebirth. In most major markets a handful of big names. Some experts went as far as stating that “It wouldn’t surprise if Microsoft became the best partner for asset managers or Walt Disney where you could invest through an ‘investortainment’ channel”2.1. the fund management industry was a fully integrated value chain. CONTEXT 1.

Such trends will be analysed in more depth in order to avoid making misleading conclusions on the dynamics of investment funds sales to the retail sector. instability rocks the financial landscape and confidence is lost. 4 According to Lipper FMI. excluding a minimal part. European fund management houses for the most part still have their own workforce selling only in-house products and. may slow down the path to a real open architecture. Further to the fund industry revival in 2009. Today. 9 October 2008 . the largest channel by far in Continental Europe. the financial crisis boosted change in fund distribution trends and the respective weight of each channel in different European countries. the Economist claimed back in 2008 that in Italy 92% of assets were “gathered directly by salesmen tied to. the predominance of banks among all distribution channels still remains to be beaten. However. when money pours into funds. FT. According to Lipper FMI data as reported for 2007 and 2010. with a total share of 75% of European fund distribution (including retail and private banks4). And they did this even more after retail clients were reassured by several Continental European governments confirming that bank saving accounts would be state-protected in case of bank default. Over the last three years. the distribution mix followed a slightly different path than during the pre-crisis years.“Open-architecture threatened by banking collapse” by Baptiste Aboulian. not only private banks and retail banks should be included in the banking distribution channel. at the peak of the crisis. in times when the fund market is dominated by redemptions. with Italian IFAs even loosing ground over the last 4 years (-4%). the total European estimated distribution market share of the banking sector would reach 72. each distribution channel tended to retain clients using any available means. For example. Over the last three years. unclear to most and often opaque to scrutiny. 1 March 2008 page 8 | Cross-border distribution of UCITS 6Source: Ignites Europe. it is still true that open architecture’s success depends on growing markets. “fears were mounting that the open-architecture distribution model would disappear and become a victim of ongoing banking consolidation”6. Before the crisis hit the fund sector so strongly. On the contrary. Banks. but not so much in favour of independent distribution. when redemptions reached very worrying levels for the industry as a whole. banks do not need to make the effort of offering more and more diversified ranges and focus on selling at least in-house products. had the biggest client retention power by being able to shift investors’ savings from funds to bank deposits. you sell”. in several Continental European markets. trends became clear only over a time-span of a few years. the fund management group”5. as distributors do not want to be held responsible for third-party products that they are not able to fully control. but also the fund of fund sector. coupled with regulators shifting toward a tougher disclosure on products. this old-style integrated distribution model still represents the vast majority of total distribution. as it is a hard task to achieve given the European distribution structure. the financial crisis boosted change in fund distribution trends and the respective weight of each channel in different European countries.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . “We make. Furthermore. a certain reshuffle in distribution did take place. However. and the institutional/corporate sales.2011 CONTEXT Only a handful of firms study and analyse the evolution of distribution patterns. or employed by.  Already back in 2008. In this case.8% 5Source: The Economist. the recent insatiable investor appetite for transparency. during 2008.

Set to be enforced at the end of 2012. Spain and Italy are the strongholds of powerful banks whereas the UK is dominated by IFAs.g. but are rather included into a more general fee (e. as mentioned.2011 CONTEXT The true “open architecture” distribution model also presents some limits: How can a nonexperienced retail investor surf the web and choose from the thousands of products that he/ she can purchase at any on-line fund supermarket? The discussion was on. product providers. And increase the professional standards of investment advisers”8. if not that IFAs will have a much harder job if they still want to be qualified for distributing all products. new. “To improve the interactions between consumers and the industry. for further reference. “management fee”). In both cases. regardless of the type of firm they work for (e. with the notable exception of the UK and to a certain extent Germany. web-based retail platforms such as Amazon or I-Tunes. It should be noted that distribution is soon to be profoundly changed in Great Britain when the new Retail Distribution Review (RDR) regulation comes into play. where IFAs account for a big portion of fund distribution. during the late nineties when internet became mainstream. Guided architecture allows fund distributors such as IFAs to offer a pre-selected range of funds.1 . and hence having the impression of receiving free advice from the bank employee. This may.fsa. IFAs or wealth managers). please see 1. where investment funds are directly held by as much as 57% of households7 and where the IFA market has been rising in influence over the past years. banks. 7Source : Ignites Europe “Germany: A hot spot for managers”. they are directly remunerated and thus retail investors are used to the concept of paying for receiving financial advice. a mature market. In the UK. toward the so-called “guided architecture”. distribution fees are quite often not presented in a transparent manner to the end-investor.gov. without any advice? Europe is a very fragmented market when it comes to distribution models.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . it will apply to all advisers in the retail investment market. targeting the choice given to the final investor. bring the IFA market to a standstill for the first months after RDR comes into play. This trend seems to be continuing as investors still need guidance. 05/01/2011 http://www.g. The extent to which RDR will reshape the distribution pattern in the UK is a much-talked-about subject and yet there is still not a preferred outcome for it. (…) the RDR is set in three measures: Improve the clarity with which firms describe their services to consumers. the third step in the evolution of fund distribution. Although most European investors are not accustomed to directly paying for advice. and it is on again in the early 2010’s with the surge of huge. This also applies to Germany. It should be noted that distribution is soon to be profoundly changed in Great Britain when the new Retail Distribution Review (RDR) regulation comes into play. Address the potential for adviser remuneration to distort consumer outcomes. What will happen to the “traditional” distribution channels if all of a sudden these platforms open up to selling funds to differentiate product offerings? Will retail investors be sent emails explaining what fellow buyers bought and suggesting certain funds only on the pure basis of peers’ past sales. in our point of view.uk/Pages/About/What/rdr/index. Hence. most Continental European investors are however accustomed to buying investment funds through retail banking channels or insurance products.shtml Cross-border distribution of UCITS | page 9 8Source : FSA.

showed that penetration of third-party products was as high as 79% for IFAs already back then. According to a survey conducted in 2007 by PricewaterhouseCoopers on 270 private banks worldwide. Private banks and fund supermarkets were the first to offer a whole range of products thanks to open architecture. manufactured by competing asset management groups. fund of funds sale. Graph 2: Key drivers contributing to the development of the open architecture business model Regulatory developments (UCITS III. 2007 . Gradually. including funds of funds Development of new distribution strategies: third-party fund distribution/ selection. private banks. even retail banks.2011 CONTEXT 1. as illustrated in the graph below. white-labelling Di s tri bu t or s er s As se tM ag an Distributors are seeking opportunities for differentiation Increased expertise in the selection of funds Source: CACEIS. which has enabled investors to improve their understanding and knowledge of fund products Investors increasingly looking for the best products available strong request for external funds In or s ve at st ul or Re g s Asset managers have used UCITS III to increase the range of funds available to European investors. at first reluctant to adopt an open-architecture distribution model. nearly three quarters stated that third-party products make up over 40% of their product range9. going down to 35% for private banks and 10% for retail banks. Over the years. A McKinsey study published in 2006. “Global Private Banking & Wealth Management Survey”. A certain number of key drivers are influencing third-party distribution and in turn affect the development of open and guided architecture models.A CACEIS PRODUCT DEVELOPMENT PUBLICATION .2 Open and guided architecture Open and guided architecture models allow retail investors to access a broader range of financial products.1. In the early 2000’s. however. started to add third-party funds to their in-house ranges. multi-managers fund sale. 2008 page 10 | Cross-border distribution of UCITS 9Source : PricewaterhouseCoopers. which allows clients to choose from a whole range of funds. IV…) help to remove barriers and favour cross-border distribution development Better access to information. most distributors shifted from the integrated old model to the much-talkedabout “open architecture” model. retail banks and IFAs shifted toward the guided architecture model and put in place distribution agreements with a few selected asset management houses which they trust.

while being exposed to a potentially higher number of investors. reputable brand. both open and guided architecture represent a great opportunity for foreign asset managers to gain market share over local players in European and international markets. open and guided architecture’s future will be more and more linked to cross-border distribution of funds: Most European asset managers expect an increase in the penetration rate for both new models as they represent an easy way of penetrating new markets. Furthermore. Open and guided architecture models may result from a wave of merger & acquisition activity in the asset management sector. and in view of conflicting demand for group funding which has damaged mutual fund franchises in Southern Europe. Furthermore. distribution through a third-party sales force means. in case of non-integrated distribution models. for a lot of fund manufacturers. This also applies to those that have been chosen for the presence in their teams of “star managers” and that see clients follow those “stars” when they move to another fund house or set up on their own. Open and guided architecture’s future will be more and more linked to cross-border distribution of funds. gained through an external sales network. managing assets. were priced very low. not many deals actually took place. most probably. while national open architecture development seems to remain steady . 08/11/2010 Cross-border distribution of UCITS | page 11 1. direct contact with their clients and therefore possibly client loyalty as a whole. is not particularly attached to them. Notwithstanding these issues. Further to the financial crisis and the widespread lack of liquidity of the banking sector. For this reason. especially for those asset managers that enjoy a strong. and will in all likelihood be regretted by sellers10. open architecture can potentially lead to an increase in fund performance. third-party distribution of funds is strengthening. we see pressures on captives likely driving additional scale deals – similar to Amundi – as banks look to rationalise costs for lower growth businesses”10. i. according to a 2010 Ignites Europe survey. on the negative side. the recent crisis has created a need for extra reporting efforts to distributors and investors. Nevertheless. there are uncertainties with regards to the future of open or guided architecture if the regulators further strengthen controls and disclosure requirements. but those that did. 10Source: Ignites Europe “Banks too quick to sell fund ops: survey” by David Ricketts. too low. loosing the ownership of client relation. When commenting on survey results. as shown by the two following graphs.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . many European banks hurriedly put their fund management units on the market. in which case distributors may want to concentrate selling efforts only toward those products that they can be held responsible for. However. Recent experience shows that this can lead to rapid losses for those asset managers that cannot beat the markets and whose client-base.2011 CONTEXT Today. as fund managers can focus purely on their core business. potential revenues (distribution and trailer fees). on the positive side. a Morgan Stanley analyst reported that “as parent banks grapple with the challenge of open architecture as investors seek best-of-breed capabilities.e. Given the insufficient capital available in the financial industry as a whole.1 .

2008–September 2010 100% 80% 31.5 66. This enables banks to better control the products they distribute (products’ risk/performance ratios.9 34. A May 2011 Cerulli proprietary survey. brand) while providing their customers with a broader range of products and with optimised asset allocation. Switzerland and Italy.7 Legend Captive channel Third-party distribution channel 0% 2008 2009 Sept-2010 Source: Cerulli Associates.3 60% 40% 71.9 54. found that some of these “bank-centred” countries may now be ready for opening to new channels in their historical patterns. namely the difficulty and cost of providing appropriate advice for a large range of products and the difficulty to determine responsibilities of asset managers and distributors toward the investor.1 20% 65. open architecture has developed so far mainly via multi-management (funds of funds) through which banks or insurance companies manage fund wraps that include a broad range of in-house products as well as products from the competition.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . Indeed.2011 CONTEXT Graph 3: Total European mutual fund assets under management by distribution channel. 2011 Graph 4: Total cross-border mutual fund assets under management by distribution channel. 2011 In France. 2008–September 2010 100% 80% 28. however.5 33.8 Legend Captive channel Third-party distribution channel 0% 2008 2009 Sept-2010 Source: Cerulli Associates. Spain. when asked to evaluate the foreseen most important distribution channel for future French asset management industry growth. survey players reported that IFAs and fund platforms have page 12 | Cross-border distribution of UCITS .2 60% 40% 68.6 30.1 45.4 20% 69. Industry players also consider that this model limits risks related to a totally open architecture model.

to third-party products through the use of German funds of funds. IFAs scored well in Italy as well. being second only to discretionary accounts. Graph 5: Cross-border distribution channels’ growth potential as viewed by Cerulli Associates survey respondents. In Germany the predominant model is guided architecture. “Selling investment funds to German private investors . Cross-border distribution of UCITS | page 13 July 2008 1. To conclude. under the pressure of growing demand from customers for a more extensive choice of funds. They first opened their doors.3 3.3 3.2011 CONTEXT by far the highest momentum. but surprisingly enough they also predict a substantial growth for direct sales11.A CACEIS PRODUCT DEVELOPMENT PUBLICATION .0 1 1. which allowed them to meet the growing demands for third parties’ products within their channels. And such momentum is not limited to France.5 0 Retail banks Fund of funds Bancassurance Private banks/ discretionary accounts Independent financial advisors/platforms Direct Source: Cerulli Associates.3 3. 2011 11Source : “European Distribution Dynamics 2011”. Cerulli Associates. through which banks distribute their own funds as well as selected external fund products from a limited number of partners. The nonGerman funds also became more and more reluctant to accept fund orders directly from IFAs in light of the transfer agent requirements imposed on them (many thousand individual investors instead of just one bank). graph 5 clearly summarises for all European cross-border distribution channels their importance in future industry developments. as rated by survey respondents and hence sends a clear message that the predominance of banks (and local banks) is not yet over. January 2011 5 1 = Least important 4 3 5 = Most important 2 4. More conservative.0 3. Then. slightly. Guided architecture was initially the banks’ answer to the growing market share of IFAs.legal and regulatory issues”. many banks widened their distribution activities by using open architecture and opened up to third-party (non-German) products by establishing fund-platforms. May 2011 12Source : Norton Rose. which tend to remain Italy’s favourite so far. Spanish players still bet on a further development of bank-driven distribution of funds. These developments led to the creation of fund platforms catering for the needs of IFAs and fund managers alike12.1 .

2008 CONTEXT page 14 | Cross-border distribution of UCITS .A CACEIS PRODUCT DEVELOPMENT PUBLICATION .

1 23. an entity with large amounts to invest in funds.e.2 performance of such investments.8 47. but also in terms of the sales and marketing approach.8 2005 15.4 14. investors are the parties whose money is invested in funds and who benefit from the An investor can either be retail – an individual who purchases small amounts of fund shares/ units for him/herself – or institutional. In the following chapters we will analyse the whole spectrum of fund sales by dealing separately with sales to the institutional sector and the private sector. Institutional investors account for the majority of overall volume. Having said so. Graph 6: Main financial assets of insurers and pension funds 100% 19. as displayed in graph 6. mutual funds. pension funds and other financial intermediaries According to the European Fund and Asset Management Association (EFAMA) and the European Central Bank (ECB).4 14.5 80% 22. reporting needs.9 share in percent of total 14. which are the retail investment fund product by definition: Since their creation they have been representing the highest investor protection tool worldwide.8 0% 14.3 8. such as banks.1 42. 1. The first one is the sale of units/shares of funds to the retail investors.2 Fund sales trends in Europe When analysing fund sales. insurance companies.A CACEIS PRODUCT DEVELOPMENT PUBLICATION .0 22.9 2008 16. one must distinguish between public distribution and private placement. By definition. one has to take into consideration the different fund investors.6 Legend 20% 15.7 25. Retail and institutional investors differ of course by nature. i.2.7 2007 17. ECB.1 Fund sales to insurers. while the latter is the sale directly to an institutional investor of funds’ units/shares.7 43.2 46. and long term investment views. in the fund distribution context. Provided that the units/shares of funds are bought for investment purposes rather than resale. .0 40% 46.9 7. This guide focuses on the distribution of UCITS.2 44. foundations and so forth. 2009 Cross-border distribution of UCITS | page 15 1.6 24.0 2009 Investment funds Quoted shares Debt securities Currency & deposits 2004 Source: EFAMA fact book 2010. private placement does not require the registration of foreign funds with local authorities. pension funds.3 60% 14.2 2006 15.2011 CONTEXT 1. investment funds account for more than a quarter of total financial assets of insurers and pension funds in Europe.

2010 In the 2005-2009 interval. In the 2005-2009 interval.9 21. OFIs.2 2006 24.4 2005 22. Moreover. Graph 7: Main financial assets of other financial intermediaries 100% 80% 41. most European countries have a payas-you-go state-based pension system. seen as tomorrow’s likely winners. Besides. despite the crisis. according to EFAMA.8 20% 21. it seems clear that investment funds earned extra exposure thanks to a decrease of direct share holding in insurers’ portfolios. Hence. insurance and pension funds clearly contributed for the totality of the investment fund asset growth.8 34.8 9.1 share in percent of total 60% 8. as shown by graph 7.A CACEIS PRODUCT DEVELOPMENT PUBLICATION .0 33.9 31. whose distribution patterns are still quite vague. OFIs. or will have to diminish drastically their real value. other financial intermediaries (OFIs) held EUR 6. of which 9.9% was invested in funds. page 16 | Cross-border distribution of UCITS .6 10. When analysing this trend. The analysis of OFIs’ holdings of funds assets is of particular interest as they include funds of funds.2 0% 22. In the Cerulli Associates survey mentioned above.6 2007 33.9 9.3 34. reporting respectively a positive net flow of €235bn and €489bn. respondents viewed “investing for retirement” as the main source of growth for the fund management industry in the next years. insurance and pension funds clearly contributed for the totality of the investment fund asset growth.9 26.5 35. the expected rise of pillar 2 and 3 pensions in most European countries.8bn financial assets at the end of 2009. In a continent that is quickly ageing and that should reach the worrisome barrier of 50% of population aged 55 and over by 2050. to be room for further modifications and hope from the asset management industry to gain extra exposure in insurance and pension fund portfolios.7 Debt securities Investment funds Quoted shares Currency & deposits 2004 2008 2009 Source: EFAMA fact book.7 33.9 28.3 32.7 28. There seems.7 10. pensions and life insurance products have market share to gain in households savings. however.0 10. and the recent crisis of some Southern European countries created the fear that Member States may not be able to pay off state pensions.2011 CONTEXT Their penetration share increased by more than 5% over the 2004-2009 interval and this.3 Legend 40% 33.

2 42.5 9.3 6.2 5.8 6. Graph 8: Main financial assets of households in the Euro area 100% 80% share in percent of total 60% 9. Understanding the local fund distribution channels is critical before marketing funds in any given country.8 1.8 33. including a lot of financial wealth of European 1.7 38.2 5.0% 8% 6% 6. up to the end of 2006.2 7.8 5.3 34.9 5. Graph 8 shows details of the financial asset holdings by asset type for the Euro zone. As EFAMA reports in its 8th Fact Book published in 2010.3 4.0 6.6 households.9 11.7 35.4 0% Understanding the local fund distribution channels is critical before marketing funds in a given country. investment fund penetration in financial wealth was still at 9%.0% 4% 4.5 41.1 9.6 10. but not tragically down.1 8.0 4.0 8. 2010 Cross-border distribution of UCITS | page 17 . the situation must be put in context as it varies widely across Euro zone members. savings shifted away from funds.7 10. as shown in graph 9.4 8.2 9.5 38.2 Fund sales to the retail sector We reported previously that at the peak of the crisis.7 40% 11. Graph 9: Household direct investment fund ownership in Europe in 2009 12.2 7. 2010 However.6 33.0% 1.2.1 8.7 2.A CACEIS PRODUCT DEVELOPMENT PUBLICATION .9 34.8 4.0 Legend Currency & deposits Debt securities Quoted shares Investment funds Insurance & pension fund reserve 20% 32.0 11.0% 12% 11.4 9.9 9. that is to say when the industry slowly recovered from its worst days.6 12. but the crisis simply destroyed a lot of wealth. At the end of 2009.0% 2% 0% 6. downward from previous years.9 9.0 37.0% 10% Share in total financial assets Share in total financial assets 8. 2004 2005 2006 2007 2008 2009 Source: EFAMA fact book.9 8. the average Euro zone holding of investment funds was stable around 11 to 12 % of the total financial wealth of households.2 38.9 6.9 9. that is to say before the crisis began.2 5.2011 CONTEXT 1.5 10.6 10.2 7.2 Country Countries EUROPE GERMANY SWEDEN BELGIUM FINALND SLOVAKIA AUSTRIA SPAIN FRANCE UNITED KINGDOM DENMARK HUNGARY POLAND SLOVENIA CZECH REPUBLIC ITALY TURKEY NORWAY PORTUGAL GREECE BULGARIA 0.0% Source: EFAMA fact book.

5% 0. even though cumulated investment fund acquisitions in the 2005-2009 period remains negative (. have decreased the proportion of funds in their household financial wealth in recent years.4% 13.1% of their wealth in funds in 2006.2011 CONTEXT This situation has evolved substantially since the pre-crisis era. stabilising around 15%. page 18 | Cross-border distribution of UCITS Therefore the figure for retail banks includes only funds offered by the bank itself as such.5 % 16. Table 1 displays the weight of the different distribution channels in France. Similarly.4% 14% 100% 2.2% 12. And thus.3% 10.A CACEIS PRODUCT DEVELOPMENT PUBLICATION .1% 7.5% 6% 0.2. Italy. 2010 21. 1.3% 6% 12. and are now down to 11. This can be seen as a direct short-term consequence of the financial turmoil. French households currently hold 8% of their assets in funds. Taking the American mature mutual fund market as a reference for comparison.4% at the end of 2006).3% 0. ther as seen in the previous analysis of penetration of open architecture.5% 100% 13Note on the data used: Lipper FMI’s data displays the proportion of fund distribution controlled by each channel.6% 100% 63.5% 0.2% 12% 100% 11. with the retail banking channel split out further to show funds of funds sales and institutional or corporate sales separately.6% 51% 8% 6% 1. when new data flows are available for the end of 2010.6% 4% 100% 54.2% 0% 7. US households invested 18% of their wealth directly into funds in 2006.5% 9. the highest proportion in Europe.3% 8% 5% 4.5% 1. that the private households’ demand for investment funds will be tending to reach its previous levels of 11 to 12% share of funds within households’ total financial portfolios in the Euro zone. if the USA stabilise around 15% of total financial households assets held directly in funds.5% 11. Spain.€139bn).5% 6. The category of insurance wrapper also includes sales through bancassurance.2% 34% 100% 44.6%.9% 13. The leitmotiv among all European countries is that the direct fund investment ratio decreased in most of them.3% 13 % 13.3% 0.3% 0. Germany.3% 0.3 Direct sales of funds to the retail sector.4 % 0. it may be not so daring to predict. Table 1: European assets by distribution channel13 DISTRIBUTION CHANNEL FRANCE GERMANY ITALY SPAIN SWITZERLAND UK Retail Bank Private Bank/Discretionary Insurance IFA/Advised Supermarket Direct Funds of Funds Institution/Corporate Total Source: Lipper FMI data digest. losing more than half their penetration rate (which was 20.6% 1. . Many countries. and are now down “only” by 3 to 4%. Swedish households held 26.2% 5. European penetration levels for investment funds may also tend to converge to the American ones in a few years time. including those in the Nordic region.4% 55.2% 13.5% 8. Furthermore. an analysis by distribution channel Today the European fund distribution landscape is very different from one country to anoThe European fund distribution landscape today is very different from one country to another. Switzerland and the UK.4 % 7.

other national particularities come as no surprise. As already mentioned.2011 CONTEXT Only common point. such as Spain and Italy still primarily linked to distribution via banks. a direct consequence of the banks’ behaviour during the crisis is indeed their losing ground: From 42% of total European fund sales in 2007 to 33%14 in 2010. the banking distribution channel occupies a dominant position in much of Continental Europe. The UK is a well-known exception. as well as the predominance of private banks in Switzerland. insurance companies. reaching a very respectable 11% of market share in 2007 before being hit by a setback in 2009. as explained earlier on. most Continental European retail investors are unused to directly paying for financial advice. Is this low penetration going to remain stable? The debate is on and it raises attention. The large market share of the institution/corporate channel in France (34% of all distribution) can be explained by the widespread company savings plans (“Plans d’Epargne Entreprise”) introduced in 1967. which are a French specificity. which explains the low market penetration of IFAs. due to their extensive existing customer base and the broad range of funds they offer. leading to uncertainty with regards to future development of such a channel.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . all having a significant market share. unclear. 14Data Source: CACEIS analysis on data Lipper FMI Data Digest 2007 and 2010 Cross-border distribution of UCITS | page 19 1. We previously talked about RDR and the effect that it may potentially have on IFAs in the country. the banking distribution channel occupies a dominant position in much of Continental Europe.2 who need to convince investors to pay extra fees -although fees paid to the banking sector are . Nonetheless. IFAs also rose in Germany in previous years. The French market still presents the most widespread use of different channels with banks. fund supermarkets and the direct channel are relatively insignificant in Europe and are not today in a position to challenge other fund distribution channels. as retail banks are almost insignificant while IFAs account for more that 55% of fund distribution. On the contrary. Their importance rising year after year. funds of funds and corporates. Besides. due to their extensive existing customer base and the broad range of funds they offer. Only common point.

A CACEIS PRODUCT DEVELOPMENT PUBLICATION .2008 CONTEXT page 20 | Cross-border distribution of UCITS .

000 35. over the past decades UCITS have come to being increasingly recognised as a “brand” of excellence for retail funds.Council Directives 2001/107/EC (“The Management Directive”) and 2001/108/EC (“The Product Directive”) of 21 Jan.2011 CONTEXT 1. UCITS II: Never implemented due to lack of common understanding. such as ALFI (Association of the Luxembourg Fund Industry).000 45. they are no longer set up to target only distribution in Europe. have more efficient passporting and a reduced time to market. UCITS V .000 15. there seems not to be any rush toward taking advantage of UCITS IV: Market players appear to be adopting the wait-and-see strategy to make sure no distribution opportunities are missed by any too rushed manoeuvres. UCITS IV will certainly impact the cross-border distribution of UCITS. It is foreseen and waited for from many industry players as a booster to their national.The EC is currently consulting on proposed changes to the current UCITS Directive.3 . such as rationalising the number of funds they provide via fund mergers or pooling of assets. 1985: Principles for harmonisation. Still. UCITS funds are today widely sold and highly valued worldwide. crossborder master-feeder structures and mergers.Directive 2009/65/ EC of the European Parliament and of the Council of 13 July 2009: Introduction of an European Management Company passport. UCITS IV .3 Analysis of UCITS cross-border distribution market The UCITS Directive was originally designed to allow each European investment fund to obtain a passport granting pan-European distribution. The number of countries of distribution can therefore be expected to increase. management company and simplified prospectus. The new UCITS IV directive will simplify the distribution of UCITS products throughout Europe. UCITS III .000 45% growth in past 4 years 24. 2002 amending the Council Directive no 85/611/EEC: Broadening of investment possibilities. Very often. UCITS (Undertakings for Collective Investment in Transferable Securities) are investment funds established and authorised in conformity with the requirements of Directive 85/611/EEC. European and international distribution.Council Directive no 85/611/EEC of 20 Dec.000 The UCITS Directive texts are available in the appendix. There is no doubt that from 1st July 2011. EFAMA. Albeit a slow start.900 25. with sales taking place all over the world. UCITS V is targeted at issues such as clarifying the roles and responsibilities of depositaries and establishing a governance structure for asset managers’ remuneration. UCITS I UCITS III 62.000 1998 2000 2002 2004 2006 2008 2006 2010 Source: Lipper & PwC 2011 International UCITS distribution currently represents 40% of UCITS assets. UCITS I (“The 1985 UCITS Directive”) . and even many are set up with the intention of cross-border distribution alone. Graph 10: Number of true cross-border funds registered 65. that initial objective of a truly integrated pan-European fund distribution model is yet to come. Yet.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . have been actively promoting the UCITS brand outside of Europe for a few years. managers of UCITS funds will have far greater flexibility to market and manage their products throughout the European Union and that most intend to capitalise on these opportunities to drive efficiencies. UCITS seem to have gone far beyond their initial goal. Nevertheless. with open architecture slightly setting back and (given recent financial turmoil in Europe) Member States’ fears raising when it comes to other European financial institutions they cannot control. in strict cooperation with other local associations. Cross-border distribution of UCITS | page 21 1.812 Number of funds registered 55. Graph 10 displays the growth of the number of UCITS registered for cross-border distribution over the past decade. making it possible to set up cross-border master-feeder structures.

newcomers to the Grand Duchy know that they have access to highly qualified and highly professional specialists who have many years of experience with UCITS and investment funds. the Grand Duchy was the first European Member State to adapt its legislation to the European Directive governing UCITS.3. fears are mounting that if anything were to go wrong to any Newcits fund. HFM Week “Newcits Uncovered”. The competitive advantage of being the first to offer the European passport for cross-border distribution to investment funds. as well as the continuous adaptation of the country’s legal and fiscal environment. Newcits funds assets were up to €52bn. According to EFAMA. “Supporting cross-border fund distribution in a global market-place”. acting as the centralised European investment funds’ body. gradually attracted fund promoters from all around the world to Luxembourg. Moreover. 2 010 . at the end of 2009. calls for the industry to discard the Newcits acronym as it may be confusing: “Newcits are UCITS that can be described as aiming actively to manage the risk-return trade-off. so-called sophisticated UCITS or “Newcits“ may eventually stain the reputation of the brand. the proportion still remain so impressive that will unlikely be beaten. 15 th May 2 011 . “Alternative and Hedge Fund UCITS through the Next Decade”. Luxembourg established itself as a hub for European cross-border distribution. Since the emergence of the cross-border distribution of investment funds decades ago. i. Today. 15Source : EFAMA. In 1988. Indeed.EFAMA report on the so-called “Newcits” phenomenon”. shifting from being the domicile of choice for 81% of all worldwide investment funds in 2001 to 75% of those in 2010. 16 th May 2011 .A CACEIS PRODUCT DEVELOPMENT PUBLICATION . Although Luxembourg lost ground. Strategic In- sight. which has been designed with the lessons of the financial crisis. 1. January 2 011 . Luxembourg established itself as a hub for European cross-border distribution. including the Lehman Brothers collapse and the Madoff scandal. which represented just below 1% of total UCITS assets. they can rely on the leader in terms of predominance for the set-up of cross-border funds. EFAMA also openly calls for the newly created European Securities and Markets Authority (ESMA) and all Member States’ national regulators to strictly comply with those rules16. However.e. 16 th May 2 011 16Sources : FSR. May 2 011 . Processes like UCITS IV can only set the pace for an even higher penetration of UCITS in all of those countries that believe in the passport and in the solidity behind this world-class brand. They are subject to and are managed in compliance with the UCITS framework.1 The leadership of Luxembourg and Irish hubs Since the emergence of the cross-border distribution of investment funds decades ago. The speed with which UCITS IV is set to follow the implementation of UCITS IV underscores the accelerated pace of regulatory change. Ignites Europe “Newcits tag must be page 22 | Cross-border distribution of UCITS scrapped : EFAMA”. EFAMA “The evolving investment strategies of UCITS . FTfm “Creativity’may tarnish Ucits brand”. as the graph below shows. Given the success of such products and the attention they receive from the international media. As such they offer the same level of investor protection as other UCITS“15. Newcits numbers are increasing steadily and there are many news reports of new fund launches for such strategies. many foreign countries would consequently cool to the reputation of the brand as a whole.2011 CONTEXT The evolution of UCITS is set to continue with the advent of UCITS V. discussion is on internationally that the setting up of more and more UCITS funds investing in hedge fund like strategies. EFAMA. firmly in mind. press release. even with regards to those plain vanilla funds that represent most of the total UCITS assets. October 2 010 . thus propelling the country into its current leading position.

the area plays host to a cosmopolitan array of financial services players”.000 0 number of cross-border fund registered 11% 14% 75% Legend Luxembourg Ireland Other 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Luxembourg and Ireland currently account for nearly 90% of all worldwide crossborder funds. Graph 12 shows that Luxembourg-based funds represent a good balance of all asset types.A CACEIS PRODUCT DEVELOPMENT PUBLICATION .000 1.000 60.750. Dublin has become the home of choice for many UCITS funds.000 1.000.592.000 40.000 1. 17Source: Financial Times Fund Management. according to PwC analysis on Lipper data.250.500.000.000 1. Graph 12: Evolution of asset classes in the Luxembourg UCITS industry (1997-2009) in € m 2.000 30. by Ian Fraser. foreign registrations of Luxembourg funds amounted to almost 47. as quoted from a 2008 FT article17.370 m as at 31/12/09 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: EFAMA.000 500. July 20 2008 Cross-border distribution of UCITS | page 23 1.000 750. Europe’s leading domicile for money market funds and the largest administration centre for exchange traded funds in Europe. 2010 The emergence of Dublin as the second largest European hub for investment funds began during the late eighties. in “part of the dilapidated docklands district said to have been so run-down it was avoided by even the city’s rats.000 20.000 10.000 0 Others (including fund of funds) Money Market Bond Balanced Equity €1.2011 CONTEXT Graph 11: Evolution of Luxembourg and Ireland market share for cross-border fund registration 70.000 250. however.000. Source: PWC. “Dublin shrugs off downturn blues”.3 . with the launch of the IFSC (1987). 2011 At the end of 2010.000 50. Today.

attracting a significant number of funds from offshore domiciles. Italian.000 900 800 700 600 500 400 300 200 100 0 963 808 730 587 435 285 208 304 363 647 749 The breakdown by assets classes in the Irish fund industry is not available 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: Central Bank of Ireland Nonetheless. France 8. Hence. employed by many international promoters from 42 different countries20 worldwide that set up their funds in the Grand Duchy. August 2010 page 24 | Cross-border distribution of UCITS 21“Commission de Surveillance du Secteur Financier”.1%. This legislation coupled with the low Corporate Tax rate continues to attract business to the country and recent statistics show that Ireland is still up and running as a state-of-the-art financial centre. at the end of November 2010.9%. Belgian. A few factors have historically boosted the fund servicing activities of Luxembourg and Ireland. the success of the country attracts a multi-lingual workforce.2%. the United States accounted for 22. Dutch and Swedish promoters all have a good proportion of total assets domiciled. from Germany 17. 18For more details on the “National Recovery Plan 2011-2014” please refer to the website www.lu/legal-environment/legal-and-regulatory-environment/ 20Source: ALFI. from Switzerland 15. the countries’ legal and fiscal framework and their strong attractiveness for well-educated young graduates coming from all over Europe and willing to relocate in those two countries offering high standard of living.3% and so forth. stimulating financial sector environment “grounded in the principle of investor protection”19. the international banking crisis was not the only thing to strike Ireland since then: The country suffered from an over-dependence on property revenues. Luxembourg benefits from its well-known reputation of being an attractive place to work.7% of total assets.gov. According to the CSSF21.lff. such as their membership of the European Union and the Euro zone. at the end of March 2011. the Irish government set a four-year austerity plan in motion named “National Recovery Plan” to reduce Ireland’s deficit to 3% of GDP by the end of the year 201418. among which the welcome re-domiciliation law. stable government. the prudential supervisory authority in Luxembourg . domestic credit expansion and so forth.budget.ie 19Source http://www. Graph 13: Evolution of total net assets of Irish domiciled funds (2000-2010) in € bn 1. with low unemployment rates. United Kingdom 12.2011 CONTEXT Graph 13 displays the evolution of total net assets of Irish-domiciled funds over the last decade. The national emergency seems not to have impacted the fund industry so far as the government was smart to quickly implement regulation facilitating local business.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . up to the point when.

both financial centres have specialised.EFAMA report on the so‐called “Newcits” phenomenon”. or at least focused on different areas of expertise: Luxembourg was traditionally the place for long-only or plain vanilla fund as well as the stronghold of the German asset management industry. May 2011 Both are European “centres of excellence” for the set up of funds aimed at being sold worldwide. 52% and 32% respectively. American and British promoters total 84% of domiciled assets. Dublin has been developing offshore products administered in Dublin and other hedge funds in general. Graph 14: Country of domiciliation of sophisticated UCITS LU 51% MT 1% AT 2% DE 3% ES 2% FR 13% GB 8% IE 20% IT 1% Source: EFAMA “The evolving investment strategies of UCITS . or at least focused on different areas of expertise. Both financial centres have specialised. with more and more hedge funds set up in Luxembourg and long-only UCITS set up in Dublin.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . €759bn. Of the €963bn in Irish funds.see Graph 11 “Evolution of Luxembourg and Ireland market share for cross-border funds registration”). equivalent to almost 80%. Today. Cross-border distribution of UCITS | page 25 1. these characteristics tend to blend significantly as indicated in graph 14 that shows the widespread use of Luxembourg as domicile for sophisticated UCITS.2011 CONTEXT Dublin relies on its use of English to become the domicile of choice of Anglo-Saxon fund houses: According to Lipper’s “Ireland Fund Encyclopaedia”. On the other hand. these characteristics tend to blend significantly. Today.3 . are UCITS funds. Moreover. They currently account for nearly 90% of all worldwide cross-border funds (Luxembourg 75% and Ireland 14% . published in June 2010.

the emergence of UCITS domiciled in domestic markets mirrors the slow yet constant decline of national European funds.186 5. the leadership of the Luxembourg and Irish hubs is still undoubted but international distribution is also expanding from funds domiciled in major domestic markets in Europe. a 148% increase over the past 3 years.561 British funds sold internationally in as much as 39 countries in every continent. the German fund market is also raising its selling goals.852 2. such as the United Kingdom.878 true cross-border French-domiciled UCITS. Belgium. France represents the strongest centre among all domestic European countries. As at 31/12/2010. Germany and to a lesser extent. Table 2: Overview of the overall openness of European fund markets to the cross-border activity as at 31/12/2010 # of true cross-border UCITS domiciled in the country Evolution in % between 31/12/2007 and 31/12/2010 # of foreign countries where local UCITS are distributed # of true crossborder foreign UCITS registered for sale The international distribution of funds is also expanding from funds domiciled in domestic markets. with 493 locally domiciled international UCITS distributed in 22 countries worldwide at the end of 2010.793 3.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . Generally speaking. France and Germany. Luxembourg Ireland France United Kingdom Belgium Germany Source: PwC. there were 1.561 781 493 +26% +29% +148% +28% +6% +28% 55 37 20 39 15 22 911 918 3. page 26 | Cross-border distribution of UCITS . in terms of funds registered for sale internationally. Indeed. At the end of 2010. Table 2 shows this phenomenon and gives an overview of the overall openness of European fund markets to the cross-border activity by adding the number of international UCITS registered for sale in each country.3. whereas the number of true cross-border Luxembourg-domiciled funds only grew by 26% over the same period. there were also 1. latest trends confirm that fund houses from all over the world wanting to launch products designed for the international market are likely to set up UCITS domiciled in Luxembourg or Dublin.e. such as the United Kingdom. however. the trend of opening local UCITS funds to pan-European and even international distribution emerged a few years ago.878 1.843 1.2011 CONTEXT 1. but some go as far as the Americas and Asia. 2008 & 2011 46. Similarly. France. It should be noted that they were only 757 at the end of 2007. partially slowed down during the years of financial turmoil and yet seems today to be speeding up again.848 Hence. most of which being distributed within the European Union borders. In parallel. and sometimes decide to register their domestic UCITS in other countries for international distribution. not all European fund houses aiming at distributing beyond borders are necessarily moving toward one of the two hubs. i.846 8. against only 385 funds distributed in 18 countries at the end of 2007.2 The cross-border distribution of domestic products As seen above.

Germany is far ahead of all others.3 Top target markets for cross-border distribution in Europe If more and more UCITS funds get distributed internationally and as much as 36% of total cross-border UCITS are registered in more than ten countries22..000 1.SWEDEN 12 .A CACEIS PRODUCT DEVELOPMENT PUBLICATION .2011 CONTEXT 1. Over the same period.000 4. 35% of cross-border funds are distributed to 3 or 4 markets only.600 funds registered at the end of December 2010.ESTONIA 10 .500 2.GREECE 20 . Then come the United Kingdom and France.CZECH REPUBLIC 17 .500 3.NORWAY 2.LIECHTENSTEIN 23 .NETHERLANDS 3 .000 foreign fund registrations each.3 . which are the target distribution countries? Graph 15 displays the top 25 target markets for cross-border distribution in Europe in terms of number of funds registered for distribution in each country at the end of 2010.UNITED KINGDOM 16 .SWITZERLAND 13 .FINLAND 18 .PORTUGAL 19 .000 500 0 Germany ranks first in terms of cross-border funds registered for distribution in the country. in 2010 alone 4.500 1. especially Sweden. The second most open European market is Austria.GERMANY 11 .POLAND 9 . Switzerland.SPAIN 7 . 22Source: PwC.DENMARK 21 .IRELAND 22 .GUERNSEY 14 . while the third one. is not a member of the European Community.ITALY Cross-border distribution of UCITS | page 27 1.800 funds registered for distribution in each country. March 2011 Clearly.500 5.000 2.485 new registrations of UCITS were made in European countries. Wealthy Scandinavia should be carefully watched by foreign European asset managers as a target market for fund distribution.LATVIA 5 . It is followed by Austria and Switzerland. with 3. They are closely followed by Italy. with almost 6.SLOVAKIA 1 . with around 3. 8 . this number increased by 71%. They are the most open markets.AUSTRIA 15 . 25 . March 2011.3.LUXEMBOURG 6 . two thirds of which are domiciled in Luxembourg. Both the Netherlands and Spain moved up in the hierarchy of the target markets receiving high numbers of new registrations. the number of cross-border funds registered for distribution grew by 49% in Denmark and by 27% in Finland and Norway.000 3. which ranks 9th in terms of number of cross-border funds registered for distribution in the country.500 4.000 Number of cross-border funds 5.000 foreign fund registrations. Graph 15: Top 25 target markets for cross-border fund distribution in Europe 6. 29% to 5 to 9 countries and 36% to 10 or more countries.BELGIUM 24 . with Switzerland being the country that received the highest number of new registrations (532 within the year 2010). Between December 2007 and December 2010.FRANCE Source: PwC. there is a bulk of eight markets open to more than 3. According to the annual PwC study on cross-border distribution.JERSEY 4 . illustrating the interest from international asset managers of these two countries in terms of potential new money flow.

many fund market regulators and industry bodies witness the explosion of UCITS distribution and try to plan solutions to mirror such success locally. Hungary had 414 foreign registrations at the end of 2010. One of those. corresponding to the high growth of a region that has been opening to investment funds just recently. mostly provided through the banking system. They are widely promoted in the newspapers of Sao Paulo and Cape Town”23. although has not yet experienced the huge boom that had been foreseen. with 739 new registrations during the year. The region continues to expand its foreign funds sales.3% Source: PwC. More generally. Such project seems to be abandoned since. jealousy is mounting.4% Africa 0. Already back three years ago. appears as the most serious attempt to get all Asian countries organised around a single UCITS equivalent. The level of penetration in international investment markets means that UCITS are beyond doubt recognised as the world’s most internationally distributed investment fund product for a few years. though.4 Distribution perspectives outside Europe Further afield.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . Once again. the financial crisis and consequent insecurity are surely to be blamed in this respect. Their success is actually so marked that East or West. many fund market regulators and industry bodies witness the explosion of UCITS distribution and try to plan solutions to mirror such success locally. The growth is still there. Latin America and the Middle East. East or West. the Czech Republic was the most attractive destination for registrations of foreign funds among new European Member States.1% Middle East 1. and steady too. 2 June 2008 . it was reported that the SEC had foreseen a project to create an American equivalent of UCITS.3.3% Asia Pacific 8. UCITS distribution outside the European Union is now focused predominately on three key international regions – Asia.9% Americas 3. driven by the Australians. in order to be able to market US-domiciled funds internationally as freely as UCITS funds. Rumours spread about as many as four on-going different initiatives to create an Asian equivalent of UCITS granting local products the same distribution opportunities that UCITS can today benefit from. an article published by The Banker began with these words “They [UCITS] are advertised on the sides of buses in Hong Kong. A few years ago.2011 CONTEXT In 2010. The country is very active in the distribution of investment funds. the region of Eastern and Central European countries had been foreseen by Western European players as a territory of easy access and expected huge money flows. 165 of which were made during the previous 12 months alone. “UCITS break out to conquer the world”. worldwide distribution of UCITS continues to grow. March 2011 page 28 | Cross-border distribution of UCITS 23Source: The Banker. 1. Graph 16 illustrates the weight of Luxembourg fund distribution in these regions at the end of 2010. Graph 16: Luxembourg domiciled funds breakdown by distribution regions (in number of funds) Europe 86.

It should actually be analysed more in depth.262 2. 24Source: PwC. Bahrain -16 -175 -263 -62 214 1. EFAMA conducted a survey assessing the relative importance of Europe. South Africa 1. All four of these top countries experienced negative net new registrations for the year. More than fifteen years later. Singapore 1.064 739 112 1. The table hereafter shows the total number tion. Retrospectively. at the time not yet open to distribution of foreign funds. and given the brand power of UCITS. Additionally most fund managers agreed that UCITS would increasingly source assets in the Middle East and in Latin America.213 1. this prediction has not yet occured and actually the proportion of UCITS distributed in their home territory (that is Europe) even increased slightly since24. more and more Asian local regulators recognise the product and facilitate its penetration in local markets. Chile 1.824 908 Source: PwC. 2011 and 2008 Distribution of UCITS funds in the Asia Pacific regions has been central and much talked about over the years. “Cross-border marketing”. there are today more UCITS distributed in Singapore than in Hong Kong. preserving their confidence in the UCITS structure is critical to future success. cross-border UCITS marketed in Europe were accounting for 85. Asia. less developed Asian fund markets. Taking Luxembourg as a proxy.2% of the total cross-border UCITS in 2008 and are now up to 86. A cross-border distribution study by Lipper dating back to 1995 already stated that Hong Kong was the UCITS target of choice outside of the EU as it was a central point from which to hit many different Asian markets. 82% of the participants in the survey believed that the proportion of UCITS held by investors in Asia would grow in the coming years. by taking into account that tail effects of the financial crisis are still there. Latin America and the Middle East in the net sales and promotion of cross-border UCITS. which should not drive to the hasty conclusion that cross-border distribution as such is in decline. but both countries are high priority as they act as hubs for distribution in Mainland China and other. one should take into account the extent to which worldwide economies have been hit by the financial crisis since the EFAMA report was published. Nonetheless. 1.2011 CONTEXT In 2008. to reach 906 registrations. or not at all open to the fund industry25. Certainly. despite UCITS funds still having to go through a lengthy full registration procedure to be able to be marketed in Hong Kong. 25Source: Lipper. Hong Kong still being the frontrunner. Hence. Having said so. 1995 .3% at the end of 2011.3 Distribution of UCITS funds in the Asia Pacific regions has been central and much talked about over the years.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . the picture has not changed much. Macau is a recent success story: UCITS sold in Macau increased by 56% in 2010. Cross-border distribution of UCITS | page 29 of cross-border funds registered in the top country of each continent and last year’s varia- Table 3: Top countries for registration of foreign funds by region outside Europe in 2010 Region Top country for registration of foreign funds in the region New registrations of foreign funds in the country in 2010 Total registrations of foreign funds in the country as at 31/12/2010 Total registrations of foreign funds in the country as at 31/12/2007 Africa Americas Asia Pacific Middle East 1.

shifts toward two crucial points: The proposals of the creation of a pan-Asian fund product and socio-demographic trends in the region. distribution in the American continent is also very dynamic. 2011 Although the sales of UCITS in Asia are already strong in the more mature markets and Taiwan. which have been classified by their level of maturity.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . fiscal. In countries such as Chile and Peru. This alone should already drive the attention of most asset managers. fiscal. asset managers tend to analyse the macro-economic and socio-demographic changes currently happening in the region to try and capture growth where it is happening or foreseen to happen. to demographical. However. Across the Pacific. legal. legal. among which the two big and booming Eastern economies: China and India. Graph 17: Asian markets maturity levels overview Emerging > Wealth increasing rapidly > Heavily populated countries > Developing capital markets > Currency inconvertibility > Entrepreneurs have the ability to invest abroad Japan Singapore Hong Kong Taiwan Indonesia Mature > High wealth density > Highly developed capital markets South Korea China India Developing > Established base of wealth and strengthening capital markets > Selectively restrictive regulations > More experienced investors > Emergence of 2nd generation HNWIs > Complex wealth management needs > HNWIs seek wealth accumulation onshore and wealth preservation offshore Least Mature Most Mature Source: NICSA. Asia accounts for more than 4 billion people.2011 CONTEXT The attention of the European regulators today. Secondly. such a product. In any case. economic aspects and so forth. UCITS are considered the foreign page 30 | Cross-border distribution of UCITS . as European regulators would allow the pan-Asian funds to be distributed in the European Union as well. particularly in South America. there are still many other national markets to target. competition would be fiercer in the region and most probably also back in Europe. economic aspects and so forth. and forecasts predict a further 25% increase by the end of 2050. Achieving a deep understanding of the region is a hard task as Asian markets are far from being at the same development stage. on quite a few sides: From regulatory. when tackling the Asian distribution issue. on quite a few sides: From regulatory. should this happen in a relatively short timeframe. if and when it would become available. to demographical. Graph 17 is a NICSA’s summary of numerous factors influencing investing in many Asian markets. will take time to make its way to success as UCITS endured many years ago. International asset managers as well as European regulators and industry bodies currently question themselves: What would happen to the distribution pattern if a truly pan-Asian product were to be launched? Would it be the end of UCITS distribution in the region? Experts tend to predict that most probably. achieving a deep understanding of the region is a hard task as Asian markets are far from being at the same development stage.

though. Regular business missions of industry representative bodies and continuous exchange allow UCITS to keep developing in the region at an uninterrupted path. Fund houses eye those countries that are still closed and look forward to regulation change as their selling potential is huge.Last updated Apr 26. UCITS registrations in the country summed up to 1.Last updated Apr 26. At the end of December 2010. more and more will also join pension schemes and money will eventually continue to pour in. with 739 funds sold. Bahrain is today the financial centre in the region where UCITS are best integrated into local market. heavily invested in foreign assets.4% of total SPP26 assets. Peru is one of the South American countries that followed Chile in reforming the pension fund system. “Bargain Shopping in Peru. Those are mostly invested in the local pension funds. Given the specificities of the Middle East region. The whole of the industry feared but thankfully Chilean authorities finally did 1.594bn at the end of 200929.2011 CONTEXT investment of choice for local pension funds. have no bank accounts and have no access to credit”27 or – may we add–pension. World Development Indicators . The private pension system. was created in 1992. Chile questioned itself if it would maintain Irish domiciled UCITS eligible for investment in the local pension funds. The region – and its wealth – represents a target that is highly valued and closely watched these days. Hence. 2010 28Source: World Bank.3 In countries such as Chile and Peru. UCITS distribution ambitions in the continent. As previously mentioned. . +171% in ten years). Chile and Brazil”. 2011.20. Cross-border distribution of UCITS | page 31 not rule Irish funds out of the eligibility program. Cuarto Trimestre de 2010 27Source: International Business Times.7 million28) and the huge growth of its economy (GDP USD 1. foreign investment funds represented 7. UCITS are considered the foreign investment of choice for local pension funds.255 was enforced improving social protection by re-defying the three pillars of Chilean pension system. Not adjusted for inflation. World Development Indicators . Then in March 2008. SPP. During 2010.S. UCITS are also well established and fast developing in the Middle East. the Chilean Social Security System was reformulated from a defined-benefit program to a defined-contribution one. dollars. 26Source: Superintendencia de Banca. Peruvians have the choice between investing into a public (State) or a private pension fund. Today. as fears were mounting on the solvency of Ireland.A CACEIS PRODUCT DEVELOPMENT PUBLICATION .262 at the end of 2010. should the country open to foreign funds’ distribution. modelled on the Chilean one and experienced very positive inflows over the past years. December 21. “which means they pay no taxes. as on average 60 to 70 thousand new workers join these programs each quarter26 and this number is set to grow as estimates account as much as 71% of Peruvians working in an informal economy. there are 5 pension funds in the Chilean market. Currently. Seguros y AFP. ‘’Evolución del Sistema Privado de Pensiones‘’. Brazil is today’s hot topic given the country’s population (193. As more people enrol into the real economic system. most of which were UCITS. data at end 2009 29Source: World Bank. Thus. In 1981. 2011 GDP in current U. most fund houses launched or planned to launch specific products to target the region. are not limited to those few American countries. and this trend is set to continue. the new Pension Reform Law No. All industry international players want to make sure to capture their market share.

cross-border third party distribution is in a strong growth phase.2011 CONTEXT As European markets continue to open to cross-border distribution of funds. As a result. particularly in Asia. the highly valued UCITS brand favours their international distribution both within Europe and globally. page 32 | Cross-border distribution of UCITS . opportunities arise for foreign asset managers to win market share from local players. Following recent market trends. Moreover. but the reversing trend is already there.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . UCITS sales in other continents have partially slowed down. Latin America and the Middle East. UCITS’ investor protection and the ability of these products to use certain derivative instruments gives them a major advantage over local and other international products.

Whilst in other domestic fund markets such as France. • Fund’s shares/units in Euroclear France (the French CSD) are bearer securities. cross-border fund markets such as Luxembourg and Ireland. the two models may coexist through the use of an International Central Security Depositary (ICSD) such as Clearstream or Euroclear. the order and settlement infrastructure is provided almost totally by Central Security Depositaries (CSDs) which is known as the CSD model.1 Cross-border distribution of UCITS | page 33 2. in the following section. this paper focuses its analysis on two fund distribution models.1. Instead. Due to the complexity of the subject. However. CSDs’ offers however differ from one another in terms of specific aspects of fund transaction services from order execution through to settlement and custody of the fund’s units/shares. Graph 18: The French CSD model Investors Distributor Fund Management Company Financial Intermediary Distributor’s Custodian (CSD Member) Centralising Agent Issuer account keeper (gestionnaire du passif) Fund’s Custodian (CSD Member) CSD (Euroclear France) Source: CACEIS.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . FUND DISTRIBUTION MODELS & PLAYERS 2. 2. There is no register of shareholders in a fund as this is the case elsewhere in Europe.1 The CSD and TA models In some European domestic fund markets such as Belgium and Italy. . and Asian domestic fund markets.1 The CSD model: The French example Graph 18 displays the generic model of players involved in France’s fund distribution industry. orders and settlement are typically handled through bilateral arrangements between the distributors/aggregators and the fund-side institutions: Registrars and transfer agents (TA) which is known as the TA model. it is important to note that in cross-border fund markets. which means that the identity of the final beneficiary is unknown to the centralising agent. 2011 There are 2 main characteristics of fund order processing in France: • Funds must appoint a centralising agent to handle the receipt and execution of subscription and redemption orders in the name of and on behalf of the fund. Germany and Switzerland. the French CSD model and the Luxembourg TA model.2011 FUND DISTRIBUTION MODELS & PLAYERS 2.

Statement of holdings & reconciliation 2.e. which makes distributor activity monitoring and trailer fee management processes more complex for the management companies. Order placement Investor Distributor 1.1. and which represents the distributor/investor in France as a custodian. while the financial intermediary updates the custody accounts of the entity for whom they have dealt. 2011 4. This can be the same entity as the fund’s custodian. Account opening 3.2 The TA model: The Luxembourg example Graph 19 displays the generic model of players involved in Luxembourg’s fund distribution industry and the investment fund distribution process. Once an order is executed and/or confirmed by the centralising agent. 2011 Graph 19b: The investment fund distribution process 5. as opposed to the TA model.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . Cash instruction CC Bank page 34 | Cross-border distribution of UCITS Source: CACEIS. 2.2011 FUND DISTRIBUTION MODELS & PLAYERS an issuer account. Note that whilst this process is representative of the vast majority of fund order processing in France. the overall principles remain the same. However. does not allow distributors/investors to be easily identified. it is nevertheless possible to keep registers for a fund (i. Most orders are placed by a financial intermediary which must be a member of Euroclear France. both the centralising agent and the financial intermediary instruct Euroclear France to clear and settle on their respective accounts held with Euroclear France through a DVP (delivery versus payment) process. with the exception of the settlement process. The French CSD model. Graph 19a: The Luxembourg TA model Investors Fund supermarket Distributor Custodian/ Broker Bank Transfer Agent Transfer Agent Transfer Agent Transfer Agent Fund Fund Fund Fund Fund Fund Fund Fund Source: CACEIS. is held in Euroclear France and reflects the total number of shares in the market. no Euroclear France account). managed by the issuer account keeper also known as the “gestionnaire du passif”. Cash instruction CC Bank . Order confirmation TA FUND 4.

In either case. The process is nearly the same for pure institutional investors or private investors dealing directly. The routing platform and the follow-up of stocks and flows are just the first of many steps that need to be taken in the development of the cross-border distribution of funds domiciled in France. As opposed to the CSD model. in an environment where crossborder fund distribution has become increasingly important. decided to take the other approach and develop a domestic model. the distributor is not required to open neither a security nor a cash account with the fund’s tranfer agent.3 Comparative analysis of both models Historically.2011 FUND DISTRIBUTION MODELS & PLAYERS The majority of orders in Luxembourg are placed by appointed distributors or aggregators. to the contrary of the French CSD model. This account is generally maintained directly with the fund custodian.DVP settlement. although in certain cases the TA may hold dedicated accounts at an intermediary bank. There is no DVP process. 2.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . they also need to adapt in the following ways: • Standardise and automate process flows. the current French CSD model is reaching its limits. However. This model is well adapted to the specific needs of fund management companies regarding distributor activity monitoring and trailer fee management as it allows distributors’ and investors’ positions to be easily identified. The current wave of standardisation initiatives at a European level is a positive indication that both the TA and CSD models are moving in the same direction. the current French CSD model is reaching its limits and must adapt in order to be able to offer the following three factors: • The inherent security of its model . cash settlement is made through the normal banking system.1 In an environment where cross-border fund distribution has become increasingly important. On the contrary. Having received confirmation of the order from the TA. such as the ability to mark orders and match them with distributors to simplify commission calculation. Cross-border distribution of UCITS | page 35 2. Although TA models. Luxembourg had no choice but to develop a cross-border model for fund distribution as its domestic market was too small. . the client or client-side institution instructs the bank or custodian to credit the fund account (for retail investors. offer more flexibility and greater efficiency in fund distribution management. and • The tools and organisational structure necessary for handling fund distribution efficiently. the TA reconciles the cash flows with the transactions they have executed. the cash payment is a prerequisite to the order processing).1. The transfer agent keeps the official register of the fund and is the only entity appointed by the fund to receive and process the orders and issue confirmations. such as the one in place in Luxembourg. • The efficiency of a single automated routing platform. It is to be noted that. • Provide greater levels of security in settlement procedures. separately from the settlement of shares. but volumes are generally lower. France with its large domestic market for fund distribution.

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2.2 The global TA model
For a few years a new fund distribution model has emerged to facilitate cross-border distribution: The global TA model, illustrated in graph 20.
Graph 20: The global TA model
Investors Investors Investors Investors

Distributors in country A

Distributors in country B

Distributors in country C

Distributors in country D

GLOBAL TA

The global TA acts as a global hub, facilitating the fund distribution process in a cross-border environment.
Target centralising agent or TA 3

Target centralising agent or TA 1

Target centralising agent or TA 2

Fund 1
Source: CACEIS, 2011

Fund 2

Fund 3

The global TA pre-centralises the subscriptions and redemptions coming from the various distributors appointed by a given fund management company in the different countries of distribution and then routes orders to the target centralising or transfer agents. It acts as a global hub, facilitating the fund distribution process in a cross-border environment. As the global TA uses registers, orders can be easily marked. This model enables fund management companies to export their funds in numerous countries while benefitting from an efficient order marking process and a centralised view of the distribution activity all over the world.

2.3 Players’ roles & responsibilities for the principal distribution markets
2.3.1 Players shared by both CSD and TA models

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

LocaL authorItIes
Local authorities are the regulatory bodies which define the rules for fund distribution players operating in the domestic market, for example the AMF in France, the BaFin in Germany, the CBFSAI in Ireland, the CNMV in Spain, the CONSOB in Italy, the CSSF in Luxembourg or the SFC in Hong Kong. In the framework of the European fund passport, they ensure that fund distribution complies with the rules in force in the country of distribution. Out of this framework, they ensure that the product complies with all the rules relating to the distribution of foreign funds in the country. The local authorities play an important role in initial fund registration and post-registration processes.
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2.2/3

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Fund management company
The fund management company is the financial institution that launches the fund, determines the investment strategy, appoints the service providers, and makes all major decisions for and on behalf of the fund. It is responsible for the fund distribution and marketing.

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

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

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

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

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

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

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

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

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

The fund issuer account keeper is appointed by the fund management company and is often performed by the same entity as the centralising agent in France. The role consists of updating the fund account open in its books to reflect the daily unit/shares subscriptions/redemptions and transfers, as well as reconciling positions with Euroclear France. The entity is also in charge of subscriptions/redemptions settlement, public and shareholder information and process concerning corporate actions. For funds not registered with Euroclear France, the fund issuer account keeper maintains a nominative shareholder register.

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

2.3.3 Players specific to the TA model

transFer agent/regIstrar
The traditional services offered by the transfer agent are maintaining the register, transaction processing, settlement and shareholder reporting: • Updating fund accounts to reflect the daily unit sales and redemptions, switches, transfers and changes of registrations, • Ensuring prompt settlement of orders and provision of tax information to the investor and its intermediaries, • Calculation and payment of commissions, • Preparation and sending of order confirmations and the resulting cash account statements to the investor or its intermediary, • Responding to requests concerning securities account holdings and undertaking a control function, • Executing payments.
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As the fund industry is shaping itself as a global distribution model, in addition to the traditional services, the transfer agent is required to provide other added-value services.

2.3

Fund Issuer account keeper (gestIonnaIre du passIF)

A third model. In the transaction value chain. Some of the differences between the various models create barriers to efficient crossborder order routing. despite harmonisation initiatives. in addition to the traditional services. the diversity of national regulations within Europe adds another layer of complexity to the process of crossborder fund distribution despite an on-going harmonisation. the transfer agent is required to provide other added-value services such as maintaining investor holdings data across complex distribution networks and trailer fee calculation based on consolidated holdings (see global TA model). called global TA model. Furthermore. page 40 | Cross-border distribution of UCITS . settlement and custody to the extent that they generate additional risks and costs for investors operating in more than one market. It notably enables French funds to be successfully distributed abroad and remedy to the absence of register in the French CSD model. is increasingly used for cross-border fund distribution. Today. As a result. the cross-border funds landscape is suffering from a high level of fragmentation at both trading and post-trading levels. fund processing by EU Member States has evolved in a manner that best serves the needs of the domestic markets. there are significant national differences in fund processing procedures across the EU.2011 FUND DISTRIBUTION MODELS & PLAYERS Nevertheless.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . as the fund industry is moving toward a global distribution model. and two competitive models have emerged: the CSD model and the TA model.

as asset managers had to comply with a range of requirements such as transmission of numerous documents (original and/or self-certified) often translated to the local language. each fund or sub-fund must be registered for sale with the national regulator of that country. provided that the notification requirements mentioned in the Directive are fulfilled. 2011 3. the United Kingdom and France (please refer to graph 15). CHALLENGES & OPPORTUNITIES The 1985 UCITS Directive. lead times and fees as at January 2011 for the initial registration of a foreign fund in the top 7 target markets. Notice Through its registration and post-registration services.A CACEIS PRODUCT DEVELOPMENT PUBLICATION .2011 CHALLENGES & OPPORTUNITIES 3. appointment of local agents and payment of fees.1 Administrative and regulatory requirements 3. the Netherlands. two parallel registrations had to be carried out: One addressed to the CONSOB and the other to the Banca d’Italia. in particular in terms of taxation.1 Registration requirements for foreign funds Today when an asset manager seeks to market funds to investors in other countries. Austria. except for private placement. So far. further work needs to be done to remove all the remaining barriers in a growing cross-border fund distribution environment. The following table sums up the major challenges faced by management companies to market their funds beyond borders: Table 4: Major issues faced by asset managers distributing their funds cross-border Administrative and regulatory requirements Country approval requirements Maintaining registration Taxation of funds and investors Various fiscal requirements Difficulties to access information on a cross-border basis Difficulties to access updated and reliable information Manual processes Lack of standardisation Lack of standardisation of distribution agreements Increasing complexity of distribution networks Taxation issues Information referencing issue Operational workflow Source: CACEIS. However. Table 5 provides a comparison of these various local distribution requirements. also known as UCITS I. namely Germany. In Italy for example.. etc. costly and difficult. The significant differences in time and cost of registration between countries made it difficult for management companies to launch funds simultaneously across different markets. the drive toward a UCITS single market in Europe is not yet over and while a significant journey has been completed. this process could be extremely time-consuming. Spain. Cross-border distribution of UCITS | page 41 3. introduced the European fund passport concept. which allows a fund domiciled in one European jurisdiction to be marketed in all other EU jurisdictions.1 Distribution agreements and trailer fee management .1. CACEIS can assist you in meeting all the administrative and regulatory requirements faced when distributing internationally. differing from one country to another. notably with the simplified notification procedure introduced by UCITS IV. Switzerland.

self-certified • Original confirmation of credit institution acting as Paying Agent • Copy of latest annual & semi-annual reports • Original of POA/mandate for submission of notification by 3rd party • Copy of proof of fees payment • Original of notification form (incl. German or Italian) 2 to 6 months Local representative and Local Paying Agent • Initial reg.000 to 20.250 for the funds without sub-funds. of paying out distribution on units and of the repurchasing or redemption of units in the Netherlands • Application form for a Collective Investment Scheme with a European passport All documents can be submitted in English or in Dutch.250 for the first sub-fund of an umbrella-fund and CHF 750 for each subsequent fund) + “Taxe d’assujetissement” (CHF 1. self-certified • Latest constitutional documents. self-certified • Original confirmation of credit institution acting as Information/Paying Agent • Copy of latest annual & semi-annual reports • Original of POA/mandate for submission of notification by 3rd party • Proof of fees payment • Original of notification form (including marketing and distribution arrangements in Germany) • Additional information for Shareholders as internal part of the German language full & simplified prospectus • Latest full & simplified prospectus with visa stamp.500 for a singlefund structure or for each sub-fund • Annual fee: EUR 500 for a singlefund structure or for each sub-fund Austria All documents to be submitted in the original language + in German (except UCITS certificate and notification form accepted in English) Within 2-4 weeks Paying Agent (“Zahlstelle”) and Information Agent (“Informationsstelle”) • Initial reg.: EUR 2.100 per structure • Launch of new sub-funds: EUR 220 per sub-fund • Annual fee: EUR 600 per structure (additional fee of EUR 200 for each sub-fund starting from the 2nd sub-fund) Switzerland • Latest Swiss version of full & simplified prospectus signed by custodian. self-certified • Latest constitutional documents. depending on the transposition of the UCITS IV Directive in each Member State Information requirement at first registration Translation requirement in local language Timing to obtain initial regist.Total of annual fees = Max CHF 20.000 per structure depending on the time spent by the FINMA’s agent • Approval of changes made to prospectus: CHF 1.A CACEIS PRODUCT DEVELOPMENT PUBLICATION .350 per structure • No fee for the subsequent registration of additional sub-funds • No annual fee page 42 | Cross-border distribution of UCITS . Swiss representative & management company/fund • Original of UCITS Certificate • Copy of the articles of incorporation (SICAV) or management regulations (FCP) signed by the Fund/ManCo • Signed copy of Representative & Paying Agent Agreement • Mandate to the Lawyers (if appointed) • Latest annual and semi-annual reports Yes. except the simplified prospectus which shall always be translated into Dutch Max 2 months None • Initial reg. all documents must be submitted in one of the official languages (French. CHF 1.: EUR 1. marketing and distribution arrangements in Austria) • Additional information for Shareholders as integral part of the German language full prospectus All documents to be submitted in the original language + in German (except UCITS certificate and notification form accepted in English) Max 2 months Paying Agent (“Zahlstelle”) and Information Agent (“Informationsstelle”) • Initial reg.2011 CHALLENGES & OPPORTUNITIES Table 5: Comparison of registration requirements in the top 7 target countries as at January 2011 Please note that some information may be no longer valid from 1st July 2011.: CHF 2. Local agent requirement Initial registration & annual fees Germany • Latest full & simplified prospectus with visa stamp. self-certified • UCITS Certificate.000 per structure and CHF 500 for the first sub-fund and each additional sub-fund) .: EUR 1. of marketing units. self-certified • UCITS Certificate.000 Netherlands • Latest full & simplified prospectus with visa stamp • Latest articles of incorporation • UCITS Certificate • Latest annual & semi-annual reports (if available) • Explanation of the envisaged manner of providing information.000 depending on the time spent by the FINMA’s agent • Annual fee: “Taxe de surveillance” (CHF 1.000 to 10.

1 France • Latest full & simplified prospectus with visa stamp • UCITS Certificate • Copy of constitutional documents • Latest annual & semi-annual reports • Proof of fees payment • Additional information/Addendum for Shareholders • Details of UCITS (Annex III-A part A) • Details of marketing arrangements (Annex III-A part B) • Annex III-C • Copy of Centralising Agent agreement Yes Max 2 months Centralising Agent • Annual fee: EUR 2. they might have to cope with various local distribution requirements if they intend to market their funds in several countries in Europe: Mandatory translation of KIIDs (Key Investor Information Documents) into the language(s) of each country of distribution. it should be noted that asset managers will still have to comply with local marketing and distribution laws in the host Member State.: GBP 600 per single UCITS and GBP 1. Asian investors buying Luxembourg or Ireland domiciled funds are mainly located in Singapore. However. The demand from Asia and Latin America remains extensively constrained by local regulations. the UCITS IV Directive should considerably streamline the notification process for cross-border fund sales in the European Union and reduce costs and marketing delays for asset managers.200 per umbrella structure • Annual fee: GBP 560 for 1-2 sub-funds GBP 1.800 for 7-15 sub-funds GBP 6.160 for 16-50 sub-funds GBP 12. 2011 As at 1st July 2011. 3. from 2 months to 10 working days. streamline the cross-border authorisation process across EU Member States and provide a shorter time to market. payment of annual fees for registration.A CACEIS PRODUCT DEVELOPMENT PUBLICATION .14‰ on the volume estimated to be commercialised in Spain subject to minimum fees as determined by the CNMV (EUR 1. etc.: 0.21 in 2011) • No annual fee UK • Self-certified copy of latest full & simplified prospectus with visa stamp • Self-certified copy of UCITS Certificate • Self-certified copy of latest constitutional documents • Self-certified copy of latest annual & semi-annual reports • Signed notification letter • FSA reference number of the distributor • Additional information for UK investors All documents to be submitted in the original language + in English Max 2 months UK Representative and Paying Agent • Initial reg.320 for >50 sub-funds Source: CACEIS. As distribution spreads beyond Europe. Thus. designed to increase cross-border registration efficiency.2011 CHALLENGES & OPPORTUNITIES Information requirement at first registration Translation requirement in local language Timing to obtain initial regist. funds will still require host country approval to be distributed cross-border according to Article 93 of the recast UCITS Directive but UCITS IV will introduce a simplified notification procedure.400 for 3-6 sub-funds GBP 2. As such.760. the issue of fund registration is even more complex. Hong Kong and Taiwan while Latin American investors are mainly located in Chile Cross-border distribution of UCITS | page 43 As at 1st July 2011. Local agent requirement Initial registration & annual fees Spain • Original version of latest full & simplified prospectus with visa stamp • Original version of latest UCITS Certificate • Self-certified notarised copy of latest articles of incorporation • Copy of latest annual & semi-annual reports • Appointment by the fund or the management company of a contact person with CNMV to act as representative of the fund in order to submit the information by means of CIFRADOC system • Appointment of a contact person among the Spanish distributors for the tax and statistical reporting All documents to be submitted in the original language + in Spanish except for the UCITS certificate (sworn translation) Max 2 months One distributor must be designated to act as representative of the fund • Initial reg.000 for each sub-fund . appointment of local agents in some countries of distribution.

another key issue is to maintain the registered status in the various countries of distribution. Asset managers have to cope with financial reporting. culture. Even in hospitable countries. 30Source: Citi. is not that simple. Increased reporting requirements. Consequently. 29 March 2011 3. • As an illustration. The situation is similar in Singapore. Overall. rising costs”. asset managers must now provide a Key Facts Statement (KFS) for structured products distributed to retail investors in Hong Kong. India. industry stage and the cross-regional relationship amongst local regulators is complex. “Key regulatory reforms for asset managers”. such as China. • With regard to Taiwan. Asia is a fragmented market where each jurisdiction has a different investment fund regulatory and tax regime. table 6 provides a comparison of the various post-registration duties for foreign funds in the top 7 target markets as at January 2011. similar to the European UCITS Key Investor Information Document (KIID) introduced by UCITS IV as at 1st July 2011. the Hong Kong regulatory authority has recently introduced new requirements for funds authorised for distribution in Hong Kong and reformed existing Securities and Futures Commission (SFC) codes regarding unit trusts. Many countries still maintain their borders closed to foreign-domiciled funds. January 2011 page 44 | Cross-border distribution of UCITS 31Source: Ignites Asia. In all EU countries. updated prospectus and UCITS certificates must also be transmitted to the local authorities to maintain registered status. distribution of foreign funds. statistical reporting and publication requirements.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . Again. where both the Product Highlight Sheet (PHS) and the KIID will be required. “Managers confront stalled flows. language. with specific formats and translation requirements differing from one country to another. Furthermore. 3. It should be noted that UCITS IV has no impact on these post-registration requirements. a partnership with a master agent is required to do business there. The Taiwanese regulator has put in place further administrative measures which make it more difficult to sell foreign funds and registration can take a long time. There the challenge comes in dealing with different rapidly evolving regulations and registration process (often involving translation requirements in local language of disclosure documents and long lead times to obtain a license) in each separate jurisdiction. these initiatives coincide with a global trend towards a more stringent regulatory approach to ensure greater investor protection as pursued also in the US and European jurisdictions30.2011 CHALLENGES & OPPORTUNITIES and Peru.2 Post-registration requirements Once registration has been obtained. Therefore UCITS funds distributed in Hong Kong will have to produce two sets of documents (the KFS and the KIID). mutual funds and investment-linked assurance schemes. Indonesia or Brazil.1 . including UCITS.1. one of the main complaints among asset managers wishing to register their UCITS funds for distribution in Hong Kong is the lack of a clear timeline for the regulatory approval. together with demand for product information and market advice has added strain to budgets31. The post-registration duties can be very cumbersome and time-consuming.

1 . • NAV: Publication requirement identical to the requirements in the home country of the fund. • NAV: Has to be published in UK in a manner which is disclosed in the UCITS’s prospectus (e. • Shareholder information: Publication requirements identical to the requirements in the home country of the fund. UK Annual & Semi-annual reports must be submitted by email to the FSA and to be made available to shareholders in English at the UK representative and paying agent. national newspaper. German or Italian – with additional requirements to those in force in the home country must be submitted twice a year by the local representative Annual & Semi-annual reports shall be made available to the investors. The manner in which such publications are to be done is according to the rules in force in the EU Home State. No statistical reporting required • Shareholder information: Publications shall be done in accordance with the rules in force in the UCITS’s EU home country. Access to these documents through the fund’s website is acceptable. • Shareholder information: The law states that all information and documentation that the EU Home State requires to be published must be published in German. with the name of the local representative/paying agent (market practice) Annual & Semi-annual reports in French. mail to the existing unitholders). explicitly stated as acceptable by the BaFin are the following: German newspaper. individual letter to German investors. 2011 Cross-border distribution of UCITS | page 45 3. website (therefore it is no longer mandatory to publish NAV in a German newspaper). in their regulations (Merkblatt 2008) the BaFin states that notifications to shareholders are required to be published in an appropriate publication medium. with the same frequency and in the same number of publications as prescripted by the law of the country of origin of the UCITS. France Annual & Semi-annual reports must be submitted to the AMF twice a year (copy of the originals + reports translated in French) with no additional requirements to those in force in the home country. with the inclusion of the German paying and information agent No statistical reporting obligations imposed on foreign funds • NAV: The law requires publication of NAV to be done according to the laws and regulations of the home country of the fund. internet. The BaFin’s regulations (Merkblatt 2008) state that it is sufficient that the NAV publication toward German investors is made via electronic information media. but in German. Each distributur must report statistical information electronicaly via CIFRADOC to the CNMV on a quaterly basis. Source: CACEIS. Information on NAV of the fund at the end of the period. No statistical reporting obligations imposed on foreign funds Switzerland Statistical reporting obligations imposed on foreign funds suspended since 31/12/07 Netherlands No statistical reporting required • Shareholder information: Publications shall be made in the same way as what is made in the home country. • Shareholder information: All events of which investors in the original country are notified have to be communicated to the investors in Spain at the same time and in the same format. in English or in Dutch. e. volume of units sold to investors in France and gross subscriptions during the period must be transmitted to the AMF twice a year by the centralising agent.2011 CHALLENGES & OPPORTUNITIES Table 6: Comparison of post-registration requirements in the top 7 target countries Financial Reporting Statistical Reporting Publication Requirements Germany Annual & Semi-annual reports (1 copy of the original report + 1 translation in German) must be submitted to the BaFin twice a year. Spain Annual & Semi-annual reports in Spanish (sworn translation) must be made available for consultation and should be kept at the fund’s representative (must be supplied to CNMV upon request only).A CACEIS PRODUCT DEVELOPMENT PUBLICATION . Austria Annual & Semi-annual reports in German must be submitted twice a year to the FMA. with the same frequency and in the same number of publications as prescribed by the law of the UCITS country of origin. However. Other appropriate publication media are: German newspaper. • Shareholder information: Foreign UCITS shall comply with the same publication obligations in France.g. individual letter to German investors. • NAV: At least one of the fund distributors/the representative or the management company must make available for consultation the NAVs corresponding to the shares marketed in Spain via electronic means. • Shareholder information: Foreign UCITS shall comply with the same publication obligations in Switzerland.g. Electronic Federal Gazette (publication in electronic information media is not acceptable). • NAV: The fund management company shall publish jointly the issue & redemption prices every time shares are issued or repurchased and at least twice a month in daily newspaper(s) or in electronic platform(s) mentioned in the prospectus. Electronic Federal Gazette.

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the tax information delivered may be certified to ensure that the determination of the published data is compliant with the local tax requirements. which requires paying agents making cross-border interest payments to EU individuals to obtain and verify certain information about those individuals and either to report information about the interest payments to their domestic tax authorities (among jurisdictions committed to the exchange of information are Denmark. With regard to unit-holders/investors. “white” or “extra-white” status in Austria). UCITS (and a lot of other savings products) are covered by this Directive. Hence the ability of the fund to calculate the relevant figures. since January 2005 the PEA regime in France allows investors to hold foreign funds). funds can be subject to taxation of income/capital gains. However. Taxation of foreign funds. CACEIS can ensure you that all tax obligations are satisfied when distributing internationally. Germany. In terms of taxation. 3. France. Again. foreign funds will have to obtain a specific tax status to be attractive to local investors (“fully transparent” status in Germany. “Zwischengewinn” (interim profit) and “Immobiliengewinn” (real estate profit) in Germany for fully transparent funds.2 various investments made by UCITS is equal everywhere. While in Europe major tax discrimination measures against foreign funds and residents investing in non-resident funds have progressively been abolished under pressure from the European Commission and the European Court of Justice (as an example. Spain Cross-border distribution of UCITS | page 47 Tax constraints often generate additional administrative requirements and are powerful financial disincentives. Notice Through its post-registration services. in countries such as Germany and Austria. and deliver the relevant tax information to investors via financial data providers and financial newspapers is crucial to avoid huge taxation of investors. outside Europe many countries still have tax regimes in place which favour domestic funds.2011 CHALLENGES & OPPORTUNITIES 3. The main taxation issues are described hereafter. each jurisdiction has developed its own tax requirements. To get the preferential tax treatment. Thus. taxation remains a major issue for cross-border fund distribution due to the existence of multiple taxation regimes for investment funds and investors. you should not ignore that a number of EU Member States have legislated for foreign UCITS to provide tax reporting in order to benefit from the same taxation as domestic UCITS. However.2. the Netherlands. implemented in July 2005. the need to comply with these local rules imposes an additional cost and administrative burden on funds distributed in these countries. 3. another constraint lies in the EU Savings Directive application. Within the European Union. taxation of UCITS is today basically . Indeed.1 Taxation of funds and investors Depending on the country of domiciliation. they may be subject to taxation on income/ capital gains realised.g. even though there is still a way to go before the net revenue of the identical whether UCITS are marketed domestically or on a cross-border basis. composition duty in Luxembourg). such as the publication at each NAV date of the “Aktiengewinn” (equity gain). Within a country. withholding taxes on income received and/or other taxation (e. taxation of residents investing in funds domiciled abroad and various fiscal requirements depending on jurisdictions are significant factors asset managers must consider before marketing a fund cross-border.2 Taxation issues Luxembourg and Irish tax regimes are viewed more favourably than many other jurisdictions across most fund types. As the European Commission stated in its Green Paper published in July 2005 on ”the enhancement of the EU framework for investment funds”. Italy.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . “tax constraints often generate additional administrative requirements and are powerful financial disincentives”. several tax regimes can apply depending on the status of the unit-holder/investor (resident or non-resident) and depending on the domiciliation of the fund (domestic or foreign fund) in which investments are made. In Asia as well. such as in South Korea where a tax barrier penalises foreign funds against local products. via public distribution or private placement.

submission of the annual Deemed Distribution Income. Luxembourg and Switzerland).2.2 Tax representative appointment and reporting to local fiscal authorities Finally.which engage in business in the United States. in particular the US Foreign Account Tax Compliance Act (FATCA). corresponding to the taxable portion of each distribution for EU Savings Directive purposes. Future tax changes should be carefully watched. All intermediaries that distribute funds will need to be FATCA compliant or the funds themselves will face 30 per cent tax32. for inclusion in the annual accounts. Belgium. The fund has to report details of the amount and description of income accumulated using equalisation. No tax reporting required Germany No Austria Yes unless “black funds” status Switzerland No Netherlands No One distributor must be deisignated to act as representative of the fund and will be responsible for submitting the required information to the CNMV. No tax reporting required page 48 | Cross-border distribution of UCITS 32Source: Ignites Europe. publication of: • the annual Deemed Distributed Income with certification of Certified Public Accountant (CPA) or tax consultant within 4 months following the fiscal year end. to enter into agreements with the US tax authority (IRS) to identify and report on US taxpayers annually. 3. with which asset managers will have to comply by the start of 2013. No No Spain Fiscal reporting at fund level to apply the roll-over relief for income tax (IRPF). and a Taxable Income at Distribution (TID). FATCA is designed to force foreign financial institutions – including investment funds and hedge funds . in some countries foreign funds may have to face additional and onerous administrative requirements such as the mandatory appointment of a tax representative and/or reporting to local fiscal authorities.2011 CHALLENGES & OPPORTUNITIES and Belgium) or levy withholding taxes (among jurisdictions committed to withholding tax are Austria. “US rules big issue for European managers”. 20 September 2010 . For white and extra-white funds. will have to be calculated and published via financial data providers or local financial newspapers when foreign funds are distributed to individuals in Austria. Luxembourg or Switzerland. These requirements are listed below for the top 7 target markets as at January 2011: Table 7: Fiscal requirements for the top 7 target markets Country of distribution Fiscal representative requirement Local tax authority’s reporting requirements For fully and partly transparent funds. UCITS distributed to retail investors in UK should benefit from the “UK fund reporting regime”. a Taxable Income per Share (TIS). • the Dividend Distributed Income with certification of CPA or tax consultant within 4 months following the fiscal year end.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . In this framework. 2011 In order to achieve maximum tax efficiency. corresponding to the taxable value of each share for EUSD purposes in the event of a sale or redemption payment. Financial reporting submission to Banque Nationale Suisse. UK France Source: CACEIS. The EU Savings Directive application proves particularly burdensome for UCITS as fund management companies are responsible for accurate TIS and TID calculations for the various jurisdictions. It will therefore generate additional tax reporting constraints.

the FPP concept is still far from being an operational reality within the investment fund industry.) that require careful attention before placing an order.3. cut off times etc. content and InItIaL prIncIpLes The FPP is a short. Hence. objectIve. order forms required. especially when they are domiciled abroad. with all the information required to initiate and process orders correctly. an EFAMA initiative In light of this. fund management companies and their service providers (transfer agents/registrars. settlement details.3 Information referencing issue 3. access to reliable and updated information is a key factor in the success of controlling operational risk relating to execution and settlement of subscription and redemption orders.2 The Fund Processing Passport. it is very difficult to obtain in a relatively easy way operational information on the various products which can be the object of a cross-border public distribution as there is no pan-European fund database and the existing fund databases are deficient.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . trustees. by providing them. unfortunately. cut off time. such as contact details of a local fund order desk in a given country. Indeed.3 . etc.2011 CHALLENGES & OPPORTUNITIES 3. at class level. The FPP initial principles defined by EFAMA are presented hereafter: Cross-border distribution of UCITS | page 49 3. portfolio managers). a few years after its launch. currency. these funds have often different characteristics (dealing frequency. The FPP aims at solving the information problems faced by banks. distributors. NAV frequency. the concept of a Fund Processing Passport (FPP) was developed by EFAMA’s Fund Processing Standardisation Group (FPSG) in 2007-2008 and was drawn up from the viewpoint of all relevant professional players involved in the operational aspects of investment funds distribution: Investor intermediaries. fund accounting agents. fund trade processing tends to be more complex when clients want to purchase third-party funds. Despite its many advantages. other distributors and their services providers when processing third-party fund transactions. To date. custodians. Most of them give only access to fund prospectus consultation and not to the information necessary to place and process orders correctly. pricing.3. distribution platforms.1 The lack of a pan-European fund database penalises cross-border distribution In the context of cross-border fund distribution. 3. Each FPP is composed of a “core data” section describing the most common arrangements handled by the “main fund order desk” in the fund home market and of annexes describing the country-specific information concerning the dealing/settlement arrangements for other markets where the class of unit/share is also distributed. single and fully harmonised document made of 105 standard fields which aims at solving the information problems faced by banks. other distributors and their services providers when processing third-party fund transactions.

Flexibility No one size fits all solution 3 . the FPP helps fund managers servicing a wide-ranging client base or striving to distribute their funds more broadly. and guarantee the FPP content accuracy 2 . The FPP benefits for fund managers and fund distributors can be summed up as follows: Table 8: FPP benefits for fund managers and fund distributors FPP benefits for fund managers FPP benefits for fund distributors • Allows fund managers to deliver higher quality • Reduces redundant checks • Reduces processing transactions delays • Reduces errors in executing orders • Ultimately reduces cost service • Speeds up the order processing • Drives down processing costs • Provides a ready-made solution for addressing distributors’ queries about funds • Opens the way to electronic communications of operational information about funds • Facilitates order placement. the common format for fund processing data defined by EFAMA is progressively being rolled out but with a relatively slow uptake.Accountability Fund managers initiate the process. possibly with the help of a service provider. less time spent collecting information. even though it is widely recognised that such a standard is useful and brings many benefits (information communicated electronically. page 50 | Cross-border distribution of UCITS .2011 CHALLENGES & OPPORTUNITIES Graph 21: FPP initial principles 4 INITIAL PRINCIPLES 1 .A CACEIS PRODUCT DEVELOPMENT PUBLICATION .Centralisation Ideally FPP should be collected in one single and central access point at national and European level 4 . one has to admit that in practice its development in Europe has been less successful than expected. At the time of writing. faster order processing). 2007 beneFIts For Fund managers and Fund dIstrIbutors Concurrently.Standardisation FPP content should be distributed through automated standardised feed Fund manager FPP service provider Single local golden copy FPP repository operated by a « repository administrator » Single European FPP directory/database Source: EFAMA. reduced operational risks. thereby satisfying customer needs and enhancing their loyalty Source: EFAMA. to address in a cost-effective way the numerous information requests they typically face from investors and fund distributors interested in their funds. 2007 a concept stILL Far From beIng an operatIonaL reaLIty More than two years after the launch of the FPP.

published by the AMF on 26 July 2010. in France. since 2008. with whom fund managers have special arrangements for the distribution. of their FPPs. FundConnect.the first step towards the creation of a product reference system over the long term. The end objective was to make the use of the FPP more widespread among all professional players involved in the fund processing procedure. although the validation and publication of this data remain their responsibility. A firm believer in the FPP’s usefulness for improving and standardising the information required for order processing in an increasingly open environment. CACEIS has supported this initiative since the beginning and has actively participated in working groups in France and Luxembourg. EFAMA announced the launch of a pan-European web portal on its website33.2011 CHALLENGES & OPPORTUNITIES Notice Nevertheless. KNEIP. At December 2010. national associations and the so-called FPP Primary Providers. Furthermore. the committee encouraged asset management companies to use the web portal set up by the AFG in order to make their completed FPPs available to distributors.318 FPPs from 69 asset managers34. OeKB and WM Datenservice. CACEIS in Paris has offered its services to asset management companies for the collection and management of FPP data concerning their UCITS. France FPP (AFG). Furthermore. 33http://fpp.org 34Source: EFAMA. asset management companies and their service providers.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . suggested that it should be compulsory to provide an FPP for all French UCITS seeking to be distributed internationally . Finesti. fund platforms. Q1 2011 Cross-border distribution of UCITS | page 51 3. and possibly the distribution. it should be pointed out that last year two initiatives relaunched the concept of the FPP to facilitate cross-border fund distribution: • On 28 June 2010.efama. The existing FPPs are made available by fund managers. “FPP Portal briefing Q1 2011”. providing a central access point for all existing FPPs in order to facilitate their use. within the framework of its support services offer for fund distributors.e.3 . i. the final report of the asset management stakeholders’ committee entitled “Implementation into French law of the UCITS IV Directive: Situation and Outlook for Asset Management”. in particular distributors. the EFAMA’s FPP portal was given access to 4. • In addition.

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Language differences also need to be considered for both reporting. Cultural differences and in particular the local service quality culture in Asia should not be neglected. lack of standardisation.2011 CHALLENGES & OPPORTUNITIES 3. transfer agents in Luxembourg and Ireland have to manually re-key many orders and other data. As products have become increasingly distributed on a global basis – in particular in Asia. local employees. stretching from the start of the Asian day to the end of the American day.the fund industry keeps on suffering from operational inefficiencies (manual processes. data aggregation and client servicing aspects.4. etc. lowers service levels and makes the market less efficient. including integration with existing IT infrastructure. one of the key challenges facing the fund industry is automation of fund related transactions. Unlike other asset classes such as stocks and bonds which rely on electronic tools. Besides. play a key role in servicing local distributors and investors. which generates costs. The importance of a global approach to fund processing remains as high as ever. Due to the structure of the industry today. One should keep in mind that signing agreements is one thing but processing successfully operations is another. The importance of open/guided architecture also exacerbates the ensuing operational costs for industry players and investors. especially in Asia. in Latin America and in the wider EMEA region -. Fund distribution support is now a complex activity.) and risk exposure in its trading. settlement and custody processes.which emerges as a global and top quality brand in the universe of savings products . standardisation remains insufficient in settlement. a more sophisticated approach is required to service both managers and distributors. each relationship being technically different and expensive to manage and maintain. asset servicing and commission handling. in the same time zone and with the industry knowledge and understanding of local cultural issues. Indeed. the fund industry still widely uses faxes and telephone calls to communicate. 3. As a result.1 The growth in cross-border business and open/guided architecture tends to exacerbate operational complexity As a custodian and/or administrator of UCITS product.4 Cross-border distribution of UCITS | page 53 Unlike other asset classes such as stocks and bonds which rely on electronic tools. More than ever. the challenge was previously more limited to supporting managers residing in various countries but in broadly similar time zones. as well as investors. which may require operational teams located in the region of distribution.4 Operational workflow The inefficiencies of fund processing are obviously more apparent in a cross-border fund distribution context. If standards such as SWIFT ISO 20022 are progressively being rolled out for order execution. there are multiple relationships between distributors and their transfer agencies. . risks. The graph below illustrates these numerous relationships: 3. beyond the worldwide commercial success of UCITS .A CACEIS PRODUCT DEVELOPMENT PUBLICATION . the fund industry still widely uses faxes and telephone calls to communicate.

SWIFT also calculated estimated costs of non automated fund processes in Europe and in Asia. Deloitte conducted a study on cross-border fund distribution in Europe35.000. Fax remains the most common mode of communication there.3 Notice CACEIS reaches an average STP rate of 84. Therefore.00)36. SWIFT also outlined that fax server is not a cheap solution. it would save up to EUR 307 million each year . the processing and operational challenges also mount. which found that the overall level of straight-through processing (STP) in the industry was as low as 47 percent and that manual processing for one non-STP transaction took. for cross-border fund distribution in the Luxembourg and Irish industries.2. According to the report.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . This can be explained by several factors: Manual processes and lack of standardisation of communication processes are obviously expensive for industry players and investors. September 2007 page 54 | Cross-border distribution of UCITS 36Source: SWIFT.2). pensive for industry players and investors.2011 CHALLENGES & OPPORTUNITIES Graph 22: Operational challenges of third-party distribution FRONT-END SERVICES TRANSFER AGENT/ CENTRALISING AGENT BACK-END SERVICES FUND ACCOUNTING BROKER FUND CUSTODY Institutional Investors CUSTODIAN TRANSFER AGENT/ CENTRALISING AGENT FUND ACCOUNTING FUND CUSTODY IFA/CONSOLIDATOR TRANSFER AGENT/ CENTRALISING AGENT FUND ACCOUNTING FUND CUSTODY Private Investors SUPERMARKET TRANSFER AGENT/ CENTRALISING AGENT FUND ACCOUNTING FUND CUSTODY BANK BRANCH TRANSFER AGENT/ CENTRALISING AGENT FUND ACCOUNTING FUND CUSTODY AUTOMATE PROCESS MANUAL PROCESS AUTOMATE PROCESS Source: CACEIS. currencies and payment systems that makes it difficult to put standardised processes in place across the region. As an example. within the framework of a market consultation on SWIFT Alliance LITE specifications for funds (see § 3. with less than 12 percent of STP rate today. • The culture of the paper. • The low appetite of distributors for automation. In Asia STP levels are much lower. February 2008 . making the distinction between manual processing with and without fax server: SWIFT conclusions were that when no fax server is used. as trade volumes from Asia have exploded. 2008 Risks Service levels Operating costs In 2007. “Cross-border fund distribution in Europe”. the manual cost is double in Europe as in Asia.Lite”.000.on a total of EUR 1 billion of total processing costs . all the more as the region remains a very fragmented market with different languages. 10 minutes.000. Manual processes and lack of standardisation in communication processes are obviously exnumber of errors and found that 0.00 (with direct cost estimated at EUR 19. Fund distribution in the region is controlled by retail banks. In the first quarter 2008. they estimated the annual cost of order processing with fax server in Europe at a total cost of EUR 76. “Funds automation for low volume users . The Deloitte study mentioned above looked at the 35Source: Deloitte. for a distributor with 10 orders a day.4.representing 30% of savings. if the fund industry would go 100% STP. 3.96% on its transfer agent and Prime TA® OGS & Mirroring activities in 2011. which make manual labour more profitable than investments in technology.11% of transactions led to an error. resulting in financial compensation averaging about EUR 1. • Relatively cheap labour cost (although the labour cost is rapidly increasing in some Asian countries). which are driven by commission and trailer fees and think that the benefits of automation are greater for transfer agents and fund managers than for them. on average.

as illustrated by graph 23: Graph 23: Actors. only when the necessary changes are implemented by all industry players. processes and components.g.2011 CHALLENGES & OPPORTUNITIES 3.4 .4. Indeed. 2008 The rationalisation of fund processing involves numerous actors. Improved response times and standardised interfaces also result in enhanced services. ICSDs and other players such as transfer agents to automate processes so that the fund industry can cope with the massive increase in dealing volumes and operational risks reduction requirements. The key drivers and benefits of automation can be summed up as follows: Table 9: Key drivers and benefits of automation Key drivers Benefits • Improve risk control • Improve customer service and satisfaction • Improve scalability and processing speed • Improve corporate image • Improve corporate IT infrastructure • Reduce manual labour & improve cost efficiency • Guaranteed delivery (e. SWIFT.2 Various initiatives have emerged to increase automation and standardisation In the past years.g. missing fax/page) • Reduce human errors (e. blurred fax) • Audit trail • More flexible dealing window (cut-off times extension) • Detailed reporting allowing efficient reconciliation • 24/7 system availability • Reduce administration time & error handling time • Reduce manual faxing & administration cost/risk • Allow labour flexibility & improve efficiency Source: SWIFT. will the benefits truly be delivered to the market as a whole. 2008 Much has been achieved already but more can be done and the efforts must continue. mistyping.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . processes and components at stake for streamlining fund processing ACTORS Management companies Other fund promoters Distributors Transfer agents PROCESSES Account opening Trading Routing Settlement & custody COMPONENTS Pricing Personnel Technology Risk Source: SWIFT. Cross-border distribution of UCITS | page 55 3. various initiatives have been taken by market place groups.

standardisation and automation of fund processing have been at the top of EFAMA’s agenda. optimising processes to access and maintain key prospectus and processing data. EFAMA. “Standardisation of funds processing in Europe”. bringing together industry participants to share experiences and discuss issues related to fund distribution operations. March 2011 38Source : EFAMA & SWIFT. tracking industry progress”.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . encouraging further standardisation of legal terms and formats of distributor agreements. harmonisation and automation and actively participates in various market place groups in Luxembourg and France: > FPSG (EFAMA). The Fund Processing Standardisation Group (FPSG) established in 2003 to identify obstacles to efficiency in back-office procedures and to outline possible actions for removing them is still very active. > AFTI’s Investment Fund Stocks and Flows Group. in association with SWIFT. settlement and commissions tracking at an EU level: Setting up automated notification and authorisation processes. we can quote the following initiatives: • For several years. > AFG’s FPP Portal Group. developing commonly agreed distributor codification at the right level of granularity. It aims at building a bridge between fund distributors and Luxembourg’s operational community.4. Mid-year and full year reports 39Source : AMF. > EUROFI Group. standardising settlement deadlines.1 Market place groups’ initiatives Among the market place groups actively working for more automation and standardisation in the fund industry in Europe and Asia. > TASC (ALFI). als to accelerate the automation and standardisation of cross-border fund order execution. a neutral discussion platform and sounding board.2011 CHALLENGES & OPPORTUNITIES 3. EFAMA’s FSPG has focused upon practical recommendations on fund processing since its inception and the latest version of its report37 released in March 2011 was once again in this spirit. Furthermore. as previously seen in the “Information referencing issue” chapter with the Fund Processing Passport. investors (especially foreign investors) and order collectors access to 37Source : EFAMA. issuing recommendations to enhance the whole fund order process. liaises with the Luxembourg TA & Distribution Forum. 26 July 2010 . • A EUROFI working group of fund industry representatives has made complementary propos- Notice CACEIS supports the efforts of the fund industry to move toward greater standardisation. > AFG’s product reference database Group. Evolutions in some existing practices of CSDs and in the risk monitoring and position keeping processes of some fund agents were also proposed to facilitate the handling of an increasing number of third-party cross-border orders with increasing amounts. EFAMA disseminates its recommendations at national levels through domestic associations. “Report of the Asset Management Stakeholders’ Committee – Implementation into French Law of UCITS page 56 | Cross-border distribution of UCITS IV : Situation and outlook for asset management regulation”. implementing industry-wide incentives to encourage small and medium sized distributors to adopt automated order input solutions. in particular: > Give distributors. • In France. the French Association of Asset Managers (AFG) and the French Association of Custodians (AFTI) have also been working together on this issue since a few years. particularly the transfer agent as a key partner to support and enhance the global fund distribution of Luxembourg domiciled funds. Its main objective is to enhance the ease of doing business with Luxembourg domiciled products from a global cross-border distribution perspective. is now regularly publishing data obtained from the Irish and Luxembourg markets38 to illustrate the growth in automation of fund order processing and the adoption of ISO standards in that field. focusing on fund administration services. > ISSA Fund Working Group. > Euroclear France UCITS order routing platform Group.2. • The TA Forum Steering Committee (TASC). an ALFI subcommittee. in July 2010 the AMF French regulator published a final report39 of the asset management stakeholders’ committee including recommendations to favour the cross-border distribution of French funds. “Fund processing standardisation. > Asset Management Stakeholders’ Committee (Haut Comité de Place).

2 Electronic messaging initiatives Mandated by the fund industry to develop standardised messages for the subscription/redemption process . notably through systematic order marking. 3. • Efforts are also being made by the Asian Fund Automation Consortium (AFAC). followed in 2004 by the SWIFTNet Funds solution ISO 20022. 3. thereby benefiting from a system similar to the transfer agent system. allowing centralising agents to accurately identify distributors. In this framework. > Promote direct ordering under a secure legal framework in which foreign investors and distributors can deal directly with the management company.4 saging standard and where other domestic message standards still tend to be used. as getting reliable data is an essential prerequisite before improving workflow automation. a group of global fund managers in Asia created in September 2006 seeking to increase automation with distributors by defining a common STP strategy for each country. > Provide management companies with better information about the liabilities of the funds under their management. SWIFT has been extending its electronic messaging offer to the fund industry since 2002. 2. complete information on French collective investment schemes marketed outside France.2011 CHALLENGES & OPPORTUNITIES standardised. using ISO 20022 single open market standard for all fund processes means enhanced quality. To improve workflow automation. SWIFT launched its first practical solution based on ISO 15022. They notably encourage the mutual fund industry to use SWIFT ISO 20022 messaging standards. with 2 main objectives: 1. Cross-border distribution of UCITS | page 57 Notice CACEIS has been an active participant in the SWIFT “Early adopter” group of the new SWIFT XML format ISO 20022. The objective was to provide the investment fund industry with a set of messages specifically designed to address their needs. Indeed.leveraging the MT messages used for securities transactions -. through the ISO 20022 and Alliance LITE initiatives presented hereafter. Today firms are encouraged by SWIFT and EFAMA to adopt ISO 20022 as their electronic mesment solutions to facilitate the necessary interoperability between those standards and ISO 20022. The full 20022 migration is expected at the end of 2012. SWIFT will turn off ISO 15022 MT message use on the SWIFT network for investment funds orders traffic and will support this actively entirely through ISO 20022 MX fund messages. which facilites business growth. to imple- . To improve data quality.4.2. regulatory compliance and insensitivity to volumes. The adoption of the SWIFTNet Funds ISO 20022 messaging solution enables the investment fund industry to move toward a common standard based on modern and flexible XML technology as recommended by EFAMA in 2005. It also means minimised operational risks and costs and higher competitiveness.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . ISO 20022 standard In 2002. which covers domestic and cross-border distribution. SWIFT has taken part in France’s BIC1 code implementation. At this point. a project aiming at setting up a product reference database has been initiated by AFG in early 2011.

promoters. secure and low cost access to SWIFT since users can access Alliance LITE using a standard internet connection with a SWIFT-issued security token. while taking advantage of the commercial agreements negotiated by these service providers. via the SWIFT’s hedge funds HARmonisation Project (SHARP). It is not possible to quote and review in detail all of them but we wish to highlight their existence and current importance on the fund market as these platforms have become key players in the fund distribution process and enjoy international connections with asset managers. • Execution platforms. FundSettle. implementation complexity and project resources requirements – and that fax servers remained consequently their favourite communication tool in spite of high costs and risks generated -. • Negotiation platforms. which cover both negotiation and execution. the quest for automation drove numerous players to implement automated fund platforms providing front-end and/or back-end services. • Global platforms. Prime TA®.3 Fund platforms In the past years. sWIFt aLLIance LIte Aware that low volume fund players were reluctant to implement the SWIFT Funds solution due to the initial and recurring SWIFT infrastructure costs. This is an internet-based service that provides direct. administrators and transfer agents. etc.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . SWIFT launched its Alliance LITE solution for funds in April 2010. SWIFT is also looking. in order to make automation attractive to small players. facilitating interoperability and interfacing. transfer agents. specialised in the negotiation and management of dealers agreements and trailer fee management. which will drive standardisation among the smaller players.2. often organised by geographical areas such as AllFunds Bank.4. some service providers such as Fund Channel and Axeltis started to position themselves as “intermediaries” between distributors and management companies. specialised in order routing and settlement. investors. Vestima+. MFEX. 3. SWIFT Alliance LITE targets institutions that exchange less than 200 messages per day and that need quick and easy connectivity to SWIFT. page 58 | Cross-border distribution of UCITS . to extend its influence into the hedge fund sector with the introduction of a new set of messages based on ISO 20022 standards for automating communications in the transaction chain between custodian banks. the quest for automation drove numerous players to implement automated fund platforms providing front-end and/or back-end services. They now offer a panel of services allowing the open architecture players to develop their activities in a simplified operational and legal context. in close collaboration with transfer agents and clearing houses.2011 CHALLENGES & OPPORTUNITIES SWIFT XML ISO 20022 standard is also increasingly adopted by larger players in Asia. Fund platforms can be split in three categories: In the past years. The chart below provides a non-exhaustive overview of these commercial and market initiatives. distributors. etc. Besides.

04%) and BNP Paribas Investment Partners (49.529 funds and enjoys strong growth. Since 40Source : Fund Channel. banking groups and online distribution platforms. integrated services: • A purchasing platform that allows its clients to benefit from the fee agreements that Fund Channel has established with management companies.fund-channel. is a European third-party fund distribution platform initially based in London and relocated in Paris in 2010.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . 2011 EMXCo Fund Channel40 Established in May 2005 by the Crédit Agricole Group. Fund Channel has proven expertise in all areas of fund distribution and uses a high-perform3. About Fund Channel (www. insurance companies.4 Cross-border distribution of UCITS | page 59 ance proprietary information system.com).com). monitoring of legal and regulatory requirements regarding counterparts.2011 CHALLENGES & OPPORTUNITIES Graph 24: Overview of commercial offerings and market initiatives Front-end services Negociation and management of distribution agreements Trailer fee management/ payment Back-end services Order routing and confirmation Settlement COMMERCIAL OFFERINGS FUND CHANNEL (Crédit Agricole & BNP Paribas Groups) AXELTIS (Natixis Group) ALLFUNDS BANK (Grupo Santander and Intesa Sanpaolo Group) MFEX EMX CALASTONE NSCC PRIME TA® Proprietary Systems CFF (Clearstream) ESES Euroclear UK & Ireland Domestic initiatives Multi-markets initiatives MARKET INITIATIVES SWIFT NetFunds (SWIFT) FUNDSETTLE (Euroclear Bank) VESTIMA+ (Clearstream) EUROCLEAR France Order Routing Platform Source: CACEIS. It is structured around two complementary. • The calculation and collection of distribution fees. private banks. Axeltis offers the following services to fund providers. a subsidiary of the Natixis Group formed in 2002.96%). calculation and reconciliation of positions. 2011 . invoicing and payment of trailer fees. such as multi-managers. negotiation of trailer fees payable by fund providers.axeltis. multi-managers and third-party fund distributors: Negotiation and centralisation of distribution agreements. This platform currently gives access to 220 fund promoters and 13. Fund Channel solution is designed for institutional clients distributing open architecture funds. 2011 41Source : Axeltis. Fund Channel is now a joint venture owned by Amundi (50. Axeltis at a glance (www. Axeltis41 Axeltis.

the Brussels-based ICSD recently launched Euroclear UK & Ireland funds settlement – a fully electronic and integrated order routing and settlement solution for fund transactions. and electronic messaging solutions for automating the purchase. settlement services. AllFunds Bank currently offers distribution services comprising 400 fund managers and over 20. Who we are (www. insurance companies and fund supermarkets.800 funds. AllFunds has successfully launched operations in Spain. Calastone notably enables buyers and sellers of mutual funds and hedge funds to communicate orders electronically by providing a universal message communication and ‘translation’ service. Axeltis has launched a specific investment solution targeted for distributors. Services/EMX message system (www. EMXCo became part of the Euroclear Group.com). is an independent cross-border transaction network for the fund industry based in London and Luxembourg.com). Portugal. and an extensive network of more than 300 clients spread over more than 16 countries. EMX44 EMXCo was established in 1999 to automate the European fund industry. for which they process over 400. MFEX43 MFEX is an investment firm licensed by the Swedish Financial Supervisory Authority and authorises to operate throughout the EU. reconciliation services and SWIFT BIC hosting.mfe. valuation and settlement of mutual funds in the UK.000 messages per month. Calastone. Its business model is based on providing clients with comprehensive fund distribution solutions (intermediation. It is an independent mutual funds wholesaler offering financial institutions and fund companies a platform enabling them to get online information on funds. Luxembourg. fund managers. Austria. Calastone45 Founded in 2007.2011 CHALLENGES & OPPORTUNITIES June 2010. Latin America and the UK and has achieved a leading position in the distribution of third-party funds in these markets. EMX routed a record 37 million messages in 2010. Today its technology is used by over 200 clients around the world .calastone. AllFunds Bank42 Since its inception in 2000 and backed by the financial strength of Spain’s Grupo Santander and Italy’s Intesa Sanpaolo Group. computation and payment of trailer fee as well as online execution and settlement of funds. analysis and information).000 funds. Axeltis currently counts 113 distributors. distributors and transfer agents. By connecting the EMX message system to Euroclear’s settlement system. Finland. 134 asset managers as counterparts and provides access to 12. tracking. Belgium. Services provided are order routing. private banking institutions. About MFEX (www.se). they launched the EMX message system. MFEX currently distributes funds in 10 different countries: Sweden. 2011 44Source : Euroclear UK & Ireland. by setting up selections of funds suitable to them. Switzerland and France. the Netherlands.allfundsbank. Italy.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . sale. 2011 page 60 | Cross-border distribution of UCITS 45Source : Calastone.fund managers. Norway. In January 2007. by connecting fund providers with UK intermediaries and fund supermarkets.com). 2011 . EMX’s rival in the UK. In 2000.euroclear. What we do (www. 374 fund companies from 18 legal domiciles have decided to distribute their mutual funds through MFEX platform. giving its clients ac42Source : AllFunds Bank. including commercial banks. Denmark. 2011 43Source : MFEX.

In 2010. and unit investment trusts.000 transactions were processed.9% compound every month since November 2009 and continue to do so. routing transactions to the official transfer agent of the target fund and performing the settlement as the case may be. Vestima + and CFF (Clearstream)47 Euroclear’s main competitor. based on full transfer agency services and capable of capturing transactions received from distributors using various means of communication.A CACEIS PRODUCT DEVELOPMENT PUBLICATION .com).4 Cross-border distribution of UCITS | page 61 Notice CACEIS can help you streamline the entire transaction process when distributing internationally through its Prime TA® . central counterparty services and a guarantee of completion for certain transactions for virtually all broker-to-broker trades involving equities. NSCC46 DTCC’s subsidiary. Prime TA® Operational since 2002 and dedicated to management companies. As a consequence. nearly 270. The Vestima+ system. CFF offers Delivery Versus Payment (DVP) settlement services for the simultaneous exchange of cash and securities between fund distributors and transfer agents. Investment fund services product information (www.dtcc.clearstream. American depositary receipts. CACEIS offers two distinct services: The “routing service” designed for distributors who settle through clearing platforms and the “nominee service” for those who do not use any clearing platform. Clearstream launched the Central Facility for Funds (CFF) as a settlement service to complement Vestima+.000 distributors.000 funds and handles the whole pre-trade In 2007. This central platform acts as a single access point between distributors and transfer agents for both order processing and settlement. being connected to this platform is crucial for any European asset manager wishing to market its funds in America. About DTCC / NSCC (www. “Clearstream launches new service for Asian investment fund distributors”. Clearstream. In addition. settlement.com). National Securities Clearing Corporation (NSCC). is an automated order-routing service that offers a single point of access to order issuers for in-house domestic. a new service designed to help Asian-based fund distributors benefit from a more efficient infrastructure to deal in European investment funds. launched in 2005. was established in 1976 and is regulated by the US Securities and Exchange Commission (SEC). process from order through to execution. 46Source : NSCC. risk management. has taken a more segregated approach. VestimaLINK48. NSCC is also opened to the distributors based in Latin America. cross-border and offshore funds. thereby streamlining the entire transaction process.Order gateway & Mirroring services. In the United States. Today NSCC completes over 190 million annual transactions. corporate and municipal debt. was created by 3. Prime TA® is CACEIS’ hub platform. operating as a central platform. more than 95% of mutual fund transactions transit through the NSCC platform. Mutual fund dealing volumes carried on the Calastone transaction network have risen by 8. Calastone currently work with major asset servicing players to boost investment fund automation in Asia. It provides clearing. exchange-traded funds. third-party. CACEIS Prime TA® has direct contacts with more than 1. Today it allows access to more than 80. offering separate systems to deal with order routing and settlement. 13 February 2009 . 2011 47Source : Clearstream. 2011 48Source: Asia Asset Management.2011 CHALLENGES & OPPORTUNITIES cess to the whole of the global funds market through a single connection.

Euroclear France UCITS order routing platform50 Euroclear France is currently the first European CSD to offer a fully STP solution for the funds channel. cross-border and domestic fund transaction processing.000 funds are eligible for processing on the platform. in August 2009 the Hong Kong Monetary Authority launched the CMU fund order 49Source : Euroclear Bank. Euroclear Bank and EMXCo put in place a structure allowing the EMX message system to route orders from UK fund distributors to the FundSettle platform. 17 June 2010 . CURRENT TRENDS Two different market initiatives have been recently observed: • The interconnection of various platforms to cover additional markets and services. domestic and cross-border funds from 26 legal domiciles and links up to 520 transfer agents. in turn. FundSettle currently gives access to over 52. settlement. Thus. Establishing a standardised platform in Hong Kong was also strategically important to attract investment funds from Mainland China. FundSettle (Euroclear Bank)49 Launched in 2000.and is now a market solution that enables users to automate and standardise order execution. especially in France and in the United Kingdom. • The creation of order routing platforms in new markets such as Hong Kong. International fund promoters. This new development eases the often complex and costly challenge to process cross-border fund transactions51. the UCITS order routing platform has been designed in close collaboration with the main French market players . reporting & reconciliation.2011 CHALLENGES & OPPORTUNITIES Clearstream in February 2009.euroclear. cus3. It is a fully integrated fund transaction platform where order routing.A CACEIS PRODUCT DEVELOPMENT PUBLICATION .com). The platform serves as a hub between the players on the buy side of the processing chain (distributors. using one single communication channel. Services/UCITS order routing (www. Launched in 2006. distributors benefit from one single access to place their fund orders. South Korea and Taiwan. including about 25% of all French funds. UK fund distributors are now able to provide many new investment opportunities for their clients while continuing to use the existing EMX order routing service. FundSettle has proven itself with major funds players around the world and has a dedicated presence in Europe.com). “Euroclear and EMXCo team on cross-border fund processing”. settlement and custody processing are centralised in a single location. 2011 page 62 | Cross-border distribution of UCITS 51Source : Euroclear. routing and settlement service with a view to developing the necessary infrastructure to help standardise and automate often complex and fragmented investment fund processing. 2011 50Source : Euroclear France. have now an easy and automated channel to reach fund investors in the UK.000 offshore.euroclear. identification of distributors & management of trailer fees. FundSettle is Euroclear Bank’s dedicated platform for automated offshore.4 > Thus. With the VestimaLINK processing service.Services/FundSettle (www. investment houses. providing seamless access to the most active fund promoters worldwide. This solution can process all Euroclear France eligible domestic and foreign funds. Today around 3. from execution through settlement. As a result.the French Association of Custodians (AFTI) and the French Association of Asset Managers (AFG) . in the second half of 2010.

> Euroclear Bank also works to help improve fund distribution in Taiwan. The link with FundSettle will enable Korean investors to use KSD as the centralised access point to invest in international funds53. “Korea Securities Depository connects to Euroclear Bank’s FundSettle Cross-border distribution of UCITS | page 63 quaterly bulletin. Korea Securities Depository (KSD) – the transfer agent for all Korean domiciled investment funds connecting to local distributors . > Besides. 52Source: Hong Kong Monetary Authority. Focus FundSettle.2011 CHALLENGES & OPPORTUNITIES todians) and those on the sell side (transfer agents and fund houses)52. September 2009 53Source platform”.4 . adopting this platform as part of its fund processing infrastructure.A CACEIS PRODUCT DEVELOPMENT PUBLICATION .and Euroclear Bank signed a bilateral agreement whereby KSD will establish a link to Euroclear Bank’s FundSettle platform by the third quarter of 2011. they have developed a low-cost solution to provide seamless. automated access to FundSettle through local back-office applications54. Together with Dimerco Data System Corporation. no settlement process is available. in February 2010. It should be noted that the CMU is only an order routing system at the time being. “The CMU fund order routing and settlement service” – HKMA : Asset Management News. “Supporting Asia’s funds markets”. 17 February 2010 54Source : Euroclear. Issue n°15 June 2010 3.

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Moreover. 3. the distribution network definition and set-up can take a considerable amount of time. In these aspects. The Markets in Financial Instruments Directive (MiFID) implemented on 1st November 2007 affected fund distribution by introducing new transparency requirements on trailer fees in order to regulate conflicts of interest and inducements and enhance final investors’ protection. The difficulty of this process originates from two sources: The increasing complexity of distribution networks and the lack of standardisation of the related distribution agreements (and consequently the possible absence of mandatory information to identify distributors or calculate fees). Mutual fund sales agreements and the associated commission processing activities are some of the less efficient aspects of the mutual fund industry. Notice CACEIS can help you manage complex distribution networks efficiently. modification relating to existing distributors.g. 55Source : Ignites Asia. distribution agreements are established between a management company and its partners in the field of distribution. Moreover. new distributors. the Taiwan’s Financial Supervisory Commission (FSC) requires from March 2011 onwards existing funds to disclose all commission fees they award to bank distributors.1 Open architecture has resulted in ever more complex distribution networks The multiplication of distribution channels means that management companies have to deal with ever more complex distribution networks. removal of a node/branch). the greater their incomes or trailer fees are. which makes the distributors’ identification. this must be disclosed to final investors. the monitoring of their activity by country and trailer fee management much more difficult than before. the distributors. Agreements are very often customised legal documents.5. we should keep in mind that a distribution network is constantly changing (e. Standardisation is uncommon except insofar as large financial groups insist that agreements must be on their own terms. It is a commonly-held view that industry practice is so fragmented that there is little prospect of improvement. is expected to profoundly change the way fund providers work with intermediaries when introduced in 2012. which aims to improve the quality of advice given to retail investors by removing all commissions. trailer fee management is an inescapable aspect. As a reminder. which take time to prepare and are expensive. the FSA’s new Retail Distribution Review (RDR) regime. New fee disclosure rules are also emerging in Asia. who will then have the objective to sell the management company products. regulatory changes should be carefully monitored. The transposition of agreements into the back office and the commission calculation and payment process is inefficient and a source of operational and financial risk. to get a consolidated view of holdings and to handle global trailer fee calculation & payment when distributing internationally. The ongoing review of MiFID might further impact rebates in Europe.5 .2011 CHALLENGES & OPPORTUNITIES 3. In practice. Thus. the greater the distributors’ activity is. “Taiwan fee disclosure rule to hurt offshore funds”. Graph 25 illustrates a distribution network with four levels. This type of commission is generally paid monthly or quarterly by the management company to the distributors. If trailer fees are planned.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . in the UK. 31 March 2011 Cross-border distribution of UCITS | page 65 3. Then. That move aims to improve the transparency of distribution because offshore fund managers have been providing higher commission fees for banks compared with onshore fund managers55.5 Distribution networks & agreements and trailer fee management In the context of cross-border distribution.

commission rates negotiation. I3 and I6 represents a branch of the network whereas P. • Transaction and/or centralisation process. 2008 3. The combination of nodes and branches allows the transfer agent to set up any type of distribution network and to define specific rate per level. adapted content will be beneficial for the management company.5. it is important to note that a well drafted distribution agreement (in terms of exactness. • And finally applicable law and competent jurisdiction. holdings by distributor by country) is a prerequisite before calculating trailer fees. 3.2011 CHALLENGES & OPPORTUNITIES Graph 25: Illustration of a distribution network with 4 levels Intermediary Level 1 P Intermediary Level 2 I1 I2 Intermediary Level 3 I6 I3 I4 I5 Intermediary Level 4 Investor Account I7 I8 I9 I10 I11 I12 Example of a distribution network. I3 represent nodes of the branch. The following points of concern can be mentioned: Holdings calculation methods Determining the basis of calculation (e. • Election of domicile. I1. distributors. I1. maintenance. agent. in particular the remuneration process. the commission calculation agent. the centralising A well drafted distribution agreement will not only facilitate the relation between the stakeholders but also the whole transactional process. dissemination). the sequence P. In this distribution network. in particular the remuneration process. the transfer agent and the distributor’s correspondent bank. • Revision modalities.5.3 Trailer fee management has become a key issue Difficulties resulting from trailer fee management are numerous. termination and suspension. the following notions should ideally be integrated into any distribution agreement: • Payment and invoicing. Institutional investor 1 2 3 4 Intermediary Level 1 5 6 7 P 8 Retail investor Intermediary Level 2 I1 I2 Commissions parametrised at intermediary level Intermediary Level 3 I7 I3 I4 I5 I6 Intermediary Level 4 I8 I9 I10 I11 I12 I13 Network must reflect consolidation nodes for clearing houses such as Euroclear and Clearstream INVESTORS Investor Account 1 2 3 4 5 6 7 8 Source: CACEIS. • Duties and responsibilities of the parties involved.2 The lack of standardisation in distribution agreements creates inefficiencies With regard to the distribution agreements. In addition to the points usually mentioned in all types of financial agreements. • Agreement duration and effectiveness.A CACEIS PRODUCT DEVELOPMENT PUBLICATION .g. the main constraint is their administrative and legal management (content definition. As such. comprehensiveness and clarity) will not only facilitate the relation between the stakeholders but also the whole transactional process. page 66 | Cross-border distribution of UCITS . Indeed.

.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . quarterly or yearly. Hence they are a prerequisite to remunerate intermediaries in an efficient way. enabling manageance of the various distributors. extent and dissemination of the distribution network modifications.4 Recent initiatives to improve fund sales agreements If the calculation formulae to be used cannot be harmonised as these are a matter for market competition. depending on the various requirements of the management company such as: • The calculation frequency. . • The payment of trailer fees to distributors to finalise the whole process. 3. transfer agents. various calculation methods can be applied for trailer fees. Reporting Finally. Several initiatives have emerged to improve fund sales agreements in the past years. • The obligation to carry out reconciliations with many players. namely ICSDs and custodians. From a commercial point of view. • Calculation frequency: Monthly. It is worthwhile mentioning that the points expressed above become more difficult to manage when there is increasing complexity in the distribution network the management company wishes to set up. it is a real challenge for management companies to obtain a quality report in terms of comprehensiveness. on the contrary.2011 CHALLENGES & OPPORTUNITIES This calculation can be made as follows: • Daily average holdings over a defined period or end of period holdings. • The demand for transmitting an estimated calculation of trailer fees to centralising agents. • The deadline required for reporting delivery. quality reports can be used as dashboards. you should not ignore the complexity of the process management. • On the basis of trade date or settlement date. in order to obtain accurate positions before calculating trailer fees. clearers or even account keepers (bank statements). clarity and accuracy. including elements such as: • Calculation rate: Real rate or rate based on a percentage of the management fee. as trailer fee calculation should take any update during the calculation period into account. etc. • The frequency. as these reports constitute the core basis on which intermediaries are remunerated.5. • Calculation basis: Presence or absence of ranges with thresholds. Trailer fee calculation methods Once the holdings are determined.5 Cross-border distribution of UCITS | page 67 ment companies to adapt and optimise their distribution networks according to the perform- 3. • The number of levels of distribution. the context and format of the distribution agreements can be harmonised. namely: • The number of distributors. Process management Beyond the holdings and trailer fee calculation methods.

cheaply. September 2008 page 68 | Cross-border distribution of UCITS 57Source : DMFSA. The objective is to develop a way to improve how the industry creates sales agreements and how it processes the associated commissions.4. It can be produced quickly. “Standardisation of fund processing in Europe”.5. It can be printed and signed if the parties to the agreement wish to keep physical records or it can be exchanged using electronic messages over a trusted network such as SWIFT. In particular. The technical framework defines the commercial term sheet that firms would append to their legal terms. 3. and a technical framework in which their commercial terms may be defined. report and pay commissions and maintain distribution networks much more easily than today. contain certain standard infor- mation and describe a clear process to ensure that the correct and complete commission entitlement information with respect to holdings. as well as how this might be annexed to distribution agreements.info/ . If electronic messages are exchanged on the basis of an unmodified model agreement. which has now reached pilot stage.dmfsa. the FPSG will undertake further work to define a standard for the minimum information necessary to identify the individual distributors to whom trail commission is payable and calculate the amount they are entitled to. and that the back-office processing of commissions should be more accurate and more efficient. transactions and transfers is available to the commission calculation agent. 56Source : EFAMA. The term sheet makes it possible for companies to reconcile holdings.2011 CHALLENGES & OPPORTUNITIES 3. As a next step. there should be no need to print anything and firms will have made their agreement in “dematerialised” form.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . drawing on initiatives already underway in certain countries such as France56. and very accurately. the EFAMA’s Fund Processing Standardisation Group (FPSG) issued recommendations regarding distribution agreements and the tracking of distributor commissions.4. It proposes a legal framework within which fund sales agreements may be made. These commercial parameters are capable of being put into an agreement database by a sales assistant in the front office or a commission officer in the back office.1 Recommendations issued by EFAMA In September 2008. • That orders carry the relevant distributor’s reference throughout the process chain in or- der to facilitate the correct allocation and payment of renumeration. It is based on a belief that the negotiation process for mutual fund sales agreements should be simpler and faster. http://www. the term sheet is transformed from a legal document into an operational document with legal foundation. • To identify distributors by way of a BIC code plus an extension where required or by an additional reference agreed by the contracting parties if necessary.2 DMFSA’s initiative57 The Dematerialised Mutual Fund Sales Agreement (DMFSA) is an initiative launched and led by Schroders Luxembourg since 2007. It also makes it possible to document and apply changes in commercial terms without delay once they have been agreed.5. the FPSG recommends: • That distribution agreements adopt a common framework. In effect.

Cross-border distribution of UCITS | page 69 . to automate processes. Optimisation should cover all processing activities: Order execution. In the future. However. Major initiatives have emerged to overcome the numerous difficulties faced in a crossborder fund distribution environment. settlement of transactions and also commissions handling. the level of automation and standardisation of crossborder fund processing needs to be optimised to improve efficiency. the suppression of tax discrimination against foreign funds at an EU level. especially in Asia. the principal obstacle to uptake lies in the difficulty and cost of implementation. simplified access to fund information and last but not least. higher levels of STP in the fund industry. in particular small and medium sized ones. progress is likely to be slow. scalability and risk management with rising volumes. industry players will have to continue working closely together to develop and implement the right industry standards and best practices.2011 CHALLENGES & OPPORTUNITIES Progress is required in automation and standardisation of cross-border fund processing to face up to the increasing volumes of the market. Although progress is being made. Asset managers must do all they can to persuade distributors. Despite the fact that the theoretical full-STP model is widely-known in the industry.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . These initiatives have already resulted in a broader harmonisation of fund regulation at the EU level.

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com). Services/UCITS order routing (www. tracking industry progress (Mid-year and full year reports). Q1 2011 .euroclear. September 2008 . EFAMA Press release. Investment fund services Product information (www.com).A CACEIS PRODUCT DEVELOPMENT PUBLICATION . 2011 CALASTONE. Cross-border fund distribution in Europe. Services/FundSettle (www. 2007 . 17 February 2010 AXELTIS.2011 BIBLIOGRAPHY AFG . September 2007 . The Fund Processing Passport: A new tool for enhancing efficiency in the European investment fund.com). 13 February 2009 ASSET MANAGEMENT NEWS.com). July 2006 . May 2011 EFAMA & SWIFT. Standardisation of funds processing in Europe. 17 June 2010 . June 2007 . 16 th May 2011 . Standardisation of funds processing in Europe. September 2007 DMFSA. Achieving STP in fund transaction processing.CESR's advice on the management company passport: A very good basis for finetuning. February 2008 ALLFUNDS BANK. Report of the Asset Management Stakeholders’ Committee – Implementation into French Law of UCITS IV: Situation and outlook for asset management regulation. Fund processing standardisation. December 2004 .calastone. Recommendations for Distribution Agreements. Clearstream launches new service for Asian investment fund distributors.euroclear. Press release: Optimising cross-border distribution and processing of investment funds in the EU. January 2011 CLEARSTREAM. 2011 EUROCLEAR UK & IRELAND. 2011 EUROFI. http://www. 26 July 2010 ASIA ASSET MANAGEMENT. 2011 EUROCLEAR BANK . Axeltis at a glance (www. 2011 . 2010 .com). EFAMA fact book. March 2011 .com). Automating fund distribution: The business case for ISO 20022.dmfsa.info/.clearstream. Euroclear and EMXCo team on cross-border fund processing. December 2007 Cross-border distribution of UCITS | page 71 . European Distribution Dynamics 2011. UCITS as a Global Brand – an industry survey by EFAMA.axeltis. Point sur l'industrialisation de la circulation des OPCVM. 2011 AMF. FPP portal briefing. Key regulatory reforms for asset managers.com). July 2008 . Trends in the European investment fund industry in the second quarter of 2008. 31 October 2008 . 2011 DELOITTE. What we do (www. Services/EMX message system (www.allfundsbank.EFAMA report on the so-called Newcits phenomenon. May 2011 CITI. September 2008 . EFAMA fact book – Trends in European investment funds. 2011 EFAMA . Who we are (www. Supporting Asia’s funds markets. 2011 CERULLI ASSOCIATES. Korea Securities Depository connects to Euroclear Bank’s FundSettle platform.euroclear. Press release . Issue n°15 June 2010 EUROCLEAR FRANCE. Focus FundSettle. The evolving investment strategies of UCITS .

March 2008 .fsa. Bargain Shopping in Peru. About Fund Channel (www. 12 July 2005 . Financial services: Commission proposes improved EU framework for investment funds.ie). Global fund distribution 2008. EU Savings Directive Health Check. European Fund Market Data Digest 2006. Open architecture threatened by banking collapse.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . Taiwan fee disclosure rule to hurt offshore funds. by Ian Fraser. 5 January 2011 . Green paper on the enhancement of the EU framework for investment funds. 15 May 2011 FSA. March 2011 page 72 | Cross-border distribution of UCITS .com). Cross-border marketing. The CMU fund order routing and settlement service – HKMA quaterly bulletin. About MFEX (www. 8 November 2010 . 1995 .com). Dublin shrugs off downturn blues. by Baptiste Aboulian. Global distribution of UCITS – Trends.mfex. About RDR (www. 29 March 2011 . 2007 . FT .uk/Pages/About/What/rdr/index. Fund Market monitor. About DTCC/NSCC (www. Banks too quick to sell fund ops: survey. April 2007 (www. Supporting cross-border fund distribution in a global market-place. Industry statistics (www. October 2008 . November 2010 . December 2005 PRICEWATERHOUSECOOPERS . 16 July 2008 FSR.com) . 2011 FUND CHANNEL. 21 December 2010 INVESTOR SERVICES JOURNAL. 20 July 2008 . Newcits tag must be scrapped: EFAMA. 16 May 2011 INTERNATIONAL BUSINESS TIMES. Global Private Banking & Wealth Management Survey. rising costs. US rules big issue for European managers. Chile and Brazil. Newcits Uncovered.pwc. European Fund Market Data Digest 2010. Germany: A hot spot for managers. July 2008 . ISJ Panel debate – Tales from transfer agency. Creativity may tarnish Ucits brand. 2011 PRICEWATERHOUSECOOPERS & EFAMA.com) . challenges and strategies.legal and regulatory issues. by David Ricketts.shtml). 2008 IRISH FUNDS INDUSTRY ASSOCIATION. 20 September 2010 . Selling investment funds to German private investors . September 2009 IGNITES ASIA .irishfunds. 9 October 2008 .2011 BIBLIOGRAPHY EUROPEAN COMMISSION .dtcc.fund-channel. January 2011 HONG KONG MONETARY AUTHORITY. Managers confront stalled flows. 31 March 2011 IGNITES EUROPE. 2011 HFM WEEK. 2006 . July 2008 NSCC. 2011 NORTON ROSE. 2011 LIPPER FMI . 2010 MFEX. 27.se). Volume 5 no.pwc. October 2010 FINANCIAL TIMES fund management . Tax discrimination against foreign funds: Light at the end of the tunnel. Asia Region Funds Passport: The Future of the Funds Management Industry in Asia. European Fund Market Data Digest 2008. 2006 (www. Global fund distribution 2010.gov.

1 March 2008 THE TRADE NEWS. 2 June 2008 THE ECONOMIST. SIBOS 2007 . Cuarto Trimestre de 2010 SWIFT .Last updated Apr 26. 2010 SUPERINTENDENTIA DE BANCA. Evolución del Sistema Privado de Pensiones. 2 July 1998 STRATEGIC INSIGHT. Alternative and Hedge Fund UCITS through the next decade. 11 December 2006 WORLD BANK. We make.2011 BIBLIOGRAPHY REUTERS LIMITED. Innovations dans le monde des fonds.A CACEIS PRODUCT DEVELOPMENT PUBLICATION . UCITS break out of Europe to conquer the world. you sell. Fund distribution costs: The Billion EUR question. Funds automation for low volume users – Lite. Euroclear buys UK mutual fund order routing network EMXCO. Euro funds look beyond traditional distributors by Andrew Priest. 2011 Cross-border distribution of UCITS | page 73 . Seguros y AFP. World Development Indicators . May 2008 THE BANKER. February 2008 .

master-feeder structures and notification procedure • Commission Directive 2010/43/EU of 1 July 2010 regarding organisational requirements. regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (includes amendments from directives 2001/107/EC and 2001/108/EC – UCITS III) APPENDIX 1B Directive 2009/65/EC on the coordination of laws. regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS IV – implementation date 1 July 2011) ASSOCIATED MATERIAL • Commission Regulation (EU) No 583/2010 of 1 July 2010 regarding key investor information and conditions to be met when providing key investor information or the prospectus in a durable medium other than paper or by means of a website • Commission Regulation (EU) No 584/2010 of 1 July 2010 regarding the form and content of the standard notification letter and UCITS attestation.APPENDICES REGULATION REFERENCES 1. risk management and content of the agreement between a depositary and a management company 2. conduct of business. Regulation at domestic level as at April 2011 APPENDIX 2 References to the main legal texts regarding crossborder distribution of UCITS for: Germany Austria Switzerland Netherlands Spain United Kingdom France Belgium Ireland Luxembourg Hong Kong 2 1 . conflicts of interest. Regulation at the European Union level APPENDIX 1A Consolidated Directive 85/611/EEC on the coordination of laws. and other matters • Commission Directive 2010/42/EU of 1 July 2010 regarding certain provisions concerning fund mergers.

eu . regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) Source: http://ec.europa.APPENDIX 1A UCITS I & UCITS III CONSOLIDATED DIRECTIVE 85/611/EEC on the coordination of laws.

2.2. 18 (2004/39/EC) page 3 | Cross-border distribution of UCITS | Appendices 1 ► This document is meant purely as a documentation tool and the institutions do not assume any liability for its contents .11. 16.2002  M5 Directive 2001/108/EC of the European Parliament and of the Council of 21 January 2002 L 41 35 13.1988 8.2005  C1 Corrected by: Corrigendum.1985. p.2000  M1  M2  M3 Council Directive 88/220/EEC of 22 March 1988 ►M2 European Parliament and Council Directive 95/26/EC of 29 June 1995 M3 Directive 2000/64/EC of the European Parliament and of the Council of 7 November 2000 L 100 L 168 L 290  M4 Directive 2001/107/EC of the European Parliament and of the Council of 21 January 2002 L 41 20 13. OJ L 45.2005.4. 3) Amended by: Official Journal No page 31 71 27 date 19.3.7.2002  M6 Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 L 145 1 30. p.12.1995 17.4. regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (85/611/EEC) (OJ L 375.2.2004  M7 Directive 2005/1/EC of the European Parliament and of the Council of 9 March 2005 L 79 9 24. B COUNCIL DIRECTIVE of 20 December 1985 on the coordination of laws. 31.

B
COUNCIL DIRECTIVE of 20 December 1985 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (85/611/EEC) 1

THE COUNCIL OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Economic Community, and in particular Article 57 (2) thereof, Having regard to the proposal from the Commission (1), Having regard to the opinion of the European Parliament (2), Having regard to the opinion of the Economic and Social Committee (3), Whereas the laws of the Member States relating to collective investment undertakings differ appreciably from one state to another, particularly as regards the obligations and controls which are imposed on those undertakings; Whereas those differences distort the conditions of competition between those undertakings and do not ensure equivalent protection for unit-holders; Whereas national laws governing collective investment undertakings should be coordinated with a view to approximating the conditions of competition between those undertakings at Community level, while at the same time ensuring more effective and more uniform protection for unit-holders; Whereas such coordination will make it easier for a collective investment undertaking situated in one Member State to market its units in other Member States; Whereas the attainment of these objectives will facilitate the removal of the restrictions on the free circulation of the units of collective investment undertakings in the Community, and such coordination will help to bring about a European capital market; Whereas, having regard to these objectives, it is desirable that common basic rules be established for the authorization, supervision, structure and activities of collective investment undertakings situated in the Member States and the information they must publish; Whereas the application of these common rules is a sufficient guarantee to permit collective investment undertakings situated in Member States, subject to the applicable provisions relating to capital movements, to market their units in other Member States without those Member States’ being able to subject those undertakings or their units to any provision whatsoever other than provisions which, in those states, do not fall within the field covered by this Directive; Whereas, nevertheless, if a collective investment undertaking situated in one Member State markets its units in a different Member State it must take all necessary steps to ensure that unit-holders in that other Member State can exercise their financial rights there with ease and are provided with the necessary information, Whereas the coordination of the laws of the Member States should be confined initially to collective investment undertakings other than of the closed-ended type which promote the sale of their units to the public in the Community and the sole object of which is investment in transferable securities (which are essentially transferable securities of ficially listed on stock exchanges or similar regulated markets); Whereas regulation of the collective investment undertakings not covered by the Directive poses a variety of problems which must be dealt with by means of other provisions, and such undertakings will accordingly be the subject of coordination at a later stage; Whereas pending such coordination any Member State may, inter alia, prescribe those categories of undertakings for collective investment in transferable securities (UCITS) excluded from this Directive’s scope on account of their investment and borrowing policies and lay down those specific rules to which such UCITS are subject in carrying on their business within its territory;
(1) OJ No C 171, 26. 7. 1976, p. 1. (2) OJ No C 57, 7. 3. 1977, p. 31. (3) OJ No C 75, 26. 3. 1977, p. 10.
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B

Whereas the free marketing of the units issued by UCITS authorized to invest up to 100% of their assets in transferable securities issued by the same body (State, local authority, etc.) may not have the direct or indirect effect of disturbing the functioning of the capital market or the financing of the Member States or of creating economic situations similar to those which Article 68 (3) of the Treaty seeks to prevent; Whereas account should be taken of the special situations of the Hellenic Republic’s and Portuguese Republic’s financial markets by allowing those countries and additional period in which to implement this Directive, HAS ADOPTED THIS DIRECTIVE: Section I General provisions and scope Article 1 1. The Member States shall apply this Directive to undertakings for collective investment in transferable securities (hereinafter referred to as UCITS) situated within their territories.

 M5 B

2. For the purposes of this Directive, and subject to Article 2, UCITS shall be undertakings: — The sole object of which is the collective investment in transferable securities and/or in other liquid financial assets referred to in Article 19(1) of capital raised from the public and which operates on the principle of risk-spreading and — The units of which are, at the request of holders, re-purchased or redeemed, directly or indirectly, out of those undertakings’ assets. Action taken by a UCITS to ensure that the stock exchange value of its units does not significantly vary from their net asset value shall be regarded as equivalent to such re-purchase or redemption. 3. Such undertakings may be constituted according to law, either under the law of contract (as common funds managed by management companies) or trust law (as unit trusts) or under statute (as investment companies). For the purposes of this Directive ‘common funds’ shall also include unit trusts. 4. Investment companies the assets of which are invested through the intermediary of subsidiary companies mainly otherwise than in transferable securities shall not, however, be subject to this Directive. 5. The Member States shall prohibit UCITS which are subject to this Directive from transforming themselves into collective investment undertakings which are not covered by this Directive. 6. Subject to the provisions governing capital movements and to Articles 44, 45 and 52 (2) no Member State may apply any other provisions whatsoever in the field covered by this Directive to UCITS situated in another Member State or to the units issued by such UCITS, where they market their units within its territory. 7. Without prejudice to paragraph 6, a Member State may apply to UCITS situated within its territory requirements which are stricter than or additional to those laid down in Article 4 et seq. of this Directive, provided that they are of general application and do not conflict with the provisions of this Directive.

 M5
8. For the purposes of this Directive, ‘transferable securities’ shall mean: — Shares in companies and other securities equivalent to shares in companies (‘shares’), — Bonds and other forms of securitised debt (‘debt securities’), — Any other negotiable securities which carry the right to acquire any such transferable securities by subscription or exchange, excluding the techniques and instruments referred to in Article 21. 9. For the purposes of this Directive ‘money market instruments’ shall mean instruments normally dealt in on the money market which are liquid, and have a value which can be accurately determined at any time.
Appendice 1 | 1985L0611 — EN — 13.04.2005 — 006.001 - page 6

 M4
Article 1a For the purposes of this Directive: 1. ‘Depositary’ shall mean any institution entrusted with the duties mentioned in Articles 7 and 14 and subject to the other provisions laid down in Sections IIIa and IVa; 2. ‘Management company’ shall mean any company, the regular business of which is the management of UCITS in the form of unit trusts/common funds and/or of investment companies (collective portfolio management of UCITS); This includes the functions mentioned in Annex II; 3. A ‘management company’s home Member State’ shall mean the Member State, in which the management company’s registered office is situated; 4. A ‘management company’s host Member State’ shall mean the Member State, other than the home Member State, within the territory of which a management company has a branch or provides services; 5. A ‘UCITS home Member State’ shall mean: (a) With regard to a UCITS constituted as unit trust/common fund, the Member State in which the management company’s registered office is situated, (b) With regard to a UCITS constituted as investment company, the Member State in which the investment company’s registered office is situated; 6. A ‘UCITS host Member State’ shall mean the Member State, other than the UCITS home Member State, in which the units of the common fund/unit trust or of the investment company are marketed; 7. ‘Branch’ shall mean a place of business which is a part of the management company, which has no legal personality and which provides the services for which the management company has been authorised; All the places of business set up in the same Member State by a management company with headquarters in another Member State shall be regarded as a single branch; 8. ‘Competent authorities’ shall mean the authorities which each Member State designates under Article 49 of this Directive; 9. ‘Close links’ shall mean a situation as defined in Article 2(1) of Directive 95/26/EC (1); 10. ‘Qualifying holdings’ shall mean any direct or indirect holding in a management company which represents 10 % or more of the capital or of the voting rights or which makes it possible to exercise a significant influence over the management of the management company in which that holding subsists. For the purpose of this definition, the voting rights referred to in Article 7 of Directive 88/627/EEC (1) shall be taken into account; 11. ‘ISD’ shall mean Council Directive 93/22/EEC of 10 May 1993 on investment services in the securities field (2); 12. ‘Parent undertaking’ shall mean a parent undertaking as defined in Articles 1 and 2 of Directive 83/349/EEC (3); 13. ‘Subsidiary’ shall mean a subsidiary undertaking as defined in Articles 1 and 2 of Directive 83/349/EEC; Any subsidiary of a subsidiary undertaking shall also be regarded as a subsidiary of the parent undertaking which is the ultimate parent of those undertakings; 14. ‘Initial capital’ shall mean capital as defined in items 1 and 2 of Article 34(2) of Directive 2000/12/EC (4); 15. ‘Own funds’ shall mean own funds as defined in Title V, Chapter 2, Section 1 of Directive 2000/12/EC; This definition may, however, be amended in the circumstances described in Annex V of Directive 93/6/EEC (5).
(1) OJ L 168, 18.7.1995, p. 7. (2) OJ L 141, 11.6.1993, p. 27. Directive as last amended by Directive 2000/64/ EC (OJ L 290, 17.11.2000, p. 27). (3) OJ L 193, 18.7.1983, p. 1. Directive as last amended by the 1994 Act of Accession. (4) OJ L 126, 26.5.2000, p. 1. Directive as amended by Directive 2000/28/EC of the European Parliament and of the Council (OJ L 275, 27.10.2000, p. 37). (5) OJ L 141, 11.6.1993, p. 1. Directive as last amended by Directive 98/33/EC of the European Parliament and of the Council (OJ L 204, 21.7.1998, p. 29).
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1

The competent authorities shall not grant authorisation If the UCITS is legally prevented (e. of its fourth indent. 3. To that end.2005 — 006. The following shall not be UCITS subject to this Directive: — UCITS of the closed-ended type. — Categories of UCITS prescribed by the regulations of the Member States in which such UCITS are situated. hereinafter referred to as ‘the competent authorities’. 2.g. Such authorization shall be valid for all Member States. through a provision in the fund  M4 B rules or instruments of incorporation) from marketing its units or shares in its home Member State. the fund rules and the choice of depositary.B Article 2 1. — UCITS which raise capital without promoting the sale of their units to the public within the Community or any part of it. A unit trust shall be authorized only If the competent authorities have approved the management company. The competent authorities may not authorise a UCITS If the management company or the investment company do not comply with the preconditions laid down in this Directive. in particular. Ifnecessary. — UCITS the units of which. 4. it shall propose suitable measures to extend the scope. represent the depositary. may be sold only to the public in non-member countries. Directors shall mean those persons who. under the law or the instruments of incorporation. No UCITS shall carry on activities as such unless it has been authorized by the competent authorities of the Member State in which it is situated. Appendice 1 | 1985L0611 — EN — 13. Article 3 For the purposes of this Directive. nor may the fund rules or the investment company’s instruments of incorporation be amended. 2. Neither the management company nor the depositary may be replaced. Moreover the competent authorities may not authorise a UCITS if the directors of the depositary are not of sufficiently good repute or are not sufficiently experienced also in relation to the type of UCITS to be managed. SECTION II Authorization of UCITS Article 4 1. An investment company shall be authorized only If the competent authorities have approved both its instruments of incorporation and the choice of depositary. or who effectively determine the policy of the depositary. 3a. a UCITS shall be deemed to be situated in the Member State in which the investment company or the management company of the unit trust has its registered office. under the fund rules or the investment company’s instruments of incorporation. in Sections III and IV respectively. the names of the directors of the depositary and of every person succeeding them in office must be communicated forthwith to the competent authorities. Five years after the implementation of this Directive the Commission shall submit to the Council a report on the implementation of paragraph 1 and. The Member States must require that the head office be situated in the same Member State as the registered office.04. without the approval of the competent authorities.page 8 . for which the rules laid down in Section V and Article 36 are inappropriate in view of their investment and borrowing policies.001 .

Without prejudice to other conditions of general application laid down by national law. however. — For the purpose of this paragraph. Management companies may in no case be authorised under this Directive to provide only the services mentioned in this 1  M6 paragraph or to provide non-core services without being authorised for the service referred to in point (a).  M4 Article 5a 1. page 9 | Cross-border distribution of UCITS | Appendices .4. 2. (b) As non-core services: — Investment advice concerning one or more of the instruments listed in Section B of the Annex to the ISD. 4. — Safekeeping and administration in relation to units of collective investment undertakings. including those owned by pension funds. the following portfolios shall be deemed to be the portfolios of the management company: (i) Unit trusts/common funds managed by the management company including portfolios for which it has delegated the management function but excluding portfolios that it is managing under delegation. the functions mentioned in Annex II which are not exhaustive. Authorisation granted under this Directive to a management company shall be valid for all Member States. in accordance with mandates given by investors on a discretionary. the following services: (a) Management of portfolios of investments. where such portfolios include one or more of the instruments listed in Section B of the Annex to the ISD. exceed EUR 10 000 000. No management company may engage in activities other than the management of UCITS authorised according to this Directive except the additional management of other collective investment undertakings which are not covered by this Directive and for which the management company is subject to prudential supervision but which cannot be marketed in other Member States under this Directive. in addition to the management of unit trusts/common funds and of investment companies. 13 and 19 of  C1 Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (C1 JO L 145 of 30. By way of derogation from paragraph 2. exceeds EUR 250 000 000. Articles 2(2). 12. client-by-client basis. p. shall apply to the provision of the services referred to in paragraph 3 of this Article by management companies. for the purpose of this Directive. Access to the business of management companies is subject to prior of ficial authorisation to be granted by the home Member State’s competent authorities.02 % of the amount by which the value of the portfolios of the management company exceeds EUR 250 000 000. The required total of the initial capital and the additional amount shall not. This additional amount of own funds shall be equal to 0. 1).2004. 3. M4 SECTION III Obligations regarding management companies Title A Conditions for taking up business Article 5 1. The activity of management of unit trusts/common funds and of investment companies includes. Member States may authorise management companies to provide. the management company shall be required to provide an additional amount of own funds. the competent authorities shall not grant authorisation to a management company unless: (a) The management company has an initial capital of at least EUR 125 000: — When the value of the portfolios of the management company.

3. An applicant shall be informed.04. The conduct of a management company’s business must be decided by at least two persons meeting such conditions. whether or not authorisation has been granted. regulations or administrative provisions of a non-member country governing one or more natural or legal persons with which the management company has close links. expressly renounces the authorisation or has ceased the activity covered by this Directive more than six months previously unless the Member State concerned has provided for authorisation to lapse in such cases. Appendice 1 | 1985L0611 — EN — 13. inter alia. or in a non-Member State provided that it is subject to prudential rules considered by the competent authorities as equivalent to those laid down in Community law. (c) No longer fulfils the conditions under which authorisation was granted. The competent authorities shall require management companies to provide them with the information they require to monitor compliance with the conditions referred to in this paragraph on a continuous basis. (b) The persons who effectively conduct the business of a management company are of sufficiently good repute and are sufficiently experienced also in relation to the type of UCITS managed by the management company. within six months of the submission of a complete application. M4 (ii) Investment companies for which the management company is the designated management company. — Irrespective of the amount of these requirements. the competent authorities shall grant authorisation only if those do not prevent the effective exercise of their supervisory functions. the organisational structure of he management company. The competent authorities may withdraw the authorisation issued to a management company subject to this Directive only where that company: (a) Does not make use of the authorisation within 12 months.001 . The competent authorities shall also refuse authorisation if the laws. The credit institution or insurance undertaking must have its registered office in a Member State.page 10 . — Member States may authorise management companies not to provide up to 50 % of the additional amount of own funds referred to in the first indent if they benefit from a guarantee of the same amount given by a credit institution or an insurance undertaking. — No later than 13 February 2005. 4. (d) No longer complies with Directive 93/6/EEC ifits authorisation also covers the discretionary portfolio management service referred to in Article 5(3)(a) of this Directive. the own funds of the management company shall never be less than the amount prescribed in Annex IV of Directive 93/6/EEC. prevent the effective exercise of their supervisory functions. the Commission shall present a report to the European Parliament and the Council on the application of this capital requirement. To that end. accompanied where appropriate by proposals for its revision. or difficulties involved in their enforcement. (e) Has seriously and/or systematically infringed the provisions adopted pursuant to this Directive. (d) Both its head office and its registered office are located in the same Member State. Moreover where close links exist between the management company and other natural or legal persons. A management company may start business as soon as authorisation has been granted. the names of these persons and of every person succeeding them in office must be communicated forthwith to the competent authorities. 5. (b) Has obtained the authorisation by making false statements or by any other irregular means.2005 — 006. or (f) Falls within any of the cases where national law provides for withdrawal. (iii) Other collective investment undertakings managed by the management company including portfolios for which it has delegated the management function but excluding portfolios that it is managing under delegation. (c) The application for authorisation is accompanied by a programme of activity setting out. 2. Reasons shall be given whenever an authorisation is refused.

whether direct or indirect. the Member States shall not apply provisions that result in treatment more favourable than that accorded to branches of management companies that have registered offices in Member States. The Member States shall also inform the Commission of any general difficulties which UCITS encounter in marketing their units in any third country. In the case of branches of management companies that have registered offices outside the European Union and are starting or carrying on business. taking into account the need to ensure the sound and prudent management of a management company. the expressions ‘firm/investment firm’ and ‘investment firms’ contained in Article 7 of the ISD shall be construed respectively as ‘management company’ and ‘management companies’. If they do. The own funds of a management company may not fall below the level specified in Article 5a(1)(a). The competent authorities shall not grant authorisation to take up the business of management companies until they have been informed of the identities of the shareholders or members. the competent authorities may. The prudential supervision of a management company shall be the responsibility of the competent authorities of the home Member State. (b) A subsidiary of the parent undertaking of another management company. 2. M4 Article 5b 1. natural or legal persons. The expression ‘providing investment services’ in Article 7(2) of the ISD shall be construed as ‘providing services’. where the circumstances justify it. Relations with third countries shall be regulated in accordance with the relevant rules laid down in Article 7 of the ISD. or (c) Controlled by the same natural or legal persons as control another management company. 2. The competent authorities of the other Member State involved shall be consulted beforehand on the authorisation of any management company which is: (a) A subsidiary of another management company. page 11 | Cross-border distribution of UCITS | Appendices . a credit institution or an insurance undertaking authorised in another Member State. an investment firm. a credit institution or an insurance undertaking authorised in another Member State. whether the management company establishes a branch or provides services in another Member State or not. 1 Title B Relations with third countries Article 5c 1. that have qualifying holdings and of the amounts of those holdings. without prejudice to those provisions of this Directive which give responsibility to the authorities of the host country. For the purpose of this Directive. they are not satisfied as to the suitability of the aforementioned shareholders or members. an investment firm. The competent authorities shall refuse authorisation if. however. 3. Title C Operating conditions Article 5d 1. The competent authorities of the management company’s home Member State shall require that the management company which they have authorised complies at all times with the conditions laid down in Article 5 and Article 5a(1) and (2) of this Directive. allow such firms a limited period in which to rectify their situations or cease their activities. an investment firm. a credit institution or an insurance undertaking authorised in another Member State. 2.

(1) OJ L 84. the mandate may only be given to undertakings which are authorised or registered for the purpose of asset management and subject to prudential supervision. — Shall be subject with regard to the services referred to in Article 5(3) to the provisions laid down in Directive 97/9/EC of the European Parliament and of the Council of 3 March 1997 on investorcompensation schemes (1). or the UCITS from being managed. rules for personal transactions by its employees or for the holding or management of investments in financial instruments in order to invest own funds and ensuring. in the best interests of its investors. 2. inter alia. M4 Article 5e 1. 22. unless it receives prior general approval from the client. that each transaction involving the fund may be reconstructed according to its origin.1997.page 12 . shall observe at all times. control and safeguard arrangements for electronic data processing and adequate internal control mechanisms including. The delegation must be in accordance with investment-allocation criteria periodically laid down by the management companies. the expressions ‘firm/investment firm’ and ‘investment firms’ contained in Article 9 of the ISD shall be construed respectively as ‘management company’ and ‘management companies’. and in particular it must not prevent the management company from acting. the organisational arrangements may not conflict with the rules of conduct laid down by the host Member State to cover conflicts of interest.04.3. Article 5f 1. (c) When the delegation concerns the investment management. between one of its clients and a UCITS or between two UCITS. between one of its clients and another. the parties to it. shall require that each such company: (a) Has sound administrative and accounting procedures.001 . Qualifying holdings in management companies shall be subject to the same rules as those laid down in Article 9 of the ISD. and the time and place at which it was effected and that the assets of the unit trusts/common funds or of the investment companies managed by the management company are invested according to the fund rules or the instruments of incorporation and the legal provisions in force. its nature.. Article 5g 1. In particular. in particular. 26. p. 2. Each management company the authorisation of which also covers the discretionary portfolio management service mentioned in Article 5(3)(a): — Shall not be permitted to invest all or a part of the investor’s portfolio in units of unit trusts/common funds or of investment companies it manages. Each home Member State shall draw up prudential rules which management companies. If Member States permit management companies to delegate to third parties for the purpose of a more efficient conduct of the companies’ business to carry out on their behalfone or more of their own functions the following preconditions have to be complied with: (a) The competent authority must be informed in an appropriate manner. (b) Is structured and organised in such a way as to minimise the risk of UCITS’ or clients’ interests being prejudiced by conflicts of interest between the company and its clients. with regard to the activity of management of UCITS authorised according to this Directive. Nevertheless. Appendice 1 | 1985L0611 — EN — 13. where a branch is set up. For the purpose of this Directive. the competent authorities of the home Member State having regard also to the nature of the UCITS managed by a management company.2005 — 006. (b) The mandate shall not prevent the effectiveness of supervision over the management company.

page 13 . (f) Measures shall exist which enable the persons who conduct the business of the management company to monitor effectively at any time the activity of the undertaking to which the mandate is given. M4 (d) Where the mandate concerns the investment management and is given to a third-country undertaking. authorised in accordance with this Directive by the competent authorities of another Member State. (b) Acts with due skill. (d) Tries to avoid conflicts of interests and. in the best interests of the UCITS it manages and the integrity of the market. ensures that the UCITS it manages are fairly treated. and (i) The UCITS’ prospectuses list the functions which the management company has been permitted to delegate. may carry on within their territories the activity for which it has been authorised. Title D The right of establishment and the freedom to provide services Article 6 1. either by the establishment of a branch or under the freedom to provide services. (g) The mandate shall not prevent the persons who conduct the business of the management company to give at any time further instructions to the undertaking to which functions are delegated and to withdraw the mandate with immediate effect when this is in the interest of investors. (c) Has and employs effectively the resources and procedures that are necessary for the proper performance of its business activities. when they cannot be avoided. In no case shall the management company’s and the depositary’s liability be affected by the fact that the management company delegated any functions to third parties. care and diligence. 2. Such rules must implement at least the principles set out in the following indents. Member States shall ensure that a management company. the undertaking to which functions will be delegated must be qualified and capable of undertaking the functions in question. 2. Member States may not make the establishment of a branch or the provision of the services subject to any authorisation requirement. and (e) Complies with all regulatory requirements applicable to the conduct of its business activities so as to promote the best interests of its investors and the integrity of the market. (e) A mandate with regard to the core function of investment management shall not be given to the depositary or to any other undertaking whose interests may conflict with those of the management company or the unit-holders. cooperation between the supervisory authorities concerned must be ensured. (h) Having regard to the nature of the functions to be delegated. to any requirement to provide endowment capital or to any other measure having equivalent effect. 1 | Cross-border distribution of UCITS | Appendices Article 5h Each Member State shall draw up rules of conduct which management companies authorised in that Member State shall observe at all times. nor shall the management company delegate its functions to the extent that it becomes a letter box entity. These principles shall ensure that a management company: (a) Acts honestly and fairly in conducting its business activities in the best interests of the UCITS it manages and the integrity of the market.

2005 — 006. indicate the conditions. Unless the competent authorities of the home Member State have reason to doubt the adequacy of the administrative structure or the financial situation of a management company. within three months of receiving all the information referred to in paragraph 2. (b) A programme of operations setting out the activities and services according to Article 5(2) and (3) envisaged and the organisational structure of the branch. 5. under which. when effecting the notification provided for in paragraph 1: (a) The Member State within the territory of which the management company plans to establish a branch. Before the branch of a management company starts business. From that moment the management company may also begin distributing the units of the unit trusts/common funds and of the investment companies subject to this Directive which it manages. In the event of change of any particulars communicated in accordance with paragraphs 2(b). Where the competent authorities of the home Member State refuse to communicate the information referred to in paragraph 2 to the competent authorities of the host Member State. communicate that information to the competent authorities of the host Member State and shall inform the management company accordingly. 7. the competent authorities of the host Member State shall. within two months of receiving the information referred to in paragraph 2. They shall also communicate details of any compensation scheme intended to protect investors. (d) The names of those responsible for the management of the branch. including the rules mentioned in Articles 44 and 45 in force in the host Member State and the rules of conduct to be respected in the case of provision of the portfolio management service mentioned in Article 5(3) and of investment advisory services and custody.page 14 . ifnecessary. in the interest of the general good. That refusal or failure to reply shall be subject to the right to apply to the courts in the home Member State. Member States shall require every management company wishing to establish a branch within the territory of another Member State to provide the following information and documents. unless the competent authorities of the host Member State establish. they shall.04. they shall give reasons for their refusal to the management company concerned within two months of receiving all the information. M4 Article 6a 1. any management company wishing to establish a branch within the territory of another Member State shall notify the competent authorities of its home Member State. (c) The address in the host Member State from which documents may be obtained. 3. In addition to meeting the conditions imposed in Articles 5 and 5a. 2.001 . the authorities of the home Member State shall inform the authorities of the host Member State accordingly. taking into account the activities envisaged. that business must be carried on in the host Member State. a management company shall give written notice of that change to the competent authorities of the home and host Member States at least one month before implementing the change so that the competent authorities of the home Member State may take a decision on the change under paragraph 3 and the competent authorities of the host Member State may do so under paragraph 4. prepare for the supervision of the management company and. 6. In the event of a change in the particulars communicated in accordance with the first subparagraph of paragraph 3. the branch may be established and start business. in a reasoned decision taken before the expiry of that period of two months — to be communicated to the competent authorities of the home Member State – that the arrangements made for the marketing of the units do not comply with the provisions referred to in Article 44(1) and Article 45. 4. (c) or (d). Appendice 1 | 1985L0611 — EN — 13. On receipt of a communication from the competent authorities of the host Member State or on the expiry of the period provided for in paragraph 4 without receipt of any communication from those authorities.

in the interest of the general good. 4. Where the competent authorities of a host Member State ascertain that a management company that has a branch or provides services within its territory is in breach of the legal or regulatory provisions adopted in that State pursuant to those provisions of this Directive which confer powers on the host Member State’s competent authorities. The latter shall. within one month of receiving the information referred to in paragraph 1. on receipt of the information referred to in paragraph 1. 1 Article 6c 1. 4. so that the competent authorities of the host Member State may. Host Member States may require management companies. the competent authorities of the host Member State shall inform the competent authorities of the home Member State accordingly. Host Member States may. (b) A programme of operations stating the activities and services referred to in Article 5(2) and (3) envisaged. 2. to provide the information necessary for the monitoring of their compliance with the standards set by the host Member State that apply to them. ifnecessary. for statistical purposes. The management company may then start business in the host Member State notwithstanding the provisions of Article 46. the competent authorities of the host Member State shall. host Member States may require branches of management companies to provide the same particulars as national management companies for that purpose. carrying on business within their territories under the freedom to provide services. They shall also communicate details of any applicable compensation scheme intended to protect investors. the management company shall give notice of the amendment in writing to the competent authorities of the home Member State and of the host Member State before implementing the change. although those requirements may not be more stringent than those which the same Member State imposes on established management companies for the monitoring of their compliance with the same standards. forward it to the competent authorities of the host Member State. 3. those authorities shall require the management company concerned to put an end to its irregular situation. In discharging their responsibilities under this Directive. take all appropriate measures to ensure that the management company concerned puts an end to its irregular situation. including the rules of conduct to be respected in the case of provision of the portfolio management service mentioned in Article 5(3) and of investment advisory services and custody. require all management companies with branches within their territories to report periodically on their activities in those host Member States to the competent authorities of those host Member States. at the earliest opportunity. the management company must comply in the host Member State. indicate to the management company the conditions. M4 Article 6b 1. 2. A management company shall also be subject to the notification procedure laid down in this Article in cases where it entrusts a third party with the marketing of the units in a host Member State. 3. page 15 | Cross-border distribution of UCITS | Appendices . with which. 5. When appropriate. inform the company of any change or addition to be made to the information communicated under paragraph 3. Any management company wishing to carry on business within the territory of another Member State for the first time under the freedom to provide services shall communicate the following information to the competent authorities of its home Member State: (a) The Member State within the territory of which the management company intends to operate. If the management company concerned fails to take the necessary steps. The nature of those measures shall be communicated to the competent authorities of the host Member State. The competent authorities of the home Member State shall.Should the content of the information communicated in accordance with paragraph 1(b) be amended.

redemption and cancellation of units effected on behalf of a unit trust or by a management company are carried out in accordance with the law and the fund rules. issue. (b) Ensure that the value of units is calculated in accordance with the law and the fund rules. After consulting the competent authorities of the Member States concerned. ►. If. to prevent that management company from initiating any further transaction within its territory. A depositary must. (e) Ensure that a unit trust’s income is applied in accordance with the law and the fund rules.  M7 Every two years the Commission shall issue a report on such cases. despite the measures taken by the home Member State or because such measures prove inadequate or are not available in the Member State in question. A depositary’s liability as referred to in Article 9 shall not be affected by the fact that it has entrusted to a third party all or some of the assets in its safe-keeping. Every such measure shall be subject to the right to apply to the courts in the Member State which adopted it. (d) Ensure that in transactions involving a unit trust’s assets any consideration is remitted to it within the usual time limits. in emergencies.  M7 Every two years the Commission shall issue a report on such cases. insof ar as necessary. 9. (c) Carry out the instructions of the management company. Appendice 1 | 1985L0611 — EN — 13. the latter may. The foregoing provisions shall not affect the powers of host Member States to take appropriate measures to prevent or to penalise irregularities committed within their territories which are contrary to legal or regulatory provisions adopted in the interest of the general good.04. M4 5. The Member States shall inform the Commission of the number and type of cases in which there have been refusals pursuant to Article 6a or measures have been taken in accordance with paragraph 5. the Commission may decide that the Member State in question must amend or abolish those measures. 5 or 6 involving penalties or restrictions on the activities of a management company must be properly justified and communicated to the management company concerned. after informing the competent authorities of the home Member State.2005 — 006. In the event of the withdrawal of authorisation. 7. 4 or 5 the competent authorities of the host Member State may. re-purchase.  ► 10. 3. 2. Before following the procedure laid down in paragraphs 3. unless they conflict with the law or the fund rules. A unit trust’s assets must be entrusted to a depositary for safekeeping. the management company persists in breaching the legal or regulatory provisions referred to in paragraph 2 in force in the host Member State. take appropriate measures to prevent or to penalise further irregularities and.001 . This shall include the possibility of preventing of fending management companies from initiating any further transactions within their territories. The Member States shall ensure that within their territories it is possible to serve the legal documents necessary for those measures on management companies.  ► ► SECTION IIIa Obligations regarding the depositary B Article 7 1. 6. 8. take any precautionary measures necessary to protect the interests of investors and others for whom services are provided. the competent authorities of the host Member State shall be informed and shall take appropriate measures to prevent the management company concerned from initiating any further transactions within its territory and to safeguard investors’ interests. The Commission and the competent authorities of the other Member States concerned must be informed of such measures at the earliest opportunity. Any measure adopted pursuant to paragraphs 4.page 16 . moreover: (a) Ensure that the sale.

1 Article 9 A depositary shall. The Member States shall determine which of the categories of institutions referred to in paragraph 2 shall be eligible to be depositaries. A depositary must either have its registered office in the same Member State as that of the management company or be established in that Member State if its registered office is in another Member State.  M4 SECTION IV Obligations regarding investment companies Title A Conditions for taking up business Article 12 Access to the business of investment companies shall be subject to prior of ficial authorisation to be granted by the home Member States competent authorities. The Member States shall determine the legal form which an investment company must take. No single company shall act as both management company and depositary. In the context of their respective roles the management company and the depositary must act independently and solely in the interest of the unit-holders. B Article 13 No investment company may engage in activities other than those referred to in Article 1 (2). be liable to the management company and the unit-holders for any loss suffered by them as a result of its unjustifiable failure to perform its obligations or its improper performance of them. Article 10 1. page 17 | Cross-border distribution of UCITS | Appendices .B Article 8 1. A depositary must be an institution which is subject to public control. in accordance with the national law of the State in which the management company’s registered office is situated. depending on the legal nature of the relationship between the depositary. 3. the management company and the unit-holders. It must also furnish sufficient financial and prof essional guarantees to be able effectively to pursue its business as depositary and meet the commitments inherent in that function. Article 11 The law or the fund rules shall lay down the conditions for the replacement of the management company and the depositary and rules to ensure the protection of unit-holders in the event of such replacement. 2. Liability to unit-holders may be invoked either directly or indirectly through the management company. 2.

(b) Has obtained the authorisation by making false statements or by any other irregular means. prevent the effective exercise of their supervisory functions. the organisational structure of the investment company. the names of the directors and of every person succeeding them in office must be communicated forthwith to the competent authorities.page 18 . In addition. Appendice 1 | 1985L0611 — EN — 13. (d) Has seriously and/or systematically infringed the provisions adopted pursuant to this Directive. whether or not authorisation has been granted. To that end. the competent authorities shall not grant authorisation to an investment company that has not designated a management company unless the investment company has a sufficient initial capital of at least EUR 300 000. or who effectively determine the policy of the company. inter alia. The competent authorities may withdraw the authorisation issued to an investment company subject to this Directive only where that company: (a) Does not make use of the authorisation within 12 months. receive any mandate to manage assets on behalfof a third party. An investment company may start business as soon as authorisation has been granted. under any circumstances. The competent authorities shall also refuse authorisation if the laws. when an investment company has not designated a management company authorised pursuant to this Directive: — The authorisation shall not be granted unless the application for authorisation is accompanied by a programme of activity setting out. regulations or administrative provisions of a non-member country governing one or more natural or legal persons with which the investment company has close links. where close links exist between the investment company and other natural or legal persons. or difficulties involved in their enforcement. — The directors of the investment company shall be of sufficiently good repute and be sufficiently experienced also in relation to the type of business carried out by the investment company. within six months of the submission of a complete application. (c) No longer fulfils the conditions under which authorisation was granted.001 . 3. Title B Operating conditions Article 13b Articles 5g and 5h shall apply to investment companies that have not designated a management company authorised pursuant to this Directive. Without prejudice to other conditions of general application laid down by national law. Investment companies may only manage assets of their own portfolio and may not. The competent authorities shall require investment companies to provide them with the information they require. represent the investment company. An applicant shall be informed.2005 — 006. Directors shall mean those persons who. M4 Article 13a 1. The conduct of an investment company’s business must be decided by at least two persons meeting such conditions. Reasons shall be given whenever an authorisation is refused. For the purpose of this Article ‘management company’ shall be construed as ‘investment company’. 4. the competent authorities shall grant authorisation only if those do not prevent the effective exercise of their supervisory functions. — Moreover.04. 2. Or (e) Falls within any of the cases where national law provides for withdrawal. under the law or the instruments of incorporation. expressly renounces the authorisation or has ceased the activity covered by this Directive more than 6 months previously unless the Member State concerned has provided for authorisation to lapse in such cases.

In particular. A Member State shall avail itselfof the option provided for in the preceding subparagraph only ifit considers that unit-holders have protection equivalent to that of unit-holders in UCITS which have depositaries within the meaning of this Directive. having regard also to the nature of the investment company. | Cross-border distribution of UCITS | Appendices page 19 . A depositary’s liability as referred to in Article 16 shall not be affected by the fact that it has entrusted to a third party all or some of the assets in its safe-keeping. Articles 34. However. A company’s instruments of incorporation must specify the stock exchange in the country of marketing the prices on which shall determine the prices at which that company will effect any transactions outwith stock exchanges in that country. (b) Intervene on the market to prevent the stock exchange values of their units from deviating by more than 5 % from their net asset values. that each transaction involving the company may be reconstructed according to its origin. A Member State may decide that investment companies situated within its territory which market their units exclusively through one or more stock exchanges on which their units are admitted to of ficial listing shall not be required to have depositaries within the meaning of this Directive. must: (a) In the absence of provision in law. inter alia. the competent authorities of the home Member State. moreover: (a) Ensure that the sale. the rules for the valuation of such companies’ assets must be stated in law or in their instruments of incorporation. control and safeguard arrangements for electronic data processing and adequate internal control mechanisms including. such companies and the companies referred to in paragraph 4. (c) Ensure that a company’s income is applied in accordance with the law and its instruments of incorporation. 4. and that any transactions which such a company may effect outwith stock exchanges are effected at stock exchange prices only. 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. re-purchase. A depositary must. (b) Ensure that in transactions involving a company’s assets any consideration is remitted to it within the usual time limits. issue. 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. the parties to it. In particular. its nature. An investment company’s assets must be entrusted to a depositary for safe-keeping. 1 SECTION IVa Obligations regarding the depositary B Article 14 1. state in their instruments of incorporation the methods of calculation of the net asset values of their units. 3. redemption and cancellation of untis effected by or on behalf of a company are carried out in accordance with the law and with the company’s instruments of incorporation. M4 Article 13c Each home Member State shall draw up prudential rules which shall be observed at all times by investment companies that have not designated a management company authorised pursuant to this Directive. in particular. 2. 5. 37 and 38 shall not apply to such companies. A Member State may decide that investment companies situated within its territory which market at least 80 % of their-units through one or more stock exchanges designated in their instruments of incorporation shall not be required to have depositaries within the meaning of this Directive provided that their units are admitted to of ficial listing on the stock exchanges of those Member States within the territories of which the units are marketed. shall require that the company has sound administrative and accounting procedures.

in accordance with the national law of the State in which the investment company’s registered office is situated. 3. The Commission shall report to the Contact Committee on the application of paragraphs 4 and 5 within five years of the implementation of this Directive. 2. A depositary must be an institution which is subject to public control. Article 17 1. an independent auditor must ensure that the calculation of the value of units is effected in accordance with the law and the company’s instruments of incorporation. or its improper performance of them. Article 15 1.page 20 . 2. Article 18 The law or the investment company’s instruments of incorporation shall lay down the conditions for the replacement of the depositary and rules to ensure the protection of unit-holders in the event of such replacement. The Member States shall determine which of the categories of institutions referred to in paragraph 2 shall be eligible to be depositaries. At least twice a month. In carrying out its role as depositary. the auditor must make sure that the company’s assets are invested in accordance with the rules laid down by law and the company’s instruments of incorporation. No single company shall act as both investment company and depositary. ifneed be. On such occasions. the Commission shall. 6. propose appropriate measures. It must also furnish sufficient financial and prof essional guarantees to be able effectively to pursue its business as depositary and meet the commitments inherent in that function.04. A depositary must either have its registered office in the same Member State as that of the investment company or be established in that Member State if its registered office is in another Member State. Article 16 A depositary shall. Appendice 1 | 1985L0611 — EN — 13. After obtaining the Contact Committee’s opinion. the depositary must act solely in the interests of the unit-holders.B (c) Establish the net asset values of their units.2005 — 006.001 . The Member States shall inform the Commission of the identities of the companies benefiting from the derogations provided for in paragraphs 4 and 5. be liable to the investment company and the unit-holders for any loss suffered by them as a result of its unjustifiable failure to perform its obligations. communicate them to the competent authorities at least twice a week and publish them twice a month.

And/or financial derivative instruments dealt in over-the-counter (‘OTC derivatives’). foreign exchange rates or currencies. interest rates. (f) Deposits with credit institutions which are repayable on demand or have the right to be withdrawn. borrowing. including equivalent cash-settled instruments. and maturing in no more than 12 months. and in particular that the rules on assets segregation.B SECTION V Obligations concerning the investment policies of UCITS Article 19 1  M5 B 1. — No more than 10 % of the UCITS’ or the other collective investment undertakings’ assets. and that cooperation between authorities is sufficiently ensured.  M5 — Such admission is secured within a year of issue  M5 and/ or. provided that: — The terms of issue include an undertaking that application will be made for admission to of ficial listing on a stock exchange or to another regulated market which operates regularly and is recognized and open to the public. provided that: — The underlying consists of instruments covered by this paragraph. and uncovered sales of transferable securities and money market instruments are equivalent to the requirements of this Directive. page 21 | Cross-border distribution of UCITS | Appendices . (b) and (c). provided that the credit institution has its registered office in a Member State or. (b) Transferable securities  M5 and money market instruments dealt in on another regulated market in a Member State which operates regularly and is recognized and open to the public and/or. provided that the choice of stock exchange or market has been approved by the competent authorities or is provided for in law or the fund rules or the investment company’s instruments of incorporation. ► (e) Units of UCITS authorised according to this Directive and/or other collective investment undertakings within the meaning of the first and second indent of Article 1(2). if the registered office of the credit institution is situated in a non-Member State. provided that it is subject to prudential rules considered by the UCITS’ competent authorities as equivalent to those laid down in Community law and/or. income and operations over the reporting period. (c) Transferable securities  M5 and money market instruments admitted to of ficial listing on a stock exchange in a non-member State or dealt in on another regulated market in a non-member State which operates regularly and is recognized and open to the public provided that the choice of stock exchange or market has been approved by the competent authorities or is provided for in law or the fund rules or the investment company’s instruments of incorporation and/or. dealt in on a regulated market referred to in subparagraphs (a). — The level of protection for unit-holders in the other collective investment undertakings is equivalent to that provided for unitholders in a UCITS. should they be situated in a Member State or not. in which the UCITS may invest according to its investment objectives as stated in the UCITS’ fund rules or instruments of incorporation. The investments of a unit trust or of an investment company must consist solely of: (a) Transferable securities and money market instruments admitted to or dealt in on a regulated market within the meaning of Article 1(13) of the ISD and/or. — 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. (g) Financial derivative instruments. whose acquisition is contemplated. be invested in aggregate in units of other UCITS or other collective investment undertakings and/or. can. lending. provided that: — Such other collective investment undertakings are authorised under laws which provide that they are subject to supervision considered by the UCITS’ competent authorities to be equivalent to that laid down in Community law. according to their fund rules or instruments of incorporation. financial indices. (d) Recently issued transferable securities.

and/or. within a group of companies which includes one or several listed companies. the second or the third indent and provided that the issuer is a company whose capital and reserves amount to at least EUR 10 million and which presents and publishes its annual accounts in accordance with Directive 78/ 660/EEC (1). (c) An investment company may acquire movable and immovable property which is essential for the direct pursuit of its business.001 . 26.2005 — 006. or.1999. (h) Money market instruments other than those dealt in on a regulated market. (b) or (c).6. and belonging to the categories approved by the UCITS’ competent authorities and. in accordance with criteria defined by Community law. — Issued by other bodies belonging to the categories approved by the UCITS’ competent authorities provided that investments in such instruments are subject to investor protection equivalent to that laid down in the first. 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. 11). a non-Member State or. However: (a) A UCITS may invest no more than 10 % of its assets in transferable securities  M5 and money market instruments  ► other than those referred to in paragraph 1. or by an establishment which is subject to and complies with prudential rules considered by the competent authorities to be at least as stringent as those laid down by Community law or. p. Appendice 1 | 1985L0611 — EN — 13. in the case of a Federal State. p. and provided that they are: — Issued or guaranteed by a central. 2. B (1) Fourth Council Directive 78/660/EEC of 25 July 1978 based on Article 54(3)(g) of the Treaty on the annual accounts of certain types of companies (OJ L 222.8. regional or local authority or central bank of a Member State. which fall under Article 1(9). Directive as last amended by Directive 1999/60/ EC (OJ L 162. if the issue or issuer of such instruments is itselfregulated for the purpose of protecting investors and savings.1978. — Issued or guaranteed by an establishment subject to prudential supervision. — The OTC derivatives are subject to reliable and verifiable valuation on a daily basis and can be sold. is an entity which.04. or by a public international body to which one or more Member States belong or. Unit trusts and companies may hold ancillary liquid assets. (d) A UCITS may not acquire either precious metals or certificates representing them. liquidated or closed by an of fsetting transaction at any time at their fair value at the UCITS’ initiative. 65). the European Union or the European Investment Bank. 14. the European Central Bank. 3. M5 — The counterparties to OTC derivative transactions are institutions subject to prudential supervision. by one of the members making up the federation.page 22 . — Issued by an undertaking any securities of which are dealt in on regulated markets referred to in subparagraphs (a).

When these operations concern the use of derivative instruments. the underlying risks. 2. A UCITS may invest. It must employ a process for accurate and independent assessment of the value of OTC derivative instruments. including the risk exposure to a counterparty in OTC derivative transactions.  M7 Such information shall be the subject of exchanges of views within the European Securities Committee. 4. the counterparty risk. The Member States may allow that. This shall also apply to the following subparagraphs. The risk exposure to a counterparty of the UCITS in an OTC derivative transaction may not exceed: — 10 % of its assets when the counterpart is a credit institution referred to in Article 19(1)(f). a UCITS may not combine: — Investments in transferable securities or money market instruments issued by. in financial derivative instruments provided that the exposure to the underlying assets does not exceed in aggregate the investment limits laid down in Article 22. M5 Article 21 1. when a UCITS invests in index-based financial derivative instruments.  Article 22 1. When a transferable security or money market instrument embeds a derivative. 2. Under no circumstances shall these operations cause the UCITS to diverge from its investment objectives as laid down in the UCITS’ fund rules. Notwithstanding the individual limits laid down in paragraph 1. as a part of its investment policy and within the limit laid down in Article 22(5). these investments do not have to be combined to the limits laid down in Article 22. the total value of the transferable securities and the money market instruments held by the UCITS in the issuing bodies in each of which it invests more than 5 % of its assets must not then exceed 40 % of the value of its assets. However. The exposure is calculated taking into account the current value of the underlying assets. A UCITS shall ensure that its global exposure relating to derivative instruments does not exceed the total net value of its portfolio. It must communicate to the competent authorities regularly and in accordance with the detailed rules they shall define. 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. The Member States may authorise UCITS to employ techniques and instruments relating to transferable securities and money market instruments under the conditions and within the limits which they lay down provided that such techniques and instruments are used for the purpose of efficient portfolio management. or — 5 % of its assets. these conditions and limits shall conform to the provisions laid down in this Directive. instruments of incorporation or prospectus. Member States may raise the 5 % limit laid down in the first sentence of paragraph 1 to a maximum of 10 %. the latter must be taken into account when complying with the requirements of this Article. A UCITS may invest no more than 5 % of its assets in transferable securities or money market instruments issued by the same body. in other cases. A UCITS may not invest more than 20 % of its assets in deposits made with the same body. The management or investment company must employ a riskmanagement process which enables it to monitor and measure at any time the risk of the positions and their contribution to the overall risk profile of the portfolio. The Member States shall send the Commission full information and any subsequent changes in their regulation concerning the methods used to calculate the risk exposures mentioned in paragraph 3. This limitation does not apply to deposits and OTC derivative transactions made with financial institutions subject to prudential supervision. The Commission shall forward that information to the other Member States. the types of derivative instruments. 3. 1 page 23 | Cross-border distribution of UCITS | Appendices . future market movements and the time available to liquidate the positions. no later than 13 February 2004.

Member States may raise the 5 % limit laid down in the first sentence of paragraph 1 to a maximum of 25 % in the case of certain bonds when these are issued by a credit institution which has its registered office in a Member State and is subject by law to special public supervision designed to protect bond-holders. and/or — Exposures arising from OTC derivative transactions undertaken with a single body in excess of 20 % of its assets.1983. by a non-member State or by public international bodies to which one or more Member States belong. according to the fund rules or instruments of incorporation. p. 18. on the following basis: — Its composition is sufficiently diversified. to issue bonds complying with the criteria set out above.04. Appendice 1 | 1985L0611 — EN — 13. The Commission shall immediately forward that information to the other Member States together with any comments which it considers appropriate. The Member States may raise the 5 % limit laid down in the first sentence of paragraph 1 to a maximum of 35 % If the transferable securities or money market instruments are issued or guaranteed by a Member State. in accordance with the laws and supervisory arrangements mentioned in the first subparagraph. When a UCITS invests more than 5 % of its assets in the bonds referred to in the first subparagraph and issued by one issuer. by its local authorities.  5. are regarded as a single body for the purpose of calculating the limits contained in this Article.7. 3.001 . the Member States may raise the limits laid down in Article 22 to a maximum of 20 % for investment in shares and/or debt securities issued by the same body when. A notice specifying the status of the guarantees of fered shall be attached to these lists.page 24 . and thus investments in transferable securities or money market instruments issued by the same body or in deposits or derivative instruments made with this body carried out in accordance with paragraphs 1. are capable of covering claims attaching to the bonds and which. Without prejudice to the limits laid down in Article 25. 3 and 4 shall under no circumstances exceed in total 35 % of the assets of the UCITS. Companies which are included in the same group for the purposes of consolidated accounts. Member States may allow cumulative investment in transferable securities and money market instruments within the same group up to a limit of 20 %. Directive as last amended by the 1994 Act of Accession. (1) Seventh Council Directive 83/349/EEC of 13 June 1983 based on the Article 54(3)(g) of the Treaty on consolidated accounts (OJ L 193. 1). sums deriving from the issue of these bonds must be invested in conformity with the law in assets which. the aim of the UCITS’ investment policy is to replicate the composition of a certain stock or debt securities index which is recognised by the competent authorities. 2.  M7 Such communication shall be the subject of exchanges of views within the European Securities Committee. and shall make the information available to the public. as defined in accordance with Directive 83/349/ EEC (1) or in accordance with recognised international accounting rules. The limits provided for in paragraphs 1. The Member States shall send the Commission a list of the aforementioned categories of bonds together with the categories of issuers authorised. 4. In particular. the total value of these investments may not exceed 80 % of the value of the assets of the UCITS. 2. The transferable securities and money market instruments referred to in paragraphs 3 and 4 shall not be taken into account for the purpose of applying the limit of 40 % referred to in paragraph 2. would be used on a priority basis for the reimbursement of the principal and payment of the accrued interest. in the event of failure of the issuer. 3 and 4 may not be combined.2005 — 006. during the whole period of validity of the bonds. Article 22a 1. M5 — Deposits made with.

By way of derogation from Article 22 and without prejudice to Article 68 (3) of the Treaty. when a UCITS has acquired units of UCITS and/or other collective investment undertakings. 3. 2. The Member States may raise the limit to a maximum of 20 %. In its annual report it shall indicate the maximum proportion of management fees charged both to the UCITS itself and to the UCITS and/or other collective investment undertaking in which it invests. The investment up to this limit is only permitted for a single issuer. or by a substantial direct or indirect holding. 3. provided that no more than 10 % of its assets are invested in units of a single UCITS or other collective investment undertaking. but securities from any one issue may not account for more than 30 % of its total assets. in aggregate. A UCITS may acquire the units of UCITS and/or other collective investment undertakings referred to in Article 19(1)(e). its local authorities. 2. When a UCITS invests in the units of other UCITS and/or other collective investment undertakings that are managed. 2. Investments made in units of collective investment undertakings other than UCITS may not exceed. 4. local authorities and/or public international bodies in the securities of which it intends to invest or has invested more than 35 % of its assets. directly or by delegation. the Member States may authorize UCITS to invest in accordance with the principle of risk-spreading up to 100 % of their assets in different transferable securities  M5 and money market instruments  issued or guaranteed by any Member State. In addition each such UCITS referred to in paragraph 1 must include a prominent statement in its prospectus and any promotional literature drawing attention to such authorization and indicating the States. The Member States may allow that.  M5 Article 24 1. a non-member State or public international bodies of which one or more Member States are members. The competent authorities shall grant such a derogation only If they consider that unit-holders in the UCITS have protection equivalent to that of unit-holders in UCITS complying with the limits laid down in Article 22. by the same management company or by any other company with which the management company is linked by common management or control. local authorities or public international bodies issuing or guaranteeing securities in which they intend to invest more than 35 % of their assets. The UCITS referred to in paragraph 1 must make express mention in the fund rules or in the investment company’s instruments of incorporation of the States. 1 B Article 23 1. Such a UCITS must hold securities from at least six different issues. M5 — The index represents an adequate benchmark for the market to which it refers. Such fund rules or instruments of incorporation must be approved by the competent authorities. page 25 | Cross-border distribution of UCITS | Appendices . A UCITS that invests a substantial proportion of its assets in other UCITS and/or collective investment undertakings shall disclose in its prospectus the maximum level of the management fees that may be charged both to the UCITS itselfand to the other UCITS and/or collective investment undertakings in which it intends to invest. that management company or other company may not charge subscription or redemption fees on account of the UCITS’s investment in the units of such other UCITS and/or collective investment undertakings. Member States may raise the limit laid down in paragraph 1 to a maximum of 35 % where that proves to be justified by exceptional market conditions in particular in regulated markets where certain transferable securities or money market instruments are highly dominant. 30 % of the assets of the UCITS. the assets of the respective UCITS or other collective investment undertakings do not have to be combined for the purposes of the limits laid down in Article 22. — It is published in an appropriate manner.

2.04. The prospectus shall indicate in which categories of assets a UCITS is authorised to invest. (b) Transferable securities  M5 and money market instruments  issued or guaranteed by a non-member State. it must include a prominent statement indicating If these operations may be carried out for the purpose of hedging or with the aim of meeting investment goals. and the possible outcome of the use of financial derivative instruments on the risk profile. (d) Shares held by a UCITS in the capital of a company incorporated in a non-member State investing its assets mainly in the securities of issuing bodies having their registered offices in that State. an investment company or unit trust may acquire no more than: — 10 % of the non-voting shares of any single issuing body. where under the legislation of that State such B Appendice 1 | 1985L0611 — EN — 13. the Member States shall take account of existing rules defining the principle stated in the first subparagraph under other Member States’ legislation. B ► Article 25 1. or the net amount of the securities in issue. Moreover. where necessary. Upon request of an investor.2005 — 006. the management company must also provide supplementary information relating to the quantitative limits that apply in the risk management of the UCITS. 3. — 10 % of the money market instruments of any single issuing body. its prospectus and. In this event. The limits laid down in the second. Pending further coordination. 4. third and fourth indents may be disregarded at the time of acquisition if at that time the gross amount of the debt securities or of the money market instruments.001 . cannot be calculated. its prospectus and. It shall mention iftransactions in financial derivative instruments are authorised. When a UCITS invests principally in any category of assets defined in Article 19 other than transferable securities and money market instruments or replicates a stock or debt securities index in accordance with Article 22a.page 26 . A Member State may waive application of paragraphs 1 and 2 as regards: (a) Transferable securities  M5 and money market instruments  issued or guaranteed by a Member State or its local authorities. any other promotional literature must include a prominent statement drawing attention to this characteristic. 2. where necessary. (c) Transferable securities  M5 and money market instruments  issued by public international bodies of which one or more Member States are members.  M5 — 25 % of the units of any single UCITS and/or other collective investment undertaking within the meaning of the first and second indent of Article 1(2). When the net asset value of a UCITS is likely to have a high volatility due to its portfolio composition or the portfolio management techniques that may be used. 3. any other promotional literature must include a prominent statement drawing attention to the investment policy. — 10 % of the debt securities of any single issuing body. M5 Article 24a 1. An investment company or a management company acting in connection with all of the unit trusts which it manages and which fall within the scope of this Directive may not acquire any shares carrying voting rights which would enable it to exercise significant influence over the management of an issuing body. to the methods chosen to this end and to the recent evolution of the main instrument categories’ risks and yields.

An investment company and. that UCITS must adopt as a priority objective for its sales transactions the remedying of that situation. the Member States may allow recently authorised UCITS to derogate from Articles 22. — Two months in the case of the half-yearly report. Publication of a prospectus and periodical reports  M4 Article 27 1. must publish: — A simplified prospectus. Article 26 shall apply mutatis mutandis. If the limits referred to in paragraph 1 are exceeded for reasons beyond the control of a UCITS or as a result of the exercise of subscription rights. page 27 | Cross-border distribution of UCITS | Appendices . This derogation. SECTION VI Obligations concerning information to be supplied to unitholders A.  M4 Article 28 1. — A full prospectus.B a holding represents the only way in which the UCITS can invest in the securities of issuing bodies of that State. of the risks attached thereto. The annual and half-yearly reports must be published within the following time limits. in particular. 24 and 25 (1) and (2). and B — A half-yearly report covering the first six months of the financial year. The latter shall include. B 2. with effect from the ends of the periods to which they relate: — Four months in the case of the annual report. and. a management company. Annex I to this Directive. taking due account of the interests of its unit-holders. 2. advice or marketing in the country where the subsidiary is located. 22a. The full prospectus shall contain at least the information provided for in Schedule A. UCITS need not comply with the limits laid down in this section when exercising subscription rights attaching to transferable securities or money market instruments which form part of their assets. Both the simplified and the full prospectuses must include the information necessary for investors to be able to make an informed judgement of the investment proposed to them. independent of the instruments invested in. — An annual report for each financial year. 2. 1  M5 (e) Shares held by an investment company or investment companies in the capital of subsidiary companies carrying on only the business of management. in so far as that information does not already appear in the fund rules or instruments of incorporation annexed to the full prospectus in accordance with Article 29(1). for each of the unit trusts and common funds it manages. While ensuring observance of the principle of risk spreading. 23 and 24 for six months following the date of their authorisation. shall apply only ifin its investment policy the company from the non-member State complies with the limits laid down in Articles 22. Where the limits set in Articles 22 and 24 are exceeded. a clear and easily understandable explanation of the fund’s risk profile. however. B  M5 Article 26 1. in regard to the repurchase of units at unitholders’ request exclusively on its or their behalf.

Member States may therefore not require any further documents or additional information to be added. a report on the activities of the financial year and the other information provided for in Schedule B. 1984. (1) OJ No L 126. Both the full and the simplified prospectus may be incorporated in a written document or in any durable medium having an equivalent legal status approved by the competent authorities. 4. B Article 31 The accounting information given in the annual report must be audited by one or more persons empowered by law to audit accounts in accordance with Council Directive 84/253/EEC of 10 April 1984 based on Article 54 (3) (g) of the EEC Treaty on the approval of persons responsible for carrying out the statutory audits of accounting documents (1). Where a UCITS has paid or proposes to pay an interim dividend.page 28 . Annex I to this Directive. the full prospectus and the latest published annual and halfyearly reports shall be supplied to subscribers free of charge on request. Annex I to this Directive.2005 — 006. Member States may permit that the simplified prospectus be attached to the full prospectus as a removable part of it. 2. he or she may consult them. Article 33 1. to the competent authorities. the figures must indicate the results after tax for the half-year concerned and the interim dividend paid or proposed. M4 3. The annual report must include a balance-sheet or a statement of assets and liabilities. as well as their annual and half-yearly reports. a detailed income and expenditure account for the financial year. The documents referred to in paragraph 1 need not. Article 30 The essential elements of the simplified and the full prospectuses must be kept up to date. 5. shall be reproduced in full in the annual report. The simplified prospectus must be of fered to subscribers free of charge before the conclusion of the contract. p. The simplified prospectus can be used as a marketing tool designed to be used in all Member States without alterations except translation. in each Member State in which the units are placed on the market. The fund rules or an investment company’s instruments of incorporation shall form an integral part of the full prospectus and must be annexed thereto. The auditor’s report. be annexed to the full prospectus provided that the unit-holder is informed that on request he or she will be sent those documents or be apprised of the place where. 12. 5. 20. It shall be structured and written in such a way that it can be easily understood by the average investor.04. Annex I to this Directive. Appendice 1 | 1985L0611 — EN — 13. including any qualifications. however. The simplified prospectus shall contain in summary form the key information provided for in Schedule C. Article 29 1. as well as any significant information which will enable investors to make an informed judgment on the development of the activities of the UCITS and its results.001 . In addition.  M4 Article 32 UCITS must send their simplified and full prospectuses and any amendments thereto. The half-yearly report must include at least the information provided for in Chapters I to IV of Schedule B. 6.

temporarily suspend the re-purchase or redemption of its units. Article 37 1. the fund rules or the investment company’s instruments of incorporation. 2. Publication of other information Article 34 A UCITS must make public in an appropriate manner the issue. specified in the full and simplified prospectus. and suspension is justified having regard to the interests of the unit-holders. The competent authorities may. sale. a UCTIS may acquire foreign currency by means of a ‘backto-back’ loan. in the case of a unit trust. may borrow. sells. 1 B B. 2. or through other means approved by the competent authorities. repurchases or redeems them. provided that the borrowing is to make possible the acquisition of immovable property essential for the direct pursuit of its business. B SECTION VII The general obligations of UCITS Article 36 1. in the cases and according to the procedures provided for by law. however. By way of derogation from paragraph 1. provided that the borrowing is on a temporary basis. repurchase or redemption price of its units each time it issues. nor — A management company or depositary acting on behalfof a unit trust. Neither: — An investment company. and at least twice a month. A UCITS must re-purchase or redeem its units at the request of any unit-holder. permit a UCITS to reduce the frequency to once a month on condition that such a derogation does not prejudice the interests of the unit-holders. page 29 | Cross-border distribution of UCITS | Appendices . a Member State may authorize a UCITS to borrow: (a) Up to10% — Of its assets. By way of derogation from paragraph 1: (a) A UCITS may. In this case the borrowing and that referred to in subparagraph (a) may not in any case in total exceed 15 % of the borrower’s assets. M4 The annual and half-yearly reports shall be supplied to unit-holders free of charge on request.  M4 Article 35 All publicity comprising an invitation to purchase the units of UCITS must indicate that prospectuses exist and the places where they may be obtained by the public or how the public may have access to them. However. The annual and half-yearly reports must be available to the public at the places. in the case of an investment company. in the case of an investment company. (b) Up to 10 % of its assets. or — Of the value of the fund. Suspension may be provided for only in exceptional cases where circumstances so require.

This provision shall not preclude the distribution of bonus units. nor — A management company or depositary acting on behalfof a unit trust  M5 may grant loans or act as a guarantor on behalfof third parties. Article 39 The distribution or reinvestment of the income of a unit trust or of an investment company shall be effected in accordance with the law and with the fund rules or the investment company’s instruments of incorporation. (g) and (h). a UCITS must without delay communicate its decision to the competent authorities and to the authorities of all Member States in which it markets its units. In the cases mentioned in paragraph 2 (a). 2. (g) and (h) which are not fully paid. B Article 43 The law or the fund rules must prescribe the remuneration and the expenditure which a management company is empowered to charge to a unit trust and the method of calculation of such remuneration. money market instruments or other financial instruments referred to in Article 19(1)(e).B (b) The Member States may allow the competent authorities to require the suspension of the re-purchase or redemption of units in the interest of the unit-holders or of the public. in the fund rules or in the investment company’s instruments of incorporation. Appendice 1 | 1985L0611 — EN — 13. money market instruments or other financial instruments referred to in Article 19(1)(e).001 . 3. Paragraph 1 shall not prevent such undertakings from acquiring transferable securities. nor — A management company or depositary acting on behalfof a unit trust may carry out uncovered sales of transferable securities.page 30 . Article 38 The rules for the valuation of assets and the rules for calculating the sale or issue price and the re-purchase or redemption price of the units of a UCITS must be laid down in the law. Without prejudice to the application of Articles 19 and 21.2005 — 006. Article 40 A UCITS unit may not be issued unless the equivalent of the net issue price is paid into the assets of the UCITS within the usual time limits. neither: — An investment company. Article 41 1.04. Article 42 Neither: — An investment company.

| Cross-border distribution of UCITS | Appendices  M4 page 31 . Article 46 If a UCITS proposes to market its units in a Member State other than that in which it is situated. — Where appropriate. It must simultaneously send the latter authorities: — An attestation by the competent authorities to the effect that it fulfils the conditions imposed by this Directive. the full and simplified prospectuses. and — Details of the arrangements made of the marketing of its units in that other Member State. 1 SECTION VIII Special provisions applicable to UCITS which market their units in Member States other than those in which they are situated Article 44 1. take the measures necessary to ensure that facilities are available in that State for making payments to unit-holders. Article 47 If a UCITS markets its units in a Member State other than that in which it is situated. A UCITS which markets its units in another Member State must comply with the laws. it must comply the provisions governing advertising in that State. 3. re-purchasing or redeeming units and making available the information which UCITS are obliged to provide. Article 45 In the case referred to in Article 44.B The law or an investment company’s instruments of incorporation must prescribe the nature of the cost to be borne by the company. the UCITS must. Any UCITS may advertise its units in the Member State in which they are marketed. 2. regulations and administrative provisions in force in the Member State of marketing. it must distribute in that other Member State. it must first inform the competent authorities of that other Member State accordingly. — Its full and simplified prospectuses. An investment company or a management company may begin to market its units in that other Member State two months after such communication. These documents shall be provided in the or one of the of ficial languages of the host Member State or in a language approved by the competent authorities of the host Member State. the annual and half-yearly reports and the other information provided for in Articles 29 and 30. in accordance with the same procedures as those provided for in the home Member State. in a reasoned decision taken before the expiry of that period of two months. inter alia. in accordance with the laws. its latest annual report and any subsequent halfyearly report. The provisions referred to in paragraphs 1 and 2 must be applied without discrimination. regulations and administrative provisions in force in that State which do not fall within the field governed by this Directive. unless the authorities of the Member States concerned establish. that the arrangements made for the marketing of units do not comply with the provisions referred to in Article 44(1) and Article 45. — Its fund rules or its instruments of incorporation.

2005 — 006. indicating any division of duties. save in summary or aggregate form such that Ucits and management companies and depositaries (hereinafter referred to as undertakings contributing towards their business activity) cannot be individually identified. They shall inform the Commission thereof.B ► Article 48 For the purpose of carrying on its activities. the host Member State may. The authorities of the State in which a UCITS is situated shall be competent to supervise that UCITS. the authorities of the State in which a UCITS markets its units in accordance with Article 44 shall be competent to supervise compliance with Section VIII. The authorities concerned must be granted all the powers necessary to carry out their task. 2. a UCITS may use the same generic name (such as investment company or unit trust) in the Community as it uses in the Member State in which it is situated.page 32 . 2.04. where appropriate. Paragraph 2 shall not prevent the competent authorities of the various Member States from exchanging information in accordance with this Directive or other Directives applicable to Ucits or to undertakings contributing towards their business activity. for the purpose of clarification. However. without prejudice to cases covered by criminal law. The authorities of the Member States referred to in Article 49 shall collaborate closely in order to carry out their task and  M2 must for that purpose alone communicate to each other all information required. The authorities referred to in paragraph 1 must be public authorities or bodies appointed by public authorities. Where the information originates in another Member State. The Member States shall designate the authorities which are to carry out the duties provided for in this Directive. when an Ucits or an undertaking contributing towards its business activity has been declared bankrupt or is being compulsorily wound up. 3. SECTION IX Provisions concerning the authorities responsible for authorization and supervision Article 49 1. ► Article 50 1. Nevertheless. Such exchange of information must be intended for the performance of the supervisory task of the authorities or bodies mentioned. it may not be disclosed without the express agreement of the competent authorities which have disclosed it and. confidential information which does not concern third parties involved in rescue attempts may be divulged in civil or commercial proceedings. Member States shall provide that all persons who work or who have worked for the competent authorities. 4. as well as auditors and experts instructed by the competent authorities. Such secrecy implies that no confidential information which they may receive in the course of their duties may be divulged to any person or authority whatsoever. Member States may conclude cooperation agreements providing for exchange of information with the competent authorities of third countries or with authorities or bodies of third countries as defined in paragraphs 6 and 7 only If the information disclosed is subject to guarantees of prof essional secrecy at least equivalent to those referred to in this Article. That information shall be subject to the conditions of prof essional secrecy imposed in paragraph 2. 4.001 . solely for the purposes for which those authorities gave their agreement. require that the name be accompanied by certain explanatory particulars. 3. shall be bound by the obligation of prof essional secrecy.  M3 Appendice 1 | 1985L0611 — EN — 13. In the event of any danger of confusion.

And — Authorities with public responsibility for the supervision of credit institutions. between competent authorities. investment undertakings and other financial institutions. Member States may authorize exchanges of information between the competent authorities and: — The authorities responsible for overseeing the bodies involved in the liquidation and bankruptcy of undertakings for collective investment in transferable securities (Ucits) or undertakings contributing towards their business activity and other similar procedures. or the disclosure to bodies which administer compensation schemes of information necessary for the performance of their functions. insurance undertakings and other financial organizations and the authorities responsible for the supervision of financial markets. Competent authorities receiving confidential information under paragraphs 2 or 3 may use it only in the course of their duties: — To check that the conditions governing the taking-up of the business of Ucits or of undertakings contributing towards their business activity are met and to facilitate the monitoring of the conduct of that business. administrative and accounting procedures and internalcontrol mechanisms. 6. credit institutions. where there are two or more competent authorities. it may not be disclosed without the express agreement of the competent authorities which have disclosed it and. Or (b) Within a Member State or between Member States. — In administrative appeals against decisions by the competent authorities. — To impose sanctions. 7. 8. — Persons responsible for carrying out statutory audits of the accounts of insurance undertakings. with the aim of strengthening the stability. solely for the purposes for which those authorities gave their agreement. credit institutions. — Bodies involved in the liquidation or bankruptcy of Ucits and other similar procedures and of undertakings contributing towards their business activity. Paragraphs 2 and 5 shall not preclude the exchange of information: (a) Within a Member State. — Where the information originates in another Member State. — Information received in this context shall be subject to the conditions of prof essional secrecy imposed in paragraph 2. authorize the exchange of information between the competent authorities and the authorities or bodies responsible under the law for the detection and investigation of breaches of company law. including integrity. 1 | Cross-border distribution of UCITS | Appendices page 33 . or — The authorities responsible for overseeing persons charged with carrying out statutory audits of the accounts of insurance undertakings. Notwithstanding paragraphs 2 to 5. Member States shall communicate to the Commission and to the other Member States the names of the authorities which may receive information pursuant to this paragraph. Such information shall be subject to the conditions of prof essional secrecy imposed in paragraph 2. investment undertakings. M2  5. investment firms and other financial institutions. in the performance of their supervisory functions. where appropriate. or — In court proceedings initiated under Article 51 (2). Member States which have recourse to the option provided for in the first subparagraph shall require at least that the following conditions are met: — The information shall be for the purpose of performing the task of overseeing referred to in the first subparagraph. of the financial system. Member States may. Notwithstanding paragraphs 2 to 5.

Member States shall communicate to the Commission and to the other Member States the names of the authorities or bodies which may receive information pursuant to this paragraph. credit institutions. in view of their specific competence. 9.04. Appendice 1 | 1985L0611 — EN — 13. 10. of persons appointed for that purpose and not employed in the public sector the possibility of exchanging information provided for in the first subparagraph may be extended to such persons under the conditions stipulated in the second subparagraph. M2 Member States which have recourse to the option provided for in the first subparagraph shall require at least that the following conditons are met: — The information shall be for the purpose of performing the task referred to in the first subparagraph. The information received in this context shall be subject to the conditions of prof essional secrecy imposed in paragraph 2. Before 31 December 2000.001 . by virtue of provisions laid down by law. In addition. Where. be made only where necessary for reasons of prudential control. Information received in this context shall be subject to the conditions of prof essional secrecy imposed in this Article. In order to implement the final indent of the second subparagraph. the Commission shall draw up a report on the application of this paragraph. Member States may.2005 — 006. Such disclosures may. however. the authorities or bodies referred to in the first subparagraph shall communicate to the competent authorities which have disclosed the information the names and precise responsibilities of the persons to whom it is to be sent. the authorities or bodies referred to in the first subparagraph perform their task of detection or investigation with the aid. however. — Where the information originates in another Member State. Member States shall.page 34 . 11. investment undertakings and insurance undertakings and to inspectors instructed by those departments. notwithstanding the provisions referred to in paragraphs 2 and 5. authorize the disclosure of certain information to other departments of their central government administrations responsible for legislation on the supervision of Ucits and of undertakings contributing towards their business activity. however. in a Member State. financial institutions. ensure that information received under paragraph 3 may not be disclosed in the circumstances referred to in this paragraph without the express consent of the competent authorities which disclosed it. Member States shall. nor shall it prevent such authorities or bodies from communicating to the competent authorities such information as they may need for the purposes of paragraph 5. — Information received in this context shall be subject to the conditions of prof essional secrecy imposed in paragraph 2. where appropriate. This Article shall not prevent the competent authorities from communicating the information referred to in paragraphs 2 to 5 to a clearing house or other similar body recognized under national law for the provision of clearing or settlement services for one of their Member State’s markets If they consider that it is necessary to communicate the information in order to ensure the proper functioning of those bodies in relation to defaults or potential defaults by market participants. solely for the purposes for which those authorities gave their agreement. provide that information received under paragraphs 3 and 6 may never be disclosed in the circumstances referred to in this paragraph except with the express agreement of the competent authorities which disclosed the information. This Article shall not prevent a competent authority from transmitting to central banks and other bodies with a similar function in their capacity as monetary authorities information intended for the performance of their tasks. it may not be disclosed without the express agreement of the competent authorities which have disclosed it and.

performing in an undertaking for collective investment in transferable securities (Ucits) or an undertaking contributing towards its business activity the task described in Article 51 of Directive 78/ 660/EEC (2). of any fact or decision referred to in paragraph 1 shall not constitute a breach of any restriction on disclosure of information imposed by contract of by any legislative. 14. The same shall apply ifno decision is taken within six months of its submission on an authorization application made by a UCITS which includes all the information required under the provisions in force. regulation or administrative provision or any regulation laid down in the fund rules or in the investment company’s instruments of incorporation. The disclosure in good faith to the competent authorities. Article 37 of Directive 83/349/EEC or Article 31 of Directive 85/611/EEC or any other statutory task. 12. Nevertheless. and any negative decision taken in implementation of the general measures adopted in application of this Directive. Only the authorities of the Member State in which a UCITS is situated shall have the power to take action against it ifit infringes any law. regulations or administrative provisions which lay down the conditions governing authorization or which specifically govern pursuit of the activities of undertakings for collective investment in transferable securities (Ucits) or undertakings contributing towards their business activity. or — Lead to refusal to certify the accounts or to the expression of reservations. (2) OJ No L 222. M2 1. 1990. Article 52 1. 2. and communicate them to applicants. 5. page 35 | Cross-border distribution of UCITS | Appendices .The Member States shall provide that decisions taken in respect of a UCITS pursuant to laws. p. 2. p. The authorities referred to in Article 49 must give reasons for any decision to refuse authorization. 1984. shall have a duty to report promptly to the competent authorities any fact or decision concerning that undertaking of which he has become aware while carrying out that task which is liable to: — Constitute a material breach of the laws. 60). 11. regulatory or administrative provision and shall not involce such persons in liability of any kind. Member States shall provide at least that: Article 50a 1 (a) Any person authorized within the meaning of Directive 84/253/ EEC (1). 1978. (b) That person shall likewise have a duty to report any facts and decisions of which he becomes aware in the course of carrying out a task as described in (a) in an undertaking having close links resulting from a control relationship with the undertaking for collective investment in transferable securities (Ucits) or an undertaking contributing towards its business activity within which he is carrying out the abovementioned task. B Article 51 1. Directive as last amended by Directive 90/ 605/EEC (OJ No L 317. (1) OJ No L 126. 8. 11. 16. by persons authorized within the meaning of Directive 84/253/EEC. or — Affect the continuous functioning of the undertaking for collective investment in transferable securities (Ucits) or an undertaking contributing towards its business activity. 2. the authorities of the Member State in which the units of a UCITS are marketed may take action against it ifit infringes the provisions referred to in Section VIII. 20. p. regulations and administrative provisions adopted in accordance with this Directive are subject to the right to apply to the courts.

2005 — 006. or any suspension of re-purchase or redemption imposed upon it.  M4 Article 52a 1. after informing the competent authorities of the host Member State. B  M7 SECTION X European Securities Committee Article 53a The technical amendments to be made to this Directive in the following areas shall be adopted in accordance with the procedure referred to in Article 53b(2): (a) Clarification of the definitions in order to ensure uniform application of this Directive throughout the Community. within the framework of their powers.page 36 .04.001 . This Article shall not affect the right of the competent authorities of the host Member State. the competent authorities of the management company’s home Member State may. carry out on-the-spot verification of the information referred to in Article 52a. Article 52b 1. Where. a management company operates in one or more host Member States. the competent authorities of the home Member State shall be informed by the competent authorities of the host Member State of any measures taken by the host Member State pursuant to Article 6c(6) which involve penalties imposed on a management company or restrictions on a management company’s activities. 2. by allowing the authorities who have requested them to carry them out or by allowing auditors or experts to do so. must be communicated without delay by the authorities of the Member State in which the UCITS in question is situated to the authorities of the other Member States in which its units are marketed. or any other serious measure taken against a UCITS. 2. nsof ar as it is necessary for the purpose of exercising their powers of supervision. Each host Member State shall ensure that. Authorities which receive such requests must. They shall supply one another on request with all the information concerning the management and ownership of such management companies that is likely to facilitate their supervision and all information likely to facilitate the monitoring of such companies. through the provision of services or by the establishment of branches.B 3. the competent authorities of all the Member States concerned shall collaborate closely. act upon them by carrying out the verifications themselves. in discharging their responsibilities under this Directive. (b) Alignment of terminology and the framing of definitions in accordance with subsequent acts on UCITS and related matters. In particular. 3. Any decision to withdraw authorization. the authorities of the home Member State shall cooperate to ensure that the authorities of the host Member State collect the particulars referred to in Article 6c(2). Appendice 1 | 1985L0611 — EN — 13. themselves or through the intermediary of persons they instruct for the purpose. to carry out on-the-spot verifications of branches established within their territory. where a management company authorised in another Member State carries on business within its territory through a branch. The competent authorities of the management company’s home Member State may also ask the competent authorities of the management company’s host Member State to have such verification carried out.

The period laid down in Article 5(6) of Decision 1999/468/EC shall be set at three months. on the date of adoption of this Directive. The Committee shall adopt its rules of procedure.2001.1. hereinafter ‘the Committee’. Decision as amended by Decision 2004/8/EC (OJ L 3. Article 56 1. 33). M7 Article 53b 1. also carry on activities other than those provided for in Article 6 to continue those other activities for five years after that date. 13. derogations and final provisions Article 54 Solely for the purpose of Danish UCITS. (2) OJ L 184. the Member States may authorize management companies to issue bearer certificates representing the registered securities of other companies. Where reference is made to this paragraph. on the date of adoption of this Directive. 45. The Hellenic Republic and the Portuguese Republic shall be authorized to postpone the implementation of this Directive until 1 April 1992 at the latest. The Member States shall bring into force no later than 1 October 1989 the measures necessary for them to comply with this Directive. p. 3. 2. One year before that date the Commission shall report to the Council on progress in implementing the Directive and on any difficulties which the Hellenic Republic or the Portuguese Republic may encounter in implementing the Directive by the date referred to in the first subparagraph. the competent authorities may authorize those UCITS which. 2. Articles 5 and 7 of Decision 1999/468/EC (2) shall apply. 7. 2. pantebreve issued in Denmark shall be treated as equivalent to the transferable securities referred to in Article 19 (1) (b). They shall forthwith inform the Commission thereof. page 37 | Cross-border distribution of UCITS | Appendices . Article 55 By way of derogation from Articles 7 (1) and 14 (1). The Commission shall be assisted by the European Securities Committee instituted by Commission Decision 2001/528/EC (1). The Member States may authorize those management companies which. had two or more depositaries in accordance with their national law to maintain that number of depositaries ifthose authorities have guarantees that the functions to be performed under Articles 7 (3) and 14 (3) will be performed in practice. having regard to the provisions of Article 8 thereof. By way of derogation from Article 6. The Member States may grant UCITS existing on the date of implementation of this Directive a period of not more than 12 months from that date in order to comply with the new national legislation. 23. 3. p. (1) OJ L 191.1999. 17.2004. Article 57 1.7. 1 B SECTION XI Transitional provisions.7. p.

Appendice 1 | 1985L0611 — EN — 13. regulations and administrative provisons which they adopt in the field covered by this Directive. ifnecessary. Article 59 This Directive is addressed to the Member States. Article 58 The Member States shall ensure that the Commission is informed of the texts of the main laws.001 .B The Commission shall.page 38 .04.2005 — 006. propose that the Council extend the postponement by up to four years.

Indication of duration. 1. Indication of unit-holders’ voting rights if these exist. 1. .2 Date of establishment of the common fund. Circumstances in which winding-up of the common fund can be decided on and winding-up procedure.B ANNEX  M4 1  SCHEDULE A 1. 1.4 Statement of the place where the fund rules. 1. entry in a register or in an account. . 1.1 Name 1. . if limited  M4 1. and periodic reports may be obtained. registered office and head office if different from the registered office 1.5 Brief indications relevant to unit-holders of the tax system applicable to the company. . if they are not annexed. 1.1 Name or style.1 Name or style. The nature of the right (real.3 In the case of investment companies having different investment compartments. Indication of duration.6 Accounting and distribution dates 1. Indication of duration. management and supervisory bodies.2 Date of the incorporation of the company.8 Names and positions in the company of the members of the administrative.12 Procedures and conditions of issue and sale of units page 39 | Cross-border distribution of UCITS | Appendices 1 . and periodical reports may be obtained. Details of whether deductions are made at source from the income and capital gains paid by the common fund to unit-holders. Characteristics of the units: Registered or bearer. Original securities or certificates providing evidence of title. Information concerning the management company 1. Original securities or certificates providing evidence of title. registered office and head office if different from the registered office 1.7 Names of the persons responsible for auditing the accounting information referred to in Article 31.3 If the company manages other common funds . form in law.2 Date of incorporation of the company. Indication of unit-holders’ voting rights. entry in a register or in an account. 11 Where applicable. if limited. personal or other) represented by the unit.10 Details of the types and main characteristics of the units and in particular: . in particular as regards the rights of unit-holders. form in law. the indication of the compartments. Accounting and distribution dates. 1.Circumstances in which winding-up of the investment company can be decided on and winding-up procedure. 1.8 Names and positions in the company of the members of the administrative. Details of their main activities outside the company where these are of significance with respect to that company 1.10 Details of the types and main characteristics of the units and in particular: . . management and supervisory bodies. 1.12 Procedures and conditions of issue and sale of units 1.Information concerning the investment company 1. if they are not annexed. indication of stock exchanges or markets where the units are listed or dealt in. 1.6. . 1.5 Brief indications relevant to unit-holders of the tax system applicable to the common fund. 1. .9 Capital 1. if limited. 1. Indication of any denominations which may be provided for.7 Names of the persons responsible for auditing the accounting information referred to in Article 31. 1. Details of whether deductions are made at source from the income and capital gains paid by the company to unit-holders.4 Statement of the place where the instruments of incorporation. Characteristics of the units: Registered or bearer. Details of their main activities outside the company where these are of significance with respect to that company.9 Amount of the subscribed capital with an indication of the capital paid-up 1. in particular as regards the rights of unit-holders.11 Where applicable. 1. Information concerning the unit trust 1. indication of those other funds 1. Indication of any denominations which may be provided for. indication of stock exchanges or markets where the units are listed or dealt in.

18 Information concerning the manner. amount and calculation of remuneration payable by the common fund to the management company. . . 1.Information concerning the charges relating to the sale or issue and the re-purchase or redemption of units.g. Appendice 1 | 1985L0611 — EN — 13. place and frequency of the publication of that value.14 Description of rules for determining and applying income. the depositary or third parties. any limitations on that investment policy and an indication of any techniques and instruments or borrowing powers which may be used in the management of the company 1.The means. specialisation in geographical or industrial sectors). (1) Investment companies within the meaning of Article 29 (5) of the Directive shall also indicate: . and reimbursement of costs by the common fund to the management company. including its financial objectives (e.16 Rules for the valuation of assets 1.14 Description of rules for determining and applying income. places and frequency of the publication of those prices.  1. .The means.18 Information concerning the manner. and circumstances in which re-purchase or redemption may be suspended.B 1.g. capital growth or income).The method and frequency of calculation of the net asset value of units. in particular: . capital growth or income). .2005 — 006.g.g.15 Description of the company’s investment objectives. 1. places and frequency of the publication of those prices(1) 1.The method and frequency of the calculation of those prices.Information concerning the charges relating to the sale or issue and the re-purchase or redemption of units.04. and circumstances in which re-purchase or redemption may be suspended.page 40 .The means.001 . investment policy (e.  M4 In the case of investment companies having different investment compartments. management and supervisory bodies. 1. 1. to the depositary or to third parties. specialisation in geographical or industrial sectors). and reimbursement of costs by the company to its directors. . or to third parties.13 Procedures and conditions for repurchase or redemption of units. to the depositary or to third parties.The method and frequency of the calculation of those prices. amount and calculation of remuneration paid by the company to its directors. any limitations on that investment policy and an indication of any techniques and instruments or borrowing powers which may be used in the management of the unit trust 1. . including its financial objectives (e.15 Description of the unit trust’s investment objectives. information on how a unit-holder may pass from one compartment into another and the charges applicable in such cases.17 Determination of the sale or issue price and the re-purchase or redemption price of units. 1. and members of the administrative. investment policy (e. in particular: . to the depositary.16 Rules for the valuation of assets 1.17 Determination of the sale or issue price and the re-purchase or redemption price of units.13 Procedures and conditions for repurchase or redemption of units.The stock exchange in the country of marketing the price on which determines the price of transactions effected outwith stock exchanges in that country.

Name or style. Possible expenses or fees. 2. 4. Other investment information: 5.2.1. Information concerning the arrangements for making payments to unit-holders. Information concerning the advisory firms or external investment advisers who give advice under contract which is paid for out of the assets of the UCITS: 3.  M4 5. Name or style of the firm or name of the adviser. Main activity. distinguishing between those to be paid by the unit-holder and those to be paid out of the common fund’s or of the investment company’s assets.2. Profile of the typical investor for whom the common fund or the investment company is designed. other than the charges mentioned in point 1. In addition. Material provisions of the contract with the management company or the investment company which may be relevant to the unitholders. Such information must in any case be given in the Member State in which the UCITS is established. 3.1.B 2.2. 6. 3. Other significant activities. re-purchasing or redeeming units and making available information concerning the UCITS. page 41 | Cross-border distribution of UCITS | Appendices 1 .17. form in law.1. registered office and head office if different from the registered office.. where units are marketed in another Member State. Information concerning the depositary: 2.3. Historical performance of the common fund or of the investment company (where applicable) — such information may be either included in or attached to the prospectus. 5. excluding those relating to remuneration. Economic information: 6. 3. such information shall be given in respect of that Member State in the prospectus published there.1.

(c) Recently issued transferable securities of the type referred to in Article 19 (1) (d). distinguishing between: (a) Transferable securities admitted to official stock exchange listing. Statement of assets and liabilities -transferable securities. For each of the above investments the proportion it represents of the total assets of the UCITS should be stated. .Depositary’s charges.Net income. .B SCHEDULE B Information to be included in the periodic reports I. -net asset value.The net asset value per unit. .Changes in capital account. VI. for each financial year. .2005 — 006.Any other changes affecting the assets and liabilities of the UCITS. -liabilities. geographical or currency criteria) as a percentage of net assets. g. Statement of changes in the composition of the portfolio during the reference period.Distributions and income reinvested. .The total net asset value. by category of transaction within the meaning of Article 21 carried out by the UCITS during the reference period. II. Appendice 1 | 1985L0611 — EN — 13. A comparative table covering the last three financial years and including.04. V. . -other assets. (b) Transferable securities dealt in on another regulated market. . VII.Appreciation or depreciation of investments.Other charges and taxes. -debt instruments of the type referred to in Article 19 (2) (b). at the end of the financial year: .Other income. .Management charges.Details. Statement of the developments concerning the assets of the UCITS during the reference period including the following: . . (e) Debt instruments treated as equivalent in accordance with Article 19 (2) (b). Portfolio. of the resulting amount of commitments. . -total assets. in accordance with economic. Net asset value per unit IV.page 42 . -bank balances. Number of units in circulation III.Income from investments. (d) Other transferable securities of the type referred to in Article 19 (2) (a). And analyzed in accordance with the most appropriate criteria in the light of the investment policy of the UCITS (e.001 .

short definition of the UCITS’ objectives. .auditors.depositary.entry and exit commissions. Investment information .profile of the typical investor the unit trust/common fund or the investment company is designed for. .the unit trust’s/common fund’s or the investment company’s investment policy and a brief assessment of the fund’s risk profile (including. .in the case of UCITS having different investment compartments.Investment management. . (d) Regulatory compliance monitoring. a bank) promoting the UCITS. if applicable.when the unit trust/common fund or the investment company was created and indication of the Member State where the unit trust/common fund or the investment company has been registered/incorporated. e) Maintenance of unit-holder register. .indication of a contact point (person/department. (i) Record keeping.financial group (e.such information may be either included in or attached to the prospectus. . .how to buy the units. (g) Unit issues and redemptions. .when and how dividends on units or shares of the UCITS (if applicable) are distributed. distinguishing between those to be paid by the unit-holder and those to be paid out of the unit trust’s/ common fund’s or the investment company’s assets. . (f) Distribution of income.frequency and where/how prices are published or made available. etc. the full prospectus. the indication of this circumstance. timing.historical performance of the unit trust/common fund/investment company (where applicable) and a warning that this is not an indicator of future performance . information according to Article 24a and by investment compartment).in the case of UCITS having different investment compartments how to pass from one investment compartment into another and the charges applicable in such cases.Administration: (a) Legal and fund management accounting services. . Additional information .statement that. page 43 | Cross-border distribution of UCITS | Appendices 1 SCHEDULE C .other possible expenses or fees. Commercial information .g.expected period of existence (when applicable). . M4 Contents of the simplified prospectus Brief presentation of the UCITS .Marketing. .how to sell the units.» ANNEX II Functions included in the activity of collective portfolio management: . .competent authority.tax regime. . (h) Contract settlements (including certificate dispatch).management company (when applicable). on request. . . (c) Valuation and pricing (including tax returns). . . (b) Customer inquiries. Economic information . the annual and half-yearly reports may be obtained free of charge before the conclusion of the contract and afterwards. .publishing date of the prospectus.) where additional explanations may be obtained if needed. .

regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (recast .text with EEA relevance) Source: http://ec.europa.eu page 1 | Cross-border distribution of UCITS .May 2011 | Appendix .APPENDIX 1B UCITS IV DIRECTIVE 2009/65/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL OF 13 JULY 2009 on the coordination of laws.

Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 .page 2 .

However. (5) The coordination of the laws of the Member States should be confined to UCITS other than of the closed-ended type that promote the sale of their units to the public in the Community. Having regard to the proposal from the Commission. to invest in financial instruments. supervision.May 2011 | Appendix . (6) Where a provision of this Directive requires that UCITS take action.THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION. 1. in particular in 2001. it has steadily become clear that changes need to be introduced into the UCITS legal framework in order to adapt it to the financial markets of the twenty-first century. while at the same time ensuring more effective and more uniform protection for unit-holders. that provision should be understood to refer to the management company in cases where the UCITS is constituted as a common fund managed by a management company and where a common fund is not in a position to act by itself because it has no legal personality of its own. (4) OJ L 145. as part of their investment objective. The selection of investments for a portfolio by means of an index is a management technique. Having regard to the Treaty establishing the European Community. 3. 30. (3) National laws governing collective investment undertakings should be coordinated with a view to approximating the conditions of competition between those undertakings at Community level. other than transferable securities.1985. regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS)(2) has been substantially amended several times(3).. (2) Directive 85/611/EEC has largely contributed to the development and success of the European investment funds industry. p. it should be recast in the interests of clarity. p. (4) Having regard to those objectives. Acting in accordance with the procedure laid down in Article 251 of the Treaty(1) Whereas: (1) Council Directive 85/611/EEC of 20 December 1985 on the coordination of laws.2004.4. 31. it is desirable to provide for common basic rules for the authorisation. (3) See Annex III. despite the improvements introduced since its adoption. and in particular Article 47(2) thereof. (7) Units of UCITS are considered to be financial instruments for the purposes of Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments(4). page 3 | Cross-border distribution of UCITS . (2) OJ L 375. It is desirable that UCITS be permitted. Part A.12. which are sufficiently liquid. Such coordination facilitates the removal of the restrictions on the free movement of units of UCITS in the Community. The Commission Green Paper of 12 July 2005 on the enhancement of the EU framework for investment funds launched a public debate on the way in which Directive 85/611/EEC should be amended in order to meet those new challenges. (1) Opinion of the European Parliament of 13 January 2009 (not yet published in the Official Journal) and Council Decision of 22 June 2009. structure and activities of UCITS established in the Member States and the information that they are required to publish. The financial instruments which are eligible to be investment assets of the portfolio of the UCITS should be listed in this Directive. That intense consultation process led to the largely shared conclusion that substantial amendments to that Directive are needed. Since further amendments are to be made.

with a view to contributing to the stability of the financial system. those requirements. (12) With regard to collective portfolio management (management of unit trusts/common funds or investment companies). to manage the assets of investment companies incorporated in Member States other than its home Member State. to the operating conditions laid down in that Directive. managed by that company. including the management of pension funds as well as some specific non-core activities linked to the main business without prejudicing the stability of such companies. page 4 . the shares of the harmonised investment companies. to guarantee the internal overview of every management company in particular by means of a two-person management system and by adequate internal control mechanisms. the authorisation of which also covers that service. it is desirable to permit them also to pursue the activity of management of portfolios of investments on a client-by-client basis (individual portfolio management). particularly those pertaining to capital charges on operational risk. on the basis of mandates. in particular as regards authorisation conditions.Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 .(8) An authorisation granted to the management company in its home Member State should ensure investor protection and the solvency of management companies. to perform. (11) By virtue of the principle of home Member State supervision. on behalf of management companies incorporated in Member States other than its home Member State. Where a management company distributes the units of its own harmonised unit trusts/common funds or shares of its own harmonised investment companies in host Member States. (14) The activity of management of individual portfolios of investments is an investment service covered by Directive 2004/39/EC. initial capital and an additional amount of own funds are required. within the Community and other international forums. it should be subject only to rules regarding cross-border marketing. including the use of guarantees. the authorisation granted to a management company in its home Member State should permit the company to pursue in host Member States the following activities. (9) In order to ensure that the management company will be able to fulfil the obligations arising from its activities and thus to ensure its stability. to distribute. specific rules should be laid down in order to prevent conflicts of interest when management companies are authorised to pursue the business of both collective and individual portfolio management. The approach adopted in this Directive is to ensure the essential harmonisation necessary and sufficient to secure the mutual recognition of authorisation and of prudential supervision systems. should be reviewed. (13) With regard to the scope of activity of management companies and in order to take into account national law and permit such companies to achieve significant economies of scale. for the protection of investors. through the establishment of a branch. to distribute the units of the harmonised unit trusts/common funds or shares of the harmonised investment companies managed by other management companies. without the establishment of a branch. management companies authorised in their home Member States should be permitted to provide the services for which they have received authorisation throughout the Community by establishing branches or under the freedom to provide services. In order to ensure a homogeneous regulatory framework in this area. prudential requirements and the rules on reporting and the prospectus. the units of the harmonised unit trusts/common funds managed by that company in its home Member State. it is desirable to subject management companies. to establish rules stricter than those laid down in this Directive. (15) A home Member State should be able. the functions included in the activity of collective portfolio management. To take account of developments. However. through the establishment of a branch. as a general rule. to perform all the other functions and tasks included in the activity of collective portfolio management. without prejudice to Chapter XI: to distribute. (10) It is necessary. making possible the grant of a single authorisation valid throughout the Community and the application of the principle of home Member State supervision.

such as through the designation of a contact person. such as the content of programmes of operations. to deal with requests for information. including all procedures and resources to perform the function of administration referred to in Annex II. specific tasks and functions to third parties so as to increase the efficiency of the conduct of its business. Such a management company should also establish appropriate procedures and arrangements to make information available at the request of the public or the competent authorities of the UCITS home Member State. and that the existence of mandates does not hinder an effective supervision over the management company. Member States permitting such delegations should ensure that the management company to which they granted authorisation does not delegate the totality of its functions to one or more third parties. the competent authorities of the UCITS home Member State should be able to obtain information directly from the management company. that management company should adopt and establish appropriate procedures and arrangements to deal with investor complaints. In order to ensure the correct functioning of the principle of the home Member State supervision. such as through appropriate provisions in distribution arrangements or through an address in the UCITS home Member State. For the purposes of this Directive. However. (19) Where the UCITS is managed by a management company authorised in a Member State other than the UCITS home Member State. which should be subject to the law of the UCITS home Member State. the location of the management company’s registered office in the UCITS home Member State. only the competent authorities of the management company’s home Member State should be considered competent to supervise the organisation of the management company. on the basis of mandates.May 2011 | Appendix page 5 . which should be subject to the law of the management company’s home Member State. the competent authorities of the management company’s host Member State may require management companies to provide information on transactions concerning the investments of the UCITS authorised in that | Cross-border distribution of UCITS . (20) The competent authorities that authorise the UCITS should take into account the rules of the common fund or the instruments of incorporation of the investment company. a management company should be authorised in the Member State in which it has its registered office. it should be possible for the Commission to examine the possibilities for harmonising delegation arrangements at Community level. (17) In order to ensure a level playing field and appropriate supervision in the long term. (21) The competent authorities of the UCITS home Member State should be competent to supervise compliance with the rules regarding the constitution and functioning of the UCITS. or the location of any activity of the management company in the UCITS home Member State. from among the employees of the management company. (18) The principle of home Member State supervision requires that the competent authorities withdraw or refuse to grant authorisation where factors. In particular. In accordance with the principle of home Member State supervision. which should not need to be an address of the management company itself. regarding the type of UCITS that the management company is authorised to manage. issued by the competent authorities of the management company’s home Member State. the competent authorities should be able to rely on an attestation. To this end. However. Authorisation of a UCITS should not be subject to an additional capital requirement at the level of the management company. the choice of the depositary and the ability of the management company to manage the UCITS. such a management company should not be required by the law of the UCITS home Member State to have a local representative in that Member State in order to fulfil those duties. Where the management company is established in another Member State.(16) It is desirable to lay down rules defining the preconditions under which a management company may delegate. the geographical distribution or the activities in fact pursued indicate clearly that a management company has opted for the legal system of one Member State for the purpose of evading the stricter standards in force in another Member State within the territory of which it intends to pursue or does pursue the greater part of its activities. the fact that the management company has delegated its functions should not affect the liabilities of that company or of the depositary vis-à-vis the unit-holders and the competent authorities. so as to become a letter-box entity.

remain part of the organisational arrangements of the management company. but each Member State should recognise a transfer of assets resulting from those merger techniques. the competent authorities of the UCITS home Member State should have the possibility to require the management company to cease managing the UCITS. the competent authorities of the merging UCITS should authorise the merger so as to ensure that the interests of the unit-holders who effectively change UCITS page 6 . where they have designated such a management company. or indirectly.Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 . For cross-border mergers. National rules on quorum should neither discriminate between national and cross-border mergers. It is therefore necessary. the competent authorities of the UCITS home Member State should be able to take preventive measures and adopt penalties as regards the management company. The organisation of the maintenance and the location of that register should. in accordance with this Directive. Member States should provide for the necessary provisions in order to arrange for an orderly management or liquidation of the UCITS in such a case. Member States should require proposed domestic or cross-border mergers between UCITS to be subject to authorisation by their competent authorities. (22) It should be possible for the UCITS home Member State to provide for rules regarding the content of the unit-holder register of the UCITS. (25) To safeguard shareholders’ interests and secure a level playing field in the market for harmonised collective investment undertakings. Once authorised. however. This Directive does not prevent UCITS from using other techniques on a purely national basis. the competent authorities of the management company’s host Member States should be able to rely on the cooperation of the competent authorities of the management company’s home Member State and. including information contained in books and records of those transactions and fund accounts. where they have not designated a management company authorised in accordance with this Directive. Although some Member States are likely to authorise only contractual funds. in order to improve the functioning of the internal market. if necessary. either directly. (24) In order to prevent supervisory arbitrage and promote confidence in the effectiveness of supervision by the home Member State’s competent authorities. initial capital is required for investment companies. mergers of UCITS encounter many legal and administrative difficulties in the Community. to lay down Community provisions facilitating mergers between UCITS (and investment compartments thereof). Those mergers will remain subject to the relevant provisions of national law. It does not require all Member States to introduce all three techniques into their national law. authorisation should be refused where a UCITS is prevented from marketing its units in its home Member State.Member State. To that end. authorised investment companies should comply with such rules. (26) Where there are applicable rules on the conduct of business and the delegation of functions and where such delegation by a management company is allowed under the law of its home Member State. Investment companies which have designated a management company will. should be able to take action directly against the management company. UCITS should be free to choose the Member State(s) where its units are to be marketed. As a last resort. (29) In order to safeguard investors’ interests. To remedy any breach of the rules under their responsibility. (28) This Directive concerns those merger techniques which are most commonly used in Member States. be covered through the management company’s additional amount of own funds. however. mutatis mutandis. (27) Despite the need for consolidation between UCITS. corporate and unit trusts) should be permitted and recognised by each Member State without the need for Member States to provide for new legal forms of UCITS in their national law. nor be more stringent than those laid down for mergers of corporate entities. cross-border mergers between all types of UCITS (contractual. (23) It is necessary to provide the UCITS home Member State with all means to remedy any breach in the rules of the UCITS. in situations where none of the UCITS concerned by the merger has been notified for cross-border marketing of its units.

(32) It is particularly important that the unit-holders are adequately informed about the proposed merger and that their rights are sufficiently protected. (33) The provisions on mergers laid down in this Directive are without prejudice to the application of the legislation on control of concentrations between undertakings. in particular Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EC Merger Regulation)(1) (34) The free marketing of the units issued by UCITS authorised to invest up to 100 % of their assets in transferable securities issued by the same body (State. (35) The definition of transferable securities included in this Directive applies only for the purposes of this Directive and does not affect the various definitions used in national legislation for other purposes such as taxation. where applicable. they should be taken into account by the competent authorities of the receiving UCITS home Member State. as set out in the prospectuses of the merging and the receiving UCITS. to cover disinvestment costs in all situations. those of the unit-holders of the receiving UCITS should also be safeguarded.May 2011 | Appendix page 7 . (31) Third-party control of mergers should also be ensured. to convert them into units in another UCITS with similar investment policies and managed by the same management company or by a linked company. (36) Money market instruments comprise transferable instruments which are normally dealt in on the money market rather than on the regulated markets. where possible. | Cross-border distribution of UCITS . commercial papers. for example treasury and local authority bills. Since the interests of the unit-holders of the receiving UCITS also need to be adequately safeguarded. the competent authorities of each merging UCITS will need to authorise the merger. the ownership of which cannot. certificates of deposit. (38) It is desirable to permit a UCITS to invest its assets in units of UCITS and other collective investment undertakings of the open-ended type which also invest in liquid financial assets referred to in this Directive and which operate on the principle of risk spreading. shares and other securities equivalent to shares issued by bodies such as building societies and industrial and provident societies. be transferred except by the issuing body buying them back. (30) Unit-holders of both the merging and the receiving UCITS should also be able to request the repurchase or redemption of their units or. save for fees. the cash payment per unit. It is necessary that UCITS or other collective investment undertakings in which a UCITS invests be subject to effective supervision. Although the interests of the unit-holders of the merging UCITS are most concerned by the merger. etc. In order to limit costs connected with cross-border mergers. in close cooperation with each other. local authority. it should be possible to draw up a single report for all UCITS involved and the statutory auditor of the merging or the receiving UCITS should be enabled to do so. For investor protection reasons. medium-term notes and bankers’ acceptances. If the merger involves more than one merging UCITS and such UCITS are domiciled in different Member States. to be retained exclusively by the respective UCITS. That right should not be subject to any additional charge. Consequently. in practice.) should not have the direct or indirect effect of disturbing the functioning of the capital market or the financing of the Member States. unit-holders should be able to obtain a copy of such report on request and free of charge. including through appropriate information-sharing. Either a depositary or an independent auditor should draw-up a report on behalf of all the UCITS involved in the merger validating the valuation methods of the assets and liabilities of such UCITS and the calculation method of the exchange ratio as set out in the common draft terms of merger as well as the actual exchange ratio and.are duly protected. The depositaries of each of the UCITS involved in the merger should verify the conformity of the common draft terms of the merger with the relevant provisions of this Directive and of the UCITS fund rules. are not covered by this definition. (37) The concept of regulated market in this Directive corresponds to that in Directive 2004/39/EC.

page 8 . 30. it should be possible to allow all UCITS to hold ancillary liquid assets. additional risk-spreading rules should apply to exposures to a single counterparty or group of counterparties. including as regards this Directive. (42) For prudential reasons it is necessary to avoid excessive concentration by a UCITS in investments which expose it to counterparty risk to the same entity or to entities belonging to the same group. With regard to OTC derivatives. in the case of sales. as part of their general investment policy or for hedging purposes in order to reach a set financial target or the risk profile indicated in the prospectus. Because of the enhanced possibilities for UCITS to invest in the units of other UCITS and collective investment undertakings. (40) In order to take into account market developments and in consideration of the completion of economic and monetary union it is desirable to permit UCITS to invest in bank deposits. To ensure adequate liquidity of investments in deposits. 201. (43) UCITS should be expressly permitted. 30. those deposits should be repayable on demand or have the right to be withdrawn. such as bank deposits at sight. to invest in financial derivative instruments. (1) OJ L 177. It is therefore essential to ensure that such investment activity does not diminish investor protection. (41) In addition to the case in which a UCITS invests in bank deposits in accordance with its fund rules or instruments of incorporation. money market instruments or in other financial assets provided for in this Directive. after duly considering the impact of such proposals. inter alia. (45) With regard to over-the-counter (OTC) derivatives. or for a period of time strictly necessary when.2006. it is necessary to limit the maximum potential exposure relating to derivative instruments so that it does not exceed the total net value of the UCITS’ portfolio. in order to cover current or exceptional payments. those risks and commitments should be measured and monitored on an ongoing basis. UCITS should describe their strategies. liquidity and ongoing assessment of the position. it is necessary to lay down certain rules on quantitative limits. for the time necessary to reinvest in transferable securities. requirements should be set in terms of the eligibility of counterparties and instruments. Finally. because of unfavourable market conditions. p. In order to ensure investor protection. p. (2) OJ L 177.Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 .2006. the disclosure of information and prevention of the cascade phenomenon. 1. The holding of such ancillary liquid assets may be justified.(39) The development of opportunities for a UCITS to invest in UCITS and in other collective investments undertakings should be facilitated. to ensure such consistency and coherence. in order to ensure investor protection through disclosure. In order to ensure constant awareness of the risks and commitments arising from derivative transactions and to check compliance with investment limits. as envisaged with regard to Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions(1) and Directive 2006/49/EC of the European Parliament and of the Council of 14 June 2006 on the capital adequacy of investment firms and credit institutions(2). the credit institution should be subject to prudential rules equivalent to those laid down in Community law. to be consistent and coherent in all relevant financial sector regulation. The Commission will put forward the appropriate legislative proposals.6. money market instruments and in other financial assets is suspended. techniques and investment limits governing their derivative operations. The purpose of such requirements is to ensure an adequate level of investor protection. If the deposits are made with a credit institution the registered office of which is located in a third country. close to that which they obtain when they acquire derivatives dealt in on regulated markets. the investment in transferable securities. (44) It is necessary for measures to address the potential misalignment of interests in products where credit risk is transferred by securitisation. (46) Operations in derivatives should never be used to circumvent the principles or rules set out in this Directive.6.

the feeder UCITS’ investment into the master UCITS should be subject to prior approval by the competent authorities of the feeder UCITS home Member State. offer special guarantees to the investor under the specific rules applicable thereto. certain activities. (50) Several Member States have enacted provisions that enable non-coordinated collective investment undertakings to pool their assets in one so-called master fund. (51) In order to facilitate the effective operation of the internal market and to ensure the same level of investor protection throughout the Community. In order to facilitate the effective operation of the internal market and to ensure the same level of investor protection throughout the Community. in particular. (48) Collective investment undertakings falling within the scope of this Directive should not be used for purposes other than the collective investment of the capital raised from the public according to the rules laid down in this Directive. In order to avoid an undue administrative burden. The general obligation to act solely in the interests of unit-holders and. (52) In order to protect the feeder UCITS’ investors. by which the feeder UCITS exceeds the limit applicable for investing into another UCITS. which applied in the case of bonds issued or guaranteed by a Member State. 20 % of their assets in a single collective investment undertaking.(47) Some portfolio management techniques for collective investment undertakings investing primarily in shares or debt securities are based on the replication of stock indices or debt-security indices. it is necessary to exempt feeder UCITS wishing to pool their assets in a master UCITS from the prohibition to invest more than 10 % of their assets or. while leaving it to the Member States to draw up the list of bonds to which they intend. provisions on notification of cross-border marketing should not apply if a master UCITS does not raise capital from the public in a Member State other than that in which it is established. to extend the derogation to the totality of private sector bonds which fulfil jointly fixed criteria. even in the absence of a State guarantee. It is necessary. (53) In order to allow the feeder UCITS to act in the best interests of its unit-holders and notably place it in a position to obtain from the master UCITS all information and documents necessary to perform its obligations. (49) The original version of Directive 85/611/EEC contained a derogation from the restriction on the percentage of its assets that a UCITS can invest in transferable securities issued by the same body. as the case may be. the objective of increasing cost efficiencies. That derogation allowed UCITS to invest. on its own behalf. Such an exemption is justified as the feeder UCITS invests all or almost all of its assets into the diversified portfolio of the master UCITS. which itself is subject to UCITS diversification rules. the conditions which must be met and the documents and information which are to be provided for approving the feeder UCITS’ investment into the master UCITS should be exhaustive. it should be possible for a UCITS to have subsidiaries only when necessary to pursue effectively. the feeder and the master UCITS should | Cross-border distribution of UCITS . never justify a UCITS undertaking measures that could hinder the competent authorities from effectively exercising their supervisory functions. up to 35 % of their assets in such bonds. therefore. no feeder UCITS should be able to invest into more than one master. In the cases identified by this Directive. In order to allow UCITS to make use of those structures. master-feeder structures should be allowed both where the master and the feeder are established in the same Member State and where they are established in different Member States. notably in a cross-border situation. to grant a derogation. A similar but more limited derogation is justified with regard to private sector bonds which. It is necessary to ensure effective supervision of UCITS. in particular.May 2011 | Appendix page 9 . but has only one or more feeder UCITS in that other Member State. where appropriate. It is desirable to permit UCITS to replicate well-known and recognised stock indices or debt-security indices. Only the initial investment into the master UCITS. In order to allow investors better to understand master-feederstructures and regulators to supervise them more easily. also defined in this Directive. In order to ensure the same level of investor protection throughout the Community the master should itself be an authorised UCITS. It may therefore be necessary to introduce more flexible risk-spreading rules for UCITS investing in shares or debt securities to this end. requires approval. The establishment of a subsidiary of a UCITS in a third country should therefore be permitted only in the cases identified and in accordance with the conditions laid down in this Directive.

(59) Key investor information should be provided as a specific document to investors. however. (60) The competent authorities of each Member State may make available to the public. A single document of limited length presenting the information in a specified sequence is the most appropriate manner in which to achieve the clarity and simplicity of presentation that is required by retail investors. As conversion is a fundamental change of the investment policy. key investor information concerning all UCITS authorised in that Member State. Such key investor information should contain only the essential elements for making such decisions. and should allow for useful comparisons. investment companies should provide key investor information to the relevant entities. Following transmission of a complete notification file by the page 10 . in good time before the subscription of the UCITS. in order to help them to reach informed investment decisions. the key investor information. (58) Member States should make a clear distinction between marketing communications and obligatory investor disclosures provided for under this Directive. The nature of the information to be found in the key investor information should be fully harmonised so as to ensure adequate investor protection and comparability. the prospectus. relevant to the investment decision. Obligatory investor disclosure includes key investor information. the depositaries or the auditors are not to be found in breach of any restriction on disclosure of information or of data protection. Intermediaries should provide key investor information to clients and potential clients. to take relevant action to ensure that unit-holders of the master UCITS are informed accordingly. free of charge. The master UCITS should. it should be sufficient that the latter establish internal conduct of business rules. The investment of the feeder UCITS into the master UCITS should not affect the ability of the feeder UCITS itself either to repurchase or redeem units at the request of its unit-holders or to act in the best interests of its unit-holders.enter into a binding and enforceable agreement. in a dedicated section of their website. when complying with those requirements. be able to charge subscription or redemption fees to other investors in the master UCITS. where applicable. Information-sharing agreements between the depositaries or the auditors respectively of the feeder UCITS and the master UCITS should ensure the flow of information and documents that is needed for the feeder UCITS’ depositary or auditor to fulfil its duties. At the same time they should sufficiently protect unit-holders. Management companies or. as well as all marketing communications should be adapted to the specificities of master-feeder structures. in accordance with the distribution method used (direct sales or intermediated sales). where appropriate. (61) Key investor information should be produced for all UCITS. however. Key investor information should be presented in a short format. (55) Under this Directive.Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 . The competent authorities should not require the feeder UCITS to provide more or information other than that specified in this Directive. (62) UCITS should be able to market their units in other Member States subject to a notification procedure based on improved communication between the competent authorities of the Member States. unit-holders should be protected from being charged unjustified additional costs by a prohibition against master UCITS charging feeder UCITS subscription and redemption fees. (57) Where the competent authorities of the master UCITS home Member State are informed of an irregularity with regard to the master UCITS or detect that the master UCITS does not comply with the provisions of this Directive. This Directive should ensure that. notably of costs and risk profile. (56) The conversion rules should enable an existing UCITS to convert into a feeder UCITS. (54) In order to ensure a high level of protection of the interests of the feeder UCITS’ investors. they may decide. the converting UCITS should be required to provide its unit-holders with sufficient information in order to enable them to decide whether to maintain their investment. the prospectus and annual and half-yearly reports. If both feeder and master UCITS are managed by the same management company.

clear and not misleading. comply with national law before the UCITS can use them. A common minimum set of powers. which should decide whether a simple or a sworn translation is necessary. (65) For the purpose of enhancing legal certainty there is a need to ensure that a UCITS which markets its units on a cross-border basis has easy access. (64) In order to facilitate cross-border marketing of units of UCITS.competent authorities of the UCITS home Member State. control of compliance of arrangements made for marketing of units of UCITS with laws. Translations should be produced under the responsibility of the UCITS. subject to such control being nondiscriminatory and not preventing that UCITS from accessing the market. applicable to infringements of this Directive. repurchasing or redeeming units and making available the information which UCITS are required to provide. Liabilities relating to such publications should be subject to national law. Member States should also take the measures necessary to ensure that those penalties are enforced. it is important that notification fees are disclosed. and administrative measures. | Cross-border distribution of UCITS . That control could cover the adequacy of arrangements made for marketing. should be performed after the UCITS has accessed the market of that Member State. in the form of an electronic publication and in a language customary in the sphere of international finance. (69) It is necessary to enhance convergence of powers at the disposal of competent authorities so as to bring about the equal enforcement of this Directive throughout the Member States. which could provide for the voluntary delegation of tasks. to complete information on the laws. which may include criminal or administrative penalties. (70) It is necessary to reinforce provisions on exchange of information between national competent authorities and to strengthen the duties of assistance and cooperation between them. (68) Member States should take the necessary administrative and organisational measures to enable cooperation between national authorities and competent authorities of other Member States. including through bilateral or multilateral agreements between those authorities. it should not be possible for the UCITS host Member State to oppose access to its market by a UCITS established in another Member State or challenge the authorisation given by that other Member State. (63) UCITS should be able to market their units subject to their taking the necessary measures to ensure that facilities are available for making payments to unit-holders. (71) For the purpose of cross-border provision of services. (67) To facilitate the access to the markets of other Member States. consistent with those conferred upon competent authorities by other Community financial services legislation should guarantee supervisory effectiveness. (66) To facilitate access of UCITS to the markets of other Member States. In addition. in particular the adequacy of distribution arrangements and the obligation for marketing communications to be presented in a manner that is fair. This Directive should not prevent the competent authorities of the host Member State from verifying that marketing communications. clear competences should be assigned to the respective competent authorities so as to eliminate any gaps or overlaps. Key investor information should specify the language(s) in which other obligatory disclosure documents and additional information are available. the UCITS should be required to translate only the key investor information into the official language or one of the official languages of a UCITS host Member State or a language approved by its competent authorities. which specifically relate to the arrangements made for marketing of units of UCITS. regulations and administrative procedures applicable in the UCITS host Member State. not including key investor information. the prospectus and annual and half-yearly reports. in accordance with the applicable law. Member States should lay down rules on penalties.May 2011 | Appendix page 11 . regulations and administrative provisions applicable in the UCITS host Member State.

(74) Certain behaviour. (78) Exchanges of information between the competent authorities on the one hand and central banks. should also be authorised. is liable to affect the stability. of the financial system. the addressees of such exchanges should remain within strict limits.Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 . they become aware. (77) Where it is stipulated that information may be disclosed only with the express agreement of the competent authorities. wherever. (82) The duty of auditors to communicate. in their capacity as monetary authorities. should be included in this Directive. where appropriate. In order to preserve the confidential nature of the information forwarded. (76) It is necessary to specify the conditions under which such exchanges of information are authorised. it is desirable for Member States to provide that such a duty should apply in all circumstances where such facts are discovered by an auditor during the performance of his tasks in an undertaking which has close links with a UCITS or an undertaking which contributes towards its business activity. the authorities applied to for authorisation must be able to identify the authorities competent to exercise supervision on a consolidated basis over that UCITS or an undertaking contributing towards its business activity. by virtue of their function. or an undertaking contributing towards its business activity. even when involving undertakings other than UCITS or undertakings contributing towards their business activity. where appropriate. to the competent authorities certain facts and decisions concerning a UCITS or an undertaking contributing towards its business activity which they discover during the performance of their tasks in an page 12 . (79) The same obligation of professional secrecy on the authorities responsible for authorising and supervising UCITS and the undertakings contributing towards such authorising and supervising and the same possibilities for exchanging information as those granted to the authorities responsible for authorising and supervising credit institutions. such as fraud or insider offences. (80) For the purpose of strengthening the prudential supervision of UCITS or of undertakings contributing towards their business activity and protection of clients of UCITS or of undertakings contributing towards their business activity. auditors should have a duty to report promptly to the competent authorities. (73) The principle of home Member State supervision requires that the competent authorities withdraw or refuse to grant authorisation where factors such as the content of programmes of operations. In such cases. while carrying out their tasks. or. including integrity. as provided for by this Directive. make their agreement subject to compliance with strict conditions.(72) The provisions in this Directive relating to the competent authorities’ effective exercise of their supervisory functions covers supervision on a consolidated basis which must be exercised over a UCITS or an undertaking contributing towards its business activity where the provisions of Community law so provide. help to strengthen the stability of the financial system. these may. (81) Having regard to the aim in this Directive. investment firms and insurance undertakings. (75) It is appropriate to provide for the possibility of exchanges of information between the competent authorities and authorities or bodies which. other public authorities responsible for supervising payment systems on the other. the geographical distribution or the activities actually pursued indicate clearly that a UCITS or an undertaking contributing towards its business activity has opted for the legal system of one Member State for the purpose of evading the stricter standards in force in another Member State within whose territory it pursues or intends to pursue the greater part of its activities. of facts which are likely to have a serious effect on the financial situation or the administrative and accounting organisation of a UCITS. however. where appropriate. bodies with a function similar to central banks.

the Commission should be empowered to adopt measures specifying the measures to be taken by depositaries in order to fulfil their duties in regard to UCITS managed by a management company. the Commission should be empowered to adopt measures designed to specify the specific conditions to be met when the prospectus is provided in a durable medium other than paper or by means of a website which does not constitute a durable medium. and the role of the depositary of the feeder in this process.May 2011 | Appendix .1999. Those implementing measures should facilitate a uniform application of the obligations of management companies and depositaries but should not be a precondition for implementing the right of management companies to pursue the activities for which they have been authorised in their home Member State throughout the Community by establishing branches or under the freedom to provide services including the management of UCITS in another Member State.entity which is neither a UCITS nor an undertaking contributing towards the business activity of a UCITS does not. 23. format and way to provide information to unit-holders. 17. As regards management companies. the impact of the merger of the master on the authorisation of the feeder. the type of irregularities originating from the master to be reported to the feeder. including arrangements that may be imposed by Member States to ensure compliance with those rules in their territory. alone. (88) As regards the provisions on disclosure. the Commission should be empowered to adopt measures designed to specify the content of the agreement between master and feeder UCITS or of the internal conduct of business rules. (83) This Directive should not affect national rules on taxation. (84) The measures necessary for the implementation of this Directive should be adopted in accordance with Council Decision 1999/468/ EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission(1) (85) In particular. the format and the way to provide information to unit-holders in case of conversion from a UCITS to a feeder UCITS. (90) The Commission should also be empowered. (1) OJ L 184.7. p. form and presentation of the key investor information taking into account the different nature or components of the UCITS concerned. the Commission should be empowered to adopt the following implementing measures. (86) As regards mergers. and the specific conditions for providing key investor information in a durable medium other than paper or by means of a website which does not constitute a durable medium. (87) As regards master-feeder structures. the content of the informationsharing agreement between either their depositaries or their auditors. (89) As regards notification. inter alia. the definition of measures appropriate to coordinate the timing of their net asset value calculation and publication in order to avoid market timing. As regards depositaries. the procedure for valuing and auditing the transfer of assets from a feeder to a master. change the nature of their tasks in that entity nor the manner in which they must perform those tasks in that entity. the Commission should be empowered to adopt measures specifying the details of organisational requirements. the Commission should be empowered to adopt measures designed to specify the scope of the information on the applicable local rules to be published by host Member State competent authorities and the technical details on access by host Member State competent authorities to stored and updated UCITS documents. to clarify definitions and align terminology and framing definitions in accordance with subsequent acts on UCITS and related matters. the Commission should be empowered to adopt measures designed to specify detailed content. the detailed and exhaustive content. risk management. page 13 | Cross-border distribution of UCITS . established in a Member State other than the UCITS home Member State and the particulars of the agreement between the depositary and the management company. conflicts of interest and rules of conduct.

p. their own tables illustrating.2003. by supplementing it with new non-essential elements. Member States are encouraged to draw up.(91) Since the measures referred to in Recitals 85 to 90 are of general scope and are designed to amend non-essential elements of this Directive. this Directive does not go beyond what is necessary to achieve those objectives. the correlation between this Directive and the transposition measures. (94) This Directive should be without prejudice to the obligations of the Member States relating to the time limits for transposition into national law and application of the Directives set out in Annex III. (95) In accordance with point 34 of the Interinstitutional Agreement on better law-making(1). for themselves and in the interest of the Community. as set out in that Article. page 14 . in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty.Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 . be better achieved at Community level. 31. (1) OJ C 321. In accordance with the principle of proportionality. The obligation to transpose the provisions which are unchanged arises under the earlier directives. the Community may adopt measures. 1. Part B. and to make them public. as far as possible. by reason of the scale and effects of those rules. (92) Since the objectives of this Directive cannot be sufficiently achieved by the Member States in so far as they involve the adoption of rules with common features applicable at Community level and can therefore. they must be adopted in accordance with the regulatory procedure with scrutiny provided for in Article 5a of Decision 1999/468/EC. (93) The obligation to transpose this Directive into national law should be confined to those provisions that represent a substantive change as compared with the directives that it recasts.12.

information of unit-holders and other rights of unit-holders Costs and entry into effect OBLIGATIONS CONCERNING THE INVESTMENT POLICIES OF UCITS MASTER-FEEDER STRUCTURES Scope and approval Common provisions for feeder UCITS and master UCITS Depositaries and auditors Compulsory information and marketing communications by the feeder UCITS Conversion of existing UCITS into feeder UCITS and change of master UCITS Obligations and competent authorities OBLIGATIONS CONCERNING INFORMATION TO BE PROVIDED TO INVESTORS Publication of a prospectus and periodical reports Publication of other information Key investor information GENERAL OBLIGATIONS OF UCITS SPECIAL PROVISIONS APPLICABLE TO UCITS WHICH MARKET THEIR UNITS IN MEMBER STATES OTHER THAN THOSE IN WHICH THEY ARE ESTABLISHED Articles 1 to 4 Article 5 Articles 6 to 8 Article 9 Articles 10 to 15 Articles 16 to 21 Articles 22 to 26 Articles 27 to 29 Articles 30 and 31 Articles 32 to 36 Articles 37 to 40 Articles 41 to 45 Articles 46 to 48 Articles 49 to 57 Articles 58 and 59 Article 60 Articles 61 and 62 Article 63 Article 64 Articles 65 to 67 Articles 68 to 75 Articles 76 and 77 Articles 78 to 82 Articles 83 to 90 Articles 91 to 96 CHAPTER XII PROVISIONS CONCERNING THE AUTHORITIES RESPONSIBLE FOR AUTHORISATION AND SUPERVISION Articles 97 to 110 Articles 111 and 112 CHAPTER XIII CHAPTER XIV SECTION 1 SECTION 2 ANNEX I ANNEX II ANNEX III Part A Part B EUROPEAN SECURITIES COMMITTEE DEROGATIONS.May 2011 | Appendix . TRANSITIONAL AND FINAL PROVISIONS Derogations Transitional and final provisions Schedules A and B Functions included in the activity of collective portfolio management Articles 113 and 114 Articles 115 to 119 Repealed Directive with list of its successive amendments List of time limits for transposition into national law and application Correlation table ANNEX IV page 15 | Cross-border distribution of UCITS .CHAPTER I CHAPTER II CHAPTER III SECTION 1 SECTION 2 SECTION 3 SECTION 4 CHAPTER IV CHAPTER V SECTION 1 SECTION 2 SECTION 3 CHAPTER VI SECTION 1 SECTION 2 SECTION 3 CHAPTER VII CHAPTER VIII SECTION 1 SECTION 2 SECTION 3 SECTION 4 SECTION 5 SECTION 6 CHAPTER IX SECTION 1 SECTION 2 SECTION 3 CHAPTER X CHAPTER XI SUBJECT MATTER. authorisation and approval Third party control. SCOPE AND DEFINITIONS AUTHORISATION OF UCITS OBLIGATIONS REGARDING MANAGEMENT COMPANIES Conditions for taking up business Relations with third countries Operating conditions Freedom of establishment and freedom to provide services OBLIGATIONS REGARDING THE DEPOSITARY OBLIGATIONS REGARDING INVESTMENT COMPANIES Conditions for taking up business Operating conditions Obligations regarding the depositary MERGERS OF UCITS Principle.

where those UCITS market their units within the territory of that Member State. no Member State shall apply any other provisions in the field covered by this Directive to UCITS established in another Member State or to the units issued by such UCITS. 4. For the purposes of this Directive: (a) ‘common funds’ shall also include unit trusts. (b) ‘units’ of UCITS shall also include shares of UCITS. at the request of holders. other than the home Member State. shall not be subject to this Directive. SCOPE AND DEFINITIONS Article 1 1. Action taken by a UCITS to ensure that the stock exchange value of its units does not significantly vary from their net asset value shall be regarded as equivalent to such repurchase or redemption. 5. the assets of which are invested through the intermediary of subsidiary companies. and subject to Article 3. 2. directly or indirectly. out of those undertakings’ assets. Member States may allow UCITS to consist of several investment compartments. For the purposes of this Directive. This Directive applies to undertakings for collective investment in transferable securities (UCITS) established within the territories of the Member States. or statute (as investment companies). 6. within the territory of which a management company has a branch or provides services. (b) ‘management company’ means a company. Article 2 1. and (b) with units which are.CHAPTER I SUBJECT MATTER. the regular business of which is the management of UCITS in the form of common funds or of investment companies (collective portfolio management of UCITS). provided that they are of general application and do not conflict with the provisions of this Directive. For the purposes of this Directive the following definitions apply: (a) depositary’ means an institution entrusted with the duties set out in Articles 22 and 32 and subject to the other provisions laid down in Chapter IV and Section 3 of Chapter V. page 16 . Investment companies. (c) ‘management company’s home Member State’ means the Member State in which the management company has its registered office. trust law (as unit trusts). 3. mainly other than in transferable securities. Subject to the provisions in Community law governing capital movements and subject to Articles 91 and 92 and the second subparagraph of Article 108(1).Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 . The undertakings referred to in paragraph 2 may be constituted in accordance with contract law (as common funds managed by management companies). Without prejudice to this Chapter. repurchased or redeemed. (d) ‘management company’s host Member State’ means a Member State. a Member State may apply to UCITS established within its territory requirements which are stricter than or additional to those laid down in this Directive. The Member States shall prohibit UCITS which are subject to this Directive from transforming themselves into collective investment undertakings which are not covered by this Directive. 7. UCITS means an undertaking: (a) with the sole object of collective investment in transferable securities or in other liquid financial assets referred to in Article 50(1) of capital raised from the public and which operate on the principle of risk-spreading.

transfer their net assets to another investment compartment of the same UCITS. which means the relationship between a ‘parent undertaking’ and a ‘subsidiary’. other than the UCITS home Member State. (q) ‘cross-border merger’ means a merger of UCITS: (i) at least two of which are established in different Member States. the ‘receiving UCITS’. of 20 % or more of the voting rights or capital of an undertaking. in exchange for the issue to their unit-holders of units of the receiving UCITS and. on being dissolved without going into liquidation. (n) ‘transferable securities’ means: (i) shares in companies and other securities equivalent to shares in companies (shares). the ‘merging UCITS’.May 2011 | Appendix . or a similar relationship between any natural or legal person and an undertaking. which has no legal personality and which provides the services for which the management company has been authorised. (ii) two or more UCITS or investment compartments thereof. page 17 | Cross-border distribution of UCITS . as defined in Articles 1 and 2 of Seventh Council Directive 83/349/EEC of 13 June 1983 based on the Article 54(3)(g) of the Treaty on consolidated accounts(1) and in all the cases referred to in Article 1(1) and (2) of Directive 83/349/EEC. (iii) any other negotiable securities which carry the right to acquire any such transferable securities by subscription or exchange. (o) ‘money market instruments’ means instruments normally dealt in on the money market which are liquid and have a value which can be accurately determined at any time. transfer all of their assets and liabilities to a UCITS which they form or an investment compartment thereof. (k) ‘initial capital’ means the funds as referred to in Article 57(a) and (b) of Directive 2006/48/EC. the ‘merging UCITS’. on being dissolved without going into liquidation. if applicable. the ‘merging UCITS’. a cash payment not exceeding 10 % of the net asset value of those units. direct or by way of control. the ‘receiving UCITS’. in exchange for the issue to their unit-holders of units of the receiving UCITS and. to a UCITS which they form or to another existing UCITS or an investment compartment thereof. (ii) bonds and other forms of securitised debt (debt securities). Section 1 of Directive 2006/48/EC. which continue to exist until the liabilities have been discharged. (j) ‘qualifying holding’ means a direct or indirect holding in a management company which represents 10 % or more of the capital or of the voting rights or which makes it possible to exercise a significant influence over the management of the management company in which that holding subsists. (iii) one or more UCITS or investment compartments thereof. which means the ownership. or (ii) established in the same Member State into a newly constituted UCITS established in another Member State. if applicable.(e) ‘UCITS home Member State’ means the Member State in which the UCITS is authorised pursuant to Article 5. (m) ‘durable medium’ means an instrument which enables an investor to store information addressed personally to that investor in a way that is accessible for future reference for a period of time adequate for the purposes of the information and which allows the unchanged reproduction of the information stored. (g) ‘branch’ means a place of business which is a part of the management company. (h) ‘competent authorities’ means the authorities which each Member State designates under Article 97. a cash payment not exceeding 10 % of the net asset value of those units. (p) ‘mergers’ means an operation whereby: (i) one or more UCITS or investment compartments thereof. (l) ‘own funds’ means own funds as referred to in Title V. in which the units of the UCITS are marketed. (r) ‘domestic merger’ means a merger between UCITS established in the same Member State where at least one of the involved UCITS has been notified pursuant to Article 93. (i) ‘close links’ means a situation in which two or more natural or legal persons are linked by either: (i) ‘participation’. (f) ‘UCITS host Member State’ means a Member State. the ‘receiving UCITS’. transfer all of their assets and liabilities to another existing UCITS or an investment compartment thereof. Chapter 2. or (ii) ‘control’.

the following shall apply: (a) a subsidiary undertaking of a subsidiary undertaking shall also be considered to be a subsidiary of the parent undertaking which is at the head of those undertakings. Article 4 For the purposes of this Directive. For the purposes of point (i)(ii) of paragraph 1. page 18 . the voting rights referred to in Articles 9 and 10 of Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004 on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market(1) shall be taken into account. For the purposes of paragraph 1(j). the regular business of a management company shall include the functions referred to in Annex II. For the purposes of paragraph 1(l). 3. may be sold only to the public in third countries.Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 . Article 3 The following undertakings are not subject to this Directive: (a) collective investment undertakings of the closed-ended type. (b) collective investment undertakings which raise capital without promoting the sale of their units to the public within the Community or any part of it. 4. 5. Articles 13 to 16 of Directive 2006/49/EC shall apply mutatis mutandis. under the fund rules or the instruments of incorporation of the investment company. transferable securities shall exclude the techniques and instruments referred to in Article 51. (b) situations in which two or more natural or legal persons are permanently linked to the same person by a control relationship shall also be regarded as constituting a close links between such persons. (c) collective investment undertakings the units of which. for which the rules laid down in Chapter VII and Article 83 are inappropriate in view of their investment and borrowing policies. 6. For the purposes of paragraph 1(n). For the purposes of paragraph 1(g).2. a UCITS shall be deemed to be established in its home Member State. (d) categories of collective investment undertakings prescribed by the regulations of the Member States in which such collective investment undertakings are established. all the places of business established in the same Member State by a management company with its head office in another Member State shall be regarded as a single branch. 7. For the purposes of paragraph 1(b).

5.CHAPTER II AUTHORISATION OF UCITS Article 5 1. The competent authorities of the UCITS home Member State shall not grant authorisation if the UCITS is legally prevented (for example. Neither the management company nor the depositary shall be replaced. the investment company.12. under the law or the instruments of incorporation. or who effectively determine the policy of the depositary. 38 page 19 | Cross-border distribution of UCITS . 3.2004. Member States shall ensure that such information is available at least in a language customary in the sphere of international finance. Directors shall mean those persons who. without the approval of the competent authorities of the UCITS home Member State. and. where relevant. 4. Without prejudice to Article 29(2). or (b) the management company is not authorised for the management of UCITS in its home Member State. 6. Authorisation shall not be subject either to a requirement that the UCITS be managed by a management company having its registered office in the UCITS home Member State or that the management company pursue or delegate any activities in the UCITS home Member State. to manage the UCITS pursuant to Article 20.May 2011 | Appendix . whether or not authorisation of the UCITS has been granted. 2. The competent authorities of the UCITS home Member State shall not authorise a UCITS if the directors of the depositary are not of sufficiently good repute or are not sufficiently experienced also in relation to the type of UCITS to be managed. where applicable. (1) OJ L 390. The competent authorities of the UCITS home Member State shall not authorise a UCITS if: (a) they establish that the investment company does not comply with the preconditions laid down in Chapter V. the names of the directors of the depositary and of every person succeeding them in office shall be communicated forthwith to the competent authorities. 31. The Member States shall ensure that complete information on the laws. on the application of the management company. To that end. within two months of the submission of a complete application. p. 7. Such authorisation shall be valid for all Member States. the management company or. Without prejudice to paragraph 2. and kept up to date. through a provision in the fund rules or instruments of incorporation) from marketing its units in its home Member State. if the UCITS is not established in the management company’s home Member State. provided in a clear and unambiguous manner. the competent authorities of the UCITS home Member State shall decide. nor shall the fund rules or the instruments of incorporation of the investment company be amended. regulations and administrative provisions implementing this Directive which relate to the constitution and functioning of the UCITS are easily accessible at a distance or by electronic means. A common fund shall be authorised only if the competent authorities of its home Member State have approved the application of the management company to manage that common fund. the fund rules and the choice of depositary. An investment company shall be authorised only if the competent authorities of its home Member State have approved both its instruments of incorporation and the choice of depositary. No UCITS shall pursue activities as such unless it has been authorised in accordance with this Directive. shall be informed. represent the depositary. the application of the designated management company to manage that investment company.

where such portfolios include one or more of the instruments listed in Annex I.CHAPTER III OBLIGATIONS REGARDING MANAGEMENT COMPANIES SECTION 1 Conditions for taking up business Article 6 1. exceed EUR 10 000 000. the management company must be required to provide an additional amount of own funds which is equal to 0.other collective investment undertakings managed by the management company including portfolios for which it has delegated the management function but excluding portfolios that it is managing under delegation. in accordance with mandates given by investors on a discretionary. or to provide non-core services without being authorised for the services referred to in point (a) of the first subparagraph. 3. Access to the business of management companies shall be subject to prior authorisation to be granted by the competent authorities of the management company’s home Member State. .Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 . and (b) as non-core services: (i) investment advice concerning one or more of the instruments listed in Annex I. for the purpose of this Directive. client-by-client basis. the own funds of the management company must at no time be less than the amount prescribed in Article 21 of Directive 2006/49/EC. in addition to the management of UCITS. including those owned by pension funds. (ii) for the purposes of this paragraph. 13 and 19 of Directive 2004/39/EC shall apply to the provision of the services referred to in paragraph 3 of this Article by management companies. . 4. Section C to Directive 2004/39/EC. page 20 . Member States may authorise management companies to provide. the following portfolios must be deemed to be the portfolios of the management company: . Without prejudice to other conditions of general application laid down by national law.common funds managed by the management company including portfolios for which it has delegated the management function but excluding portfolios that it is managing under delegation. Management companies shall not be authorised under this Directive to provide only the services referred to in this paragraph. however. 2. No management company shall engage in activities other than the management of UCITS authorised under this Directive. (iii) irrespective of the amount of those requirements. (ii) safekeeping and administration in relation to units of collective investment undertakings. Article 2(2) and Articles 12. the functions referred to in Annex II. The activity of management of UCITS shall include.investment companies for which the management company is the designated management company. Section C to Directive 2004/39/EC. the competent authorities shall not grant authorisation to a management company unless the following conditions are met: (a) the management company has an initial capital of at least EUR 125 000. Article 7 1. the following services: (a) management of portfolios of investments. Authorisation granted under this Directive to a management company shall be valid for all Member States. By way of derogation from paragraph 2. with the exception of the additional management of other collective investment undertakings which are not covered by this Directive and for which the management company is subject to prudential supervision but the units of which cannot be marketed in other Member States under this Directive.02 % of the amount by which the value of the portfolios of the management company exceeds EUR 250 000 000 but the required total of the initial capital and the additional amount must not. taking into account the following: (i) when the value of the portfolios of the management company exceeds EUR 250 000 000.

expressly renounces the authorisation or has ceased the activity covered by this Directive more than six months previously. The competent authorities shall inform the applicant within six months of the submission of a complete application whether or not authorisation has been granted. The competent authorities shall also refuse authorisation if the laws. whether direct or indirect. or (f) falls within any of the cases where national law provides for withdrawal. (e) has seriously or systematically infringed the provisions adopted pursuant to this Directive. the organisational structure of the management company. prevent the effective exercise of their supervisory functions. The competent authorities shall require management companies to provide them with the information they require to monitor compliance with the conditions referred to in this paragraph on a continuous basis. Where close links exist between the management company and other natural or legal persons. Reasons shall be given where an authorisation is refused. 4. that have qualifying holdings and of the amounts of those holdings. The competent authorities may withdraw the authorisation issued to a management company subject to this Directive only where that company: (a) does not make use of the authorisation within 12 months. regulations or administrative provisions of a third country governing one or more natural or legal persons with which the management company has close links. natural or legal persons. The competent authorities shall refuse authorisation if. 3. 5. (b) has obtained the authorisation by making false statements or by any other irregular means. For the purposes of point (a) of the first subparagraph. at least. they are not satisfied as to the suitability of the shareholders or members referred to in the first subparagraph. (c) the application for authorisation is accompanied by a programme of activity setting out. page 21 | Cross-border distribution of UCITS . or in a third country where it is subject to prudential rules considered by the competent authorities as equivalent to those laid down in Community law. Member States may authorise management companies not to provide up to 50 % of the additional amount of own funds referred to in point (i) of point (a) if they benefit from a guarantee of the same amount given by a credit institution or an insurance undertaking which has its registered office in a Member State.(b) the persons who effectively conduct the business of a management company are of sufficiently good repute and are sufficiently experienced also in relation to the type of UCITS managed by the management company. the names of those persons and of every person succeeding them in office being communicated forthwith to the competent authorities and the conduct of the business of a management company being decided by at least two persons meeting such conditions. taking into account the need to ensure the sound and prudent management of a management company. unless the Member State concerned has provided for authorisation to lapse in such cases. The competent authorities shall not grant authorisation to take up the business of management companies until they have been informed of the identities of the shareholders or members. A management company may start business as soon as authorisation has been granted. (c) no longer fulfils the conditions under which authorisation was granted. Article 8 1.May 2011 | Appendix . 2. or difficulties involved in their enforcement. the competent authorities shall grant authorisation only if those close links do not prevent the effective exercise of their supervisory functions. and (d) the head office and the registered office of the management company are located in the same Member State. (d) no longer complies with Directive 2006/49/EC if its authorisation also covers the discretionary portfolio management service referred to in Article 6(3)(a) of this Directive.

For the purposes of this Directive. an investment firm. ‘management company’ and‘management companies’.2. the Member States shall not apply provisions that result in treatment more favourable than that accorded to branches of management companies that have registered offices in Member States. or (c) a company controlled by the same natural or legal persons as control another management company. For the purposes of this Directive. allow such firms a limited period in which to rectify their situations or cease their activities. Relations with third countries shall be regulated in accordance with the relevant rules laid down in Article 15 of Directive 2004/39/EC. The own funds of a management company shall not fall below the level specified in Article 7(1)(a). however. SECTION 3 Operating conditions Article 10 1. the terms ‘investment firm’ and‘investment firms’ referred to in Article 15 of Directive 2004/39/EC shall mean. Article 11 1. mean. a credit institution or an insurance undertaking authorised in another Member State. 10a and 10b of Directive 2004/39/EC. the competent authorities may. 2. (b) a subsidiary of the parent undertaking of another management company. an investment firm. a credit institution or an insurance undertaking authorised in another Member State. page 22 . 3. SECTION 2 Relations with third countries Article 9 1. In the case of branches of management companies that have registered offices outside the Community and are taking up or pursuing business.Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 . ‘management company’ and‘management companies’. where the circumstances so justify. respectively. If they do. Qualifying holdings in management companies shall be subject to the same rules as those laid down in Articles 10. 2. 2. Member States shall inform the Commission of any general difficulties which UCITS encounter in marketing their units in any third country. The prudential supervision of a management company shall be the responsibility of the competent authorities of the management company’s home Member State. the term ‘providing investment services’ referred to in Article 15(1) of Directive 2004/39/EC shall mean ‘providing services’. a credit institution or an insurance undertaking authorised in another Member State. The competent authorities of the management company’s home Member State shall require that the management company which they have authorised complies at all times with the conditions laid down in Article 6 and Article 7(1) and (2). respectively. the terms ‘investment firm’ and ‘investment firms’ referred to in Article 10 of Directive 2004/39/ EC. The competent authorities of the other Member State involved shall be consulted beforehand in relation to the authorisation of any management company which is one of the following: (a) a subsidiary of another management company. without prejudice to those provisions of this Directive which confer responsibility to the competent authorities of a management company’s host Member State. an investment firm. whether the management company establishes a branch or provides services in another Member State or not.

or between two UCITS. between two of its clients. to carry out on their behalf one or more of their own functions.May 2011 | Appendix . (d) where the mandate concerns the investment management and is given to a third-country undertaking.Article 12 1. 2. rules for personal transactions by its employees or for the holding or management of investments in financial instruments in order to invest on its own account and ensuring. the delegation must be in accordance with investment-allocation criteria periodically laid down by the management companies. must not prevent the management company from acting. and the time and place at which it was effected and that the assets of the UCITS managed by the management company are invested according to the fund rules or the instruments of incorporation and the legal provisions in force. In particular. in particular. having regard also to the nature of the UCITS managed by a management company. and. p. between one of its clients and a UCITS. shall observe at all times. the competent authorities of the management company’s home Member State. at least. the mandate must be given only to undertakings which are authorised or registered for the purpose of asset management and subject to prudential supervision. all of the following preconditions shall be complied with: (a) the management company must inform the competent authorities of its home Member State in an appropriate manner. If the law of the management company’s home Member State allows management companies to delegate to third parties for the purpose of a more efficient conduct of the companies’ business. Each management company the authorisation of which also covers the discretionary portfolio management service referred to in Article 6(3)(a) shall: (a) not be permitted to invest all or a part of the investor’s portfolio in units of collective investment undertakings it manages. Without prejudice to Article 116.3. without delay. by 1 July 2010. 22. the Commission shall adopt. implementing measures specifying the procedures and arrangements as referred to under point (a) of the second subparagraph of paragraph 1 and the structures and organisational requirements to minimise conflicts of interests as referred to under point (b) of the second subparagraph of paragraph 1. control and safeguard arrangements for electronic data processing and adequate internal control mechanisms including. with regard to the activity of management of UCITS authorised according to this Directive. that each transaction involving the UCITS may be reconstructed according to its origin. (1) OJ L 84. in the best interests of its investors. transmit the information to the competent authorities of the UCITS home Member State. shall require that each such company: (a) has sound administrative and accounting procedures. (b) the mandate must not prevent the effectiveness of supervision over the management company. its nature. shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 112(2). (b) is structured and organised in such a way as to minimise the risk of UCITS’ or clients’ interests being prejudiced by conflicts of interest between the company and its clients. or the UCITS from being managed.1997. page 23 | Cross-border distribution of UCITS . designed to amend non-essential elements of this Directive by supplementing it. the parties to it. Article 13 1. Those measures. in particular. (b) be subject with regard to the services referred to in Article 6(3) to the provisions laid down in Directive 97/9/EC of the European Parliament and of the Council of 3 March 1997 on investor-compensation schemes(1) 3. (c) when the delegation concerns the investment management. 26. (e) a mandate with regard to the core function of investment management must not be given to the depositary or to any other undertaking whose interests may conflict with those of the management company or the unit-holders. the competent authorities of the management company’s home Member State must. unless it receives prior general approval from the client. Each Member State shall draw up prudential rules which management companies authorised in that Member State. cooperation between the supervisory authorities concerned must be ensured.

implementing measures.(f) measures must exist which enable the persons who conduct the business of the management company to monitor effectively at any time the activity of the undertaking to which the mandate is given. by 1 July 2010. and (e) complies with all regulatory requirements applicable to the conduct of its business activities so as to promote the best interests of its investors and the integrity of the market. ensures that the UCITS it manages are fairly treated. Such rules shall implement at least the principles set out in this paragraph. (g) the mandate must not prevent the persons who conduct the business of the management company from giving further instructions to the undertaking to which functions are delegated at any time or from withdrawing the mandate with immediate effect when this is in the interest of investors. Those measures. (b) specify the principles required to ensure that management companies employ effectively the resources and procedures that are necessary for the proper performance of their business activities. 2. in the best interests of the UCITS it manages and the integrity of the market. Those principles shall ensure that a management company: (a) acts honestly and fairly in conducting its business activities in the best interests of the UCITS it manages and the integrity of the market. The liability of the management company or the depositary shall not be affected by delegation by the management company of any functions to third parties. shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 112(2). The management company shall not delegate its functions to the extent that it becomes a letter-box entity. and (i) the UCITS’ prospectuses must list the functions which the management company has been allowed to delegate in accordance with this Article. Those measures shall allow investors to file complaints in the official language or one of the official languages of their Member State. Without prejudice to Article 116. care and diligence in the best interests of the UCITS. with a view to ensuring that the management company complies with the duties set out in paragraph 1. page 24 . and (c) define the steps that management companies might reasonably be expected to take to identify. investment companies shall take measures in accordance with Article 92 and establish appropriate procedures and arrangements to ensure that they deal properly with investor complaints and that there are no restrictions on investors exercising their rights in the event that the management company is authorised in a Member State other than the UCITS home Member State. Article 15 Management companies or. in particular to: (a) establish appropriate criteria for acting honestly and fairly and with due skill. (d) tries to avoid conflicts of interests and. (c) has and employs effectively the resources and procedures that are necessary for the proper performance of its business activities. 2. (h) having regard to the nature of the functions to be delegated. care and diligence. the undertaking to which functions will be delegated must be qualified and capable of undertaking the functions in question. prevent. the Commission shall adopt.Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 . (b) acts with due skill. Article 14 1. where relevant. Each Member State shall draw up rules of conduct which management companies authorised in that Member State shall observe at all times. manage or disclose conflicts of interest as well as to establish appropriate criteria for determining the types of conflicts of interest whose existence may damage the interests of the UCITS. designed to amend non-essential elements of this Directive by supplementing it. when they cannot be avoided.

2. SECTION 4 Freedom of establishment and freedom to provide services Article 16 1. 2. It shall also include a description of the procedures and arrangements taken in accordance with Article 15. without proposing to pursue any other activities or services. 3. (b) a programme of operations setting out the activities and services according to Article 6(2) and (3) envisaged and the organisational structure of the branch. Subject to the conditions set out in this Article. may pursue within their territories the activity for which it has been authorised.Management companies shall also establish appropriate procedures and arrangements to make information available at the request of the public or the competent authorities of the UCITS home Member State.May 2011 | Appendix . In addition to meeting the conditions imposed in Articles 6 and 7. to any requirement to provide endowment capital or to any other measure having equivalent effect. provided that such a management company complies with the provisions of: (a) Article 17 or Article 18. The refusal or any failure to reply shall be subject to the right to apply to the courts in the management company’s home Member State. they shall give reasons for such refusal to the management company concerned within two months of receiving all the information. (c) the address in the management company’s host Member State from which documents may be obtained. authorised by its home Member State. when effecting the notification provided for in paragraph 1: (a) the Member State within the territory of which the management company plans to establish a branch. a UCITS shall be free to designate. They shall also communicate details of any compensation scheme intended to protect investors. 3. Member States shall require every management company wishing to establish a branch within the territory of another Member State to provide the following information and documents. within two months of receiving all the information referred to in paragraph 2. page 25 | Cross-border distribution of UCITS . such marketing shall be subject only to the requirements of Chapter XI. Unless the competent authorities of the management company’s home Member State have reason to doubt the adequacy of the administrative structure or the financial situation of a management company. either by the establishment of a branch or under the freedom to provide services. communicate that information to the competent authorities of the management company’s host Member State and shall inform the management company accordingly. and (d) the names of those responsible for the management of the branch. or to be managed by a management company authorised in a Member State other than the UCITS home Member State in accordance with the relevant provisions of this Directive. without establishing a branch. and (b) Articles 19 and 20. Member States shall not make the establishment of a branch or the provision of the services subject to any authorisation requirement. Member States shall ensure that a management company. they shall. Where the competent authorities of the management company’s home Member State refuse to communicate the information referred to in paragraph 2 to the competent authorities of the management company’s host Member State. Where a management company so authorised proposes. Article 17 1. only to market the units of the UCITS it manages as provided for in Annex II in a Member State other than the UCITS home Member State. which shall include a description of the risk management process put in place by the management company. taking into account the activities envisaged. a management company wishing to establish a branch within the territory of another Member State to pursue the activities for which it has been authorised shall notify the competent authorities of its home Member State accordingly.

within one month of receiving the information referred to in paragraph 1. In the event of change of any particulars communicated in accordance with paragraph 2(b). The competent authorities of the management company’s home Member State shall.Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 . 7. It shall also include a description of the procedures and arrangements taken in accordance with Article 15.Where a management company wishes to pursue the activity of collective portfolio management referred to in Annex II. within two months of receiving the information referred to in paragraph 2. 8. 6. prepare for supervising the compliance of the management company with the rules under their responsibility. In the event of a change in the particulars communicated in accordance with the first subparagraph of paragraph 3. and (b) a programme of operations stating the activities and services referred to in Article 6(2) and (3) envisaged which shall include a description of the risk management process put in place by the management company. The competent authorities of the management company’s home Member State shall update the information contained in the attestation referred to in the third subparagraph of paragraph 3 and inform the competent authorities of the management company’s host Member State whenever there is a change in the scope of the management company’s authorisation or in the details of any restriction on the types of UCITS that the management company is authorised to manage. On receipt of a communication from the competent authorities of the management company’s host Member State or on the expiry of the period provided for in paragraph 6 without receipt of any communication from those authorities. forward it to the competent authorities of the management company’s host Member State. page 26 . Any management company wishing to pursue the activities for which it has been authorised within the territory of another Member State for the first time under the freedom to provide services shall communicate the following information to the competent authorities of the management company’s home Member State: (a) the Member State within the territory of which the management company intends to operate. 5. The competent authorities of the management company’s host Member State shall be responsible for supervising compliance with paragraph 4. 2. the competent authorities of the management company’s home Member State shall inform the competent authorities of the management company’s host Member State accordingly. Article 18 1. (c) or (d). 4. A management company which pursues activities by a branch within the territory of the host Member State shall comply with the rules drawn up by the management company’s host Member State pursuant to Article 14. the competent authorities of the management company’s host Member State shall. the competent authorities of the management company’s home Member State shall enclose with the documentation sent to the competent authorities of the management company’s host Member State an attestation that the management company has been authorised pursuant to the provisions of this Directive. a management company shall give written notice of that change to the competent authorities of the management company’s home Member State and of the management company’s host Member State at least one month before implementing the change so that the competent authorities of the management company’s home Member State may take a decision on the change under paragraph 3 and the competent authorities of the management company’s host Member State may do so under paragraph 6. 9. Before the branch of a management company starts business. a description of the scope of the management company’s authorisation and details of any restriction on the types of UCITS that the management company is authorised to manage. the branch may be established and start business.

the management company shall give notice of the amendment in writing to the competent authorities of the management company’s home Member State and of the management company’s host Member State before implementing the change. (b) the issuance and redemption of units and shares. (d) restrictions on borrowing. procedures referred to in Article 12 and the management company’s reporting requirements. 4. key investor information and periodic reports. a description of the scope of the management company’s authorisation and details of any restriction on the types of UCITS that the management company is authorised to manage. including the calculation of total exposure and leverage. the competent authorities of the management company’s home Member State shall enclose with the documentation sent to the competent authorities of the management company’s host Member State an attestation that the management company has been authorised pursuant to the provisions of this Directive. Notwithstanding Articles 20 and 93. The competent authorities of the management company’s home Member State shall be responsible for supervising compliance with paragraph 1. the management company may then start business in the management company’s host Member State. (f) the calculation of the issue or redemption price. 3. A management company which pursues the activity of collective portfolio management on a cross-border basis by establishing a branch or in accordance with the freedom to provide services shall comply with the rules of the UCITS home Member State which relate to the constitution and functioning of the UCITS.May 2011 | Appendix page 27 . A management company which pursues activities under the freedom to provide services shall comply with the rules drawn up by the management company’s home Member State pursuant to Article 14.The competent authorities of the management company’s home Member State shall also communicate details of any applicable compensation scheme intended to protect investors. lending and uncovered sales. 3. (e) the valuation of assets and the accounting of the UCITS. including the prospectus. 2. including delegation arrangements. (i) the arrangements made for marketing. Those rules shall be no stricter than those applicable to management companies conducting their activities only in their home Member State. and errors in the calculation of the net asset value and related investor compensation. prudential rules and supervision. Article 19 1. Where the content of the information communicated in accordance with paragraph 1(b) is amended. | Cross-border distribution of UCITS . risk-management procedures. (c) investment policies and limits. (g) the distribution or reinvestment of the income. Where a management company wishes to pursue the activity of collective portfolio management as referred to in Annex II. namely the rules applicable to: (a) the setting up and authorisation of the UCITS. A management company which pursues the activity of collective portfolio management on a cross-border basis by establishing a branch or under the freedom to provide services shall comply with the rules of the management company’s home Member State which relate to the organisation of the management company. The competent authorities of the management company’s home Member State shall update the information contained in the attestation referred to in paragraph 2 and inform the competent authorities of the management company’s host Member State whenever there is a change in the scope of the management company’s authorisation or in the details of any restriction on the types of UCITS that the management company is authorised to manage. (h) the disclosure and reporting requirements of the UCITS.

except in the cases expressly referred to in this Directive. 3. Member States shall ensure that any management company authorised in a Member State is not subject to any additional requirement established in the UCITS home Member State in respect of the subject matter of this Directive.(j) the relationship with unit-holders. page 28 . and the obligations set out in the prospectus. and (o) the exercise of unit-holders’ voting rights and other unit-holders’ rights in relation to points (a) to (m). The management company shall decide and be responsible for adopting and implementing all the arrangements and organisational decisions which are necessary to ensure compliance with the rules which relate to the constitution and functioning of the UCITS and with the obligations set out in the fund rules or in the instruments of incorporation. 5. (n) the licensing and supervision fees regarding the UCITS. 6. If a management company already manages other UCITS of the same type in the UCITS home Member State. The competent authorities of the management company’s home Member State shall be responsible for supervising the adequacy of the arrangements and organisation of the management company so that the management company is in a position to comply with the obligations and rules which relate to the constitution and functioning of all the UCITS it manages. a management company which applies to manage a UCITS established in another Member State shall provide the competent authorities of the UCITS home Member State with the following documentation: (a) the written agreement with the depositary referred to in Articles 23 and 33. (l) the winding-up and liquidation of the UCITS.Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 . based on the attestation referred to in Articles 17 and 18. and (b) information on delegation arrangements regarding functions of investment management and administration referred to in Annex II. 4. which shall be consistent with the applicable law as referred to in paragraphs 1 and 3. Article 20 1. The competent authorities of the UCITS home Member State shall be responsible for supervising compliance with paragraphs 3 and 4. 2. or (c) the management company has not provided the documentation referred to in paragraph 1. The management company shall comply with the obligations set out in the fund rules or in the instruments of incorporation. and with the obligations set out in the prospectus. (k) the merging and restructuring of the UCITS. the competent authorities of the UCITS home Member State may ask the competent authorities of the management company’s home Member State for clarification and information regarding the documentation referred to in paragraph 1 and. Where applicable. In so far as it is necessary to ensure compliance with the rules for which they are responsible. 7. Without prejudice to Article 5. the competent authorities of the management company’s home Member State shall provide their opinion within 10 working days of the initial request. as to whether the type of UCITS for which authorisation is requested falls within the scope of the management company’s authorisation. (b) the management company is not authorised by the competent authorities of its home Member State to manage the type of UCITS for which authorisation is requested. 8. the content of the unit-holder register. reference to the documentation already provided shall be sufficient. The competent authorities of the UCITS home Member State may refuse the application of the management company only if: (a) the management company does not comply with the rules falling under their responsibility pursuant to Article 19. (m) where applicable.

or persists in breaching the legal or regulatory provisions. those authorities shall require the management company concerned to put an end to that breach and inform the competent authorities of the management company’s home Member State thereof. If. referred to in the same paragraph. Where the competent authorities of a management company’s host Member State ascertain that a management company that has a branch or provides services within its territory is in breach of one of the rules under their responsibility. in so far as necessary. after informing the competent authorities of the management company’s home Member State. including under Articles 98 and 99. 5. A management company’s host Member State may. the management company continues to refuse to provide the information requested by the management company’s host Member State pursuant to paragraph 2. the management company’s host Member State may require the management company to cease managing that UCITS. 4. take appropriate measures. the competent authorities of the management company’s host Member State may.May 2011 | Appendix . 3. If the management company concerned refuses to provide the management company’s host Member State with information falling under its responsibility. Member States shall ensure that within their territories it is possible to serve the legal documents necessary for those measures on management companies. in force in the management company’s host Member State. Where the service provided within the management company’s host Member State is the management of a UCITS. page 29 | Cross-border distribution of UCITS . Article 21 1. despite the measures taken by the competent authorities of the management company’s home Member State or because such measures prove to be inadequate or are not available in the Member State in question. Any subsequent material modifications of the documentation referred to in paragraph 1 shall be notified by the management company to the competent authorities of the UCITS home Member State. require all management companies with branches within its territory to report periodically on their activities pursued in that host Member State to the competent authorities of that host Member State. the competent authorities of the management company’s host Member State shall inform the competent authorities of the management company’s home Member State accordingly. to prevent that management company from initiating any further transaction within its territory. take all appropriate measures to ensure that the management company concerned provides the information requested by the management company’s host Member State pursuant to paragraph 2 or puts an end to the breach. 2. to provide the information necessary for the monitoring of their compliance with the rules under the responsibility of the management company’s host Member State that apply to them. at the earliest opportunity. A management company’s host Member State may require management companies pursuing business within its territory through the establishment of a branch or under the freedom to provide services. or fails to take the necessary steps to put an end to the breach referred to in paragraph 3. the competent authorities of the UCITS home Member State shall consult the competent authorities of the management company’s home Member State. The competent authorities of the management company’s home Member State shall. 4. for statistical purposes.Before refusing an application. Management companies shall ensure that the procedures and arrangements referred to in Article 15 enable the competent authorities of the UCITS home Member State to obtain directly from the management company the information referred to in this paragraph. Those requirements shall not be more stringent than those which the same Member State imposes on management companies authorised in that Member State for the monitoring of their compliance with the same standards. to prevent or penalise further irregularities and. The nature of those measures shall be communicated to the competent authorities of the management company’s host Member State.

A depositary’s liability as referred to in Article 24 shall not be affected by the fact that it has entrusted to a third party all or some of the assets in its safe-keeping. A depositary shall either have its registered office or be established in the UCITS home Member State. 4 or 5 the competent authorities of the management company’s host Member State may. Every two years the Commission shall issue a report on such cases. Member States shall inform the Commission of the number and type of cases in which they refuse authorisation under Article 17 or an application under Article 20 and of any measures taken in accordance with paragraph 5 of this Article. (d) ensure that in transactions involving a common fund’s assets any consideration is remitted to it within the usual time limits. the Commission may decide that the Member State in question must amend or abolish those measures. It shall also furnish sufficient financial and professional guarantees to be able effectively to pursue its business as depositary and meet the commitments inherent in that function. the competent authorities of the UCITS home Member State shall take appropriate measures to safeguard investors’ interests. 2. Article 23 1. 3. (e) ensure that a common fund’s income is applied in accordance with the applicable national law and the fund rules. (b) ensure that the value of units is calculated in accordance with the applicable national law and the fund rules. 2. The Commission and the competent authorities of the other Member States concerned shall be informed of such measures at the earliest opportunity. issue. After consulting the competent authorities of the Member States concerned. The assets of a common fund shall be entrusted to a depositary for safe-keeping. CHAPTER IV OBLIGATIONS REGARDING THE DEPOSITARY Article 22 1. Those measures may include decisions preventing the management company concerned from initiating any further transactions within its territory. in emergencies. 7. A depositary shall be an institution which is subject to prudential regulation and ongoing supervision. (c) carry out the instructions of the management company. Every such measure shall be subject to the right to apply to the courts in the Member State which adopted it. 9. The competent authorities of the management company’s home Member State shall consult the competent authorities of the UCITS home Member State before withdrawing the authorisation of the management company. page 30 . Every two years the Commission shall issue a report on such cases. A depositary shall: (a) ensure that the sale. Any measure adopted pursuant to paragraphs 4 or 5 involving measures or penalties shall be properly justified and communicated to the management company concerned. redemption and cancellation of units effected on behalf of a common fund or by a management company are carried out in accordance with the applicable national law and the fund rules. 8. repurchase. take any precautionary measures necessary to protect the interests of investors and others for whom services are provided.Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 . unless they conflict with the applicable national law or the fund rules. In such cases.6. Before following the procedure laid down in paragraphs 3.

The depositary shall enable the competent authorities of the UCITS home Member State to obtain. No company shall act as both management company and depositary. CHAPTER V OBLIGATIONS REGARDING INVESTMENT COMPANIES SECTION 1 Conditions for taking up business Article 27 Access to the business of an investment company shall be subject to prior authorisation to be granted by the competent authorities of the investment company’s home Member State. in accordance with the national law of the UCITS home Member State. Member States shall determine which of the categories of institutions referred to in paragraph 2 shall be eligible to be depositaries. all information that the depositary has obtained while discharging its duties and that is necessary for the competent authorities to supervise the UCITS compliance with this Directive. Those measures. the management company and the depositary shall act independently and solely in the interest of the unit-holders. Where the management company’s home Member State is not the UCITS home Member State.3. Article 26 The law or the fund rules shall lay down the conditions for the replacement of the management company and the depositary and rules to ensure the protection of unit-holders in the event of such replacement. 2. The registered office of the investment company shall be situated in the investment company’s home Member State. 4. In the context of their respective roles.May 2011 | Appendix page 31 . Article 25 1. regulations or administrative provisions which are relevant for depositaries in the UCITS home Member State. Liability to unit-holders may be invoked directly or indirectly through the management company. the management company and the unit-holders. be liable to the management company and the unit-holders for any loss suffered by them as a result of its unjustifiable failure to perform its obligations or its improper performance of them. designed to amend non-essential elements of this Directive by supplementing it. including the particulars that need to be included in the standard agreement to be used by the depositary and the management company in accordance with paragraph 5. shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 112(2). the depositary shall sign a written agreement with the management company regulating the flow of information deemed necessary to allow it to perform the functions set out in Article 22 and in other laws. depending on the legal nature of the relationship between the depositary. The Commission may adopt implementing measures in relation to the measures to be taken by a depositary in order to fulfil its duties regarding a UCITS managed by a management company established in another Member State. Article 24 A depositary shall. on request. Member States shall determine the legal form which an investment company must take. 6. 5. | Cross-border distribution of UCITS .

Where an investment company has not designated a management company. the following conditions shall apply: (a) the authorisation must not be granted unless the application for authorisation is accompanied by a programme of operations setting out. the organisational structure of the investment company. the investment company shall be informed. (b) has obtained the authorisation by making false statements or by any other irregular means. and (c) where close links exist between the investment company and other natural or legal persons. 3. The competent authorities of the investment company’s home Member State may withdraw the authorisation issued to an investment company subject to this Directive only where that company: (a) does not make use of the authorisation within 12 months. the competent authorities of the investment company’s home Member State shall not grant authorisation to an investment company that has not designated a management company unless the investment company has a sufficient initial capital of at least EUR 300 000. Without prejudice to other conditions of general application laid down by national law. under the law or the instruments of incorporation.Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 . An investment company may start business as soon as authorisation has been granted.Article 28 No investment company may engage in activities other than those referred to in Article 1(2). when an investment company has not designated a management company authorised pursuant to this Directive. or difficulties involved in their enforcement. 2. the conduct of an investment company’s business must be decided by at least two persons meeting such conditions. the competent authorities must grant authorisation only if those close links do not prevent the effective exercise of their supervisory functions. prevent the effective exercise of their supervisory functions. Article 29 1. whether or not authorisation has been granted. (d) has seriously or systematically infringed the provisions adopted pursuant to this Directive. page 32 . and ‘directors’ shall mean those persons who. In addition. to that end: the names of the directors and of every person succeeding them in office must be communicated forthwith to the competent authorities. (c) no longer fulfils the conditions under which authorisation was granted. The competent authorities of the investment company’s home Member State shall require investment companies to provide them with the information they need. unless the Member State concerned has provided for authorisation to lapse in such cases. (b) the directors of the investment company must be of sufficiently good repute and be sufficiently experienced also in relation to the type of business pursued by the investment company and. represent the investment company. or who effectively determine the policy of the company. regulations or administrative provisions of a third country governing one or more natural or legal persons with which the investment company has close links. or (e) falls within any of the cases where national law provides for withdrawal. expressly renounces the authorisation or has ceased the activity covered by this Directive more than six months previously. at least. 4. The competent authorities of the investment company’s home Member State shall also refuse authorisation if the laws. within six months of the submission of a complete application. Reasons shall be given whenever an authorisation is refused.

4. Article 31 Each investment company’s home Member State shall draw up prudential rules which shall be observed at all times by investment companies that have not designated a management company authorised pursuant to this Directive. issue. the competent authorities of the investment company’s home Member State. Articles 76. control and safeguard arrangements for electronic data processing and adequate internal control mechanisms including. 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. A depositary’s liability as referred to in Article 34 shall not be affected by the fact that it has entrusted to a third party all or some of the assets in its safe-keeping. that each transaction involving the company may be reconstructed according to its origin. An investment company’s home Member State may decide that investment companies established on its territory which market at least 80 % of their units through one or more stock exchanges designated in their instruments of incorporation are not required to have depositaries within the meaning of this Directive provided that their units are admitted to official listing on the stock ex| Cross-border distribution of UCITS . under any circumstances. and (c) that an investment company’s income is applied in accordance with the law and its instruments of incorporation.May 2011 | Appendix page 33 . Investment companies shall manage only assets of their own portfolio and shall not. in particular. A depositary shall ensure the following: (a) that the sale. 5. In particular. SECTION 3 Obligations regarding the depositary Article 32 1. (b) that in transactions involving an investment company’s assets any consideration is remitted to it within the usual time limits. shall require that the company has sound administrative and accounting procedures. 2. the parties to it. redemption and cancellation of units effected by or on behalf of an investment company are carried out in accordance with the law and with the investment company’s instruments of incorporation. 84 and 85 shall not apply to such investment companies. at least. The assets of an investment company shall be entrusted to a depositary for safe-keeping. repurchase. having regard also to the nature of the investment company. 3. receive any mandate to manage assets on behalf of a third party. 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.‘management company’ means ‘investment company’. However. For the purpose of the Articles referred to in the first paragraph.SECTION 2 Operating conditions Article 30 Articles 13 and 14 shall apply mutatis mutandis to investment companies that have not designated a management company authorised pursuant to this Directive. the rules for the valuation of such investment companies’ assets shall be stated in the applicable national law or in their instruments of incorporation. An investment company’s home Member State may decide that investment companies established on its territory which market their units exclusively through one or more stock exchanges on which their units are admitted to official listing are not required to have depositaries within the meaning of this Directive. its nature.

regulations or administrative provisions which are relevant for depositaries in the UCITS home Member State. 6. Member States shall determine which of the categories of institutions referred to in paragraph 2 shall be eligible to be depositaries. state in their instruments of incorporation the methods of calculation of the net asset values of their units. on request. 3. Investment companies referred to in this paragraph and in paragraph 4. including the particulars that need to be included in the standard agreement to be used by the depositary and the management company in accordance with paragraph 5. communicate them to the competent authorities at least twice a week and publish them twice a month. and that any transactions which such an investment company may effect outwith stock exchanges are effected at stock exchange prices only. all information that the depositary has obtained while discharging its duties and that is necessary for the competent authorities to supervise compliance of the UCITS with this Directive. (b) intervene on the market to prevent the stock exchange values of their units from deviating by more than 5 % from their net asset values. shall. A Member State shall avail itself of the derogation provided for in the first subparagraph only if it considers that unit-holders have protection equivalent to that of unit-holders in UCITS which have depositaries within the meaning of this Directive. The Commission may adopt implementing measures in relation to the measures to be taken by a depositary in order to fulfil its duties regarding a UCITS managed by a management company established in another Member State. Where the management company’s home Member State is not the UCITS home Member State. (c) etablish the net asset values of their units. the depositary shall sign a written agreement with the management company regulating the flow of information deemed necessary to allow it to perform the functions set out in Article 32 and in other laws. A depositary shall be an institution which is subject to prudential regulation and ongoing supervision. The depositary shall enable the competent authorities of the UCITS home Member State to obtain.Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 . 2. The instruments of incorporation of an investment company shall specify the stock exchange in the country of marketing the prices on which shall determine the prices at which that investment company will effect any transactions outwith stock exchanges in that country. Those measures. page 34 . 5. At least twice a month. 4.changes of those Member States within the territories of which the units are marketed. Member States shall inform the Commission of the identities of the investment companies benefiting from the derogations provided for in paragraphs 4 and 5. the auditor shall ensure that the investment company’s assets are invested in accordance with the rules laid down by law and the instruments of incorporation of the investment company. Article 33 1. On such occasions. designed to amend non-essential elements of this Directive by supplementing it. 6. A depositary shall either have its registered office or be established in the same Member State as that of the investment company. in particular: (a) in the absence of national law to this effect. an independent auditor shall ensure that the calculation of the value of units is effected in accordance with the law and the instruments of incorporation of the investment company. shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 112(2).

they have verified compliance of the particulars set out in points (a). The merger techniques used for cross-border mergers as defined in Article 2(1)(q) must be provided for under the laws of the merging UCITS home Member State. in accordance with Article 41.Article 34 A depositary shall. | Cross-border distribution of UCITS . CHAPTER VI MERGERS OF UCITS SECTION 1 Principle. Article 35 1. subject to the conditions set out in this Chapter and irrespective of the manner in which UCITS are constituted under Article 1(3). The merger techniques used for domestic mergers as defined in Article 2(1)(r) must be provided for under the laws of the Member State. (c) a statement by each of the depositaries of the merging and the receiving UCITS confirming that. 2. if established in another Member State. Mergers shall be subject to prior authorisation by the competent authorities of the merging UCITS home Member State. 2. of the receiving UCITS. referred to in Article 78. in accordance with the national law of the investment company’s home Member State. Article 38 1. authorisation and approval Article 37 For the purposes of this Chapter. The merging UCITS shall provide the following information to the competent authorities of its home Member State: (a) the common draft terms of the proposed merger duly approved by the merging UCITS and the receiving UCITS. (f) and (g) of Article 40(1) with the requirements of this Directive and the fund rules or instruments of incorporation of their respective UCITS. No company shall act as both investment company and depositary. or in a language approved by those competent authorities. Article 36 The law or the instruments of incorporation of the investment company shall lay down the conditions for the replacement of the depositary and rules to ensure the protection of unit-holders in the event of such replacement.May 2011 | Appendix page 35 . or its improper performance of them. Article 39 1. 2. in which the UCITS are established. allow for cross-border and domestic mergers as defined in Article 2(1)(q) and (r) in accordance with one or more of the merger techniques provided for in Article 2(1)(p). Member States shall. In carrying out its role as depositary. That information shall be provided in such a manner as to enable the competent authorities of both the merging and the receiving UCITS home Member State to read them in the official language or one of the official languages of that Member State or those Member States. and (d) the information on the proposed merger that the merging and the receiving UCITS intend to provide to their respective unit-holders. (b) an up-to-date version of the prospectus and the key investor information. the depositary shall act solely in the interests of the unit-holders. a UCITS shall include investment compartments thereof. be liable to the investment company and the unit-holders for any loss suffered by them as a result of its unjustifiable failure to perform its obligations.

3. Once the file is complete, the competent authorities of the merging UCITS home Member State shall immediately transmit copies of the information referred to in paragraph 2 to the competent authorities of the receiving UCITS home Member State. The competent authorities of the merging and the receiving UCITS home Member State shall, respectively, consider the potential impact of the proposed merger on unit-holders of the merging and the receiving UCITS to assess whether appropriate information is being provided to unit-holders. If the competent authorities of the merging UCITS home Member State consider it necessary, they may require, in writing, that the information to unit-holders of the merging UCITS be clarified. If the competent authorities of the receiving UCITS home Member State consider it necessary, they may require, in writing, and no later than 15 working days of receipt of the copies of the complete information referred to in paragraph 2, that the receiving UCITS modify the information to be provided to its unit-holders. In such a case, the competent authorities of the receiving UCITS home Member State shall send an indication of their dissatisfaction to the competent authorities of the merging UCITS home Member State. They shall inform the competent authorities of the merging UCITS home Member State 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 competent authorities of the merging UCITS home Member State shall authorise the proposed merger if the following conditions are met: (a) the proposed merger complies with all of the requirements of Articles 39 to 42; (b) the receiving UCITS has been notified, in accordance with Article 93, to market its units in all Member States where the merging UCITS is either authorised or has been notified to market its units in accordance with Article 93; and (c) the competent authorities of the merging and 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 the fourth subparagraph of paragraph 3. 5. If the competent authorities of the merging UCITS home Member State consider that the file is not complete, they shall request additional information within 10 working days of receiving the information referred to in paragraph 2. The competent authorities of the merging UCITS home Member State shall inform the merging UCITS, within 20 working days of submission of the complete information, in accordance with paragraph 2, whether or not the merger has been authorised. The competent authorities of the merging UCITS home Member State shall also inform the competent authorities of the receiving UCITS home Member State of their decision. 6. Member States may, in accordance with the second subparagraph of Article 57(1), provide for a derogation from Articles 52 to 55 for receiving UCITS.

Article 40
1. Member States shall require that the merging and the receiving UCITS draw up common draft terms of merger. The common draft terms of merger shall set out the following particulars: (a) an identification of the type of merger and of the UCITS involved; (b) the background to and rationale for the proposed merger; (c) the expected impact of the proposed merger on the unit-holders of both the merging and the receiving UCITS; (d) 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 Article 47(1); (e) the calculation method of the exchange ratio; (f) the planned effective date of the merger; (g)the rules applicable, respectively, to the transfer of assets and the exchange of units; and

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(h) in the case of a merger pursuant to point (p)(ii) of Article 2(1) and, where applicable, point (p)(iii) of Article 2(1), the fund rules or instruments of incorporation of the newly constituted receiving UCITS. The competent authorities shall not require that any additional information is included in the common draft terms of mergers. 2. The merging UCITS and the receiving UCITS may decide to include further items in the common draft terms of merger.

SECTION 2 Third-party control, information of unit-holders and other rights of unit-holders

Article 41
Member States shall require that the depositaries of the merging and of the receiving UCITS verify the conformity of the particulars set out in points (a), (f) and (g) of Article 40(1) with the requirements of this Directive and the fund rules or instruments of incorporation of their respective UCITS

Article 42
1. The law of the merging UCITS home Member States shall entrust either a depositary or an independent auditor, approved in accordance with Directive 2006/43/EC of the European Parliament and of the Council of 17 May 2006 on statutory audits of annual accounts and consolidated accounts(1) to validate the following: (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 Article 47(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 Article 47(1). 2. The statutory auditors of the merging UCITS or the statutory auditor of the receiving UCITS shall be considered independent auditors for the purposes of paragraph 1. 3. A copy of the reports of the independent auditor, or, where applicable, the depositary shall be made available on request and free of charge to the unit-holders of both the merging UCITS and the receiving UCITS and to their respective competent authorities.

Article 43
1. Member States shall require merging and receiving UCITS to provide appropriate and accurate information on the proposed merger to their respective unit-holders so as to enable them to make an informed judgement of the impact of the proposal on their investment. 2. That information shall be provided to unit-holders of the merging and of the receiving UCITS only after the competent authorities of the merging UCITS home Member State have authorised the proposed merger under Article 39. It shall be provided at least 30 days before the last date for requesting repurchase or redemption or, where applicable, conversion without additional charge under Article 45(1). 3. The information to be provided to unit-holders of the merging 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 Articles 44 and 45.

(1) OJ L 157, 9.6.2006, p. 87.

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It shall include the following: (a) the background to and the rationale for the proposed merger; (b) the possible impact of the proposed merger on unit-holders, including but not limited to any material differences in respect of 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; (c) any specific rights unit-holders have in relation to the proposed merger, including but not limited to the right to obtain additional information, the right to obtain a copy of the report of the independent auditor or the depositary on request, and the right to request the repurchase or redemption or, where applicable, the conversion of their units without charge as specified in Article 45(1) and the last date for exercising that right; (d) the relevant procedural aspects and the planned effective date of the merger; and (e) a copy of the key investor information, referred to in Article 78, of the receiving UCITS. 4. If the merging or the receiving UCITS has been notified in accordance with Article 93, the information referred to in paragraph 3 shall be provided in the official language, or one of the official languages, of the relevant UCITS host Member State, or in a language approved by its competent authorities. The UCITS required to provide the information shall be responsible for producing the translation. That translation shall faithfully reflect the content of the original. 5. The Commission may adopt implementing measures specifying the detailed content, format and method by which to provide the information referred to in paragraphs 1 and 3. Those measures, designed to amend non-essential elements of this Directive by supplementing it, shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 112(2).

Article 44
Where the national laws of Member States require approval by the unit-holders of mergers between UCITS, Member States shall ensure that such approval does not require more than 75 % of the votes actually cast by unit-holders present or represented at the general meeting of unit-holders. The first paragraph shall be without prejudice to any presence quorum provided for under national laws. Member States shall impose neither more stringent presence quorums for cross-border than for domestic mergers nor more stringent presence quorums for UCITS mergers than for mergers of corporate entities.

Article 45
1. The laws of Member States shall provide that unit-holders of both the merging and the receiving UCITS have the right to request, without any charge other than those retained by the UCITS to meet disinvestment costs, the repurchase or redemption of their units or, where possible, to convert them into units in another UCITS with similar investment policies and managed by the same management company or by any other company with which the management company is linked by common management or control, or by a substantial direct or indirect holding. That right shall become effective from the moment that the unit-holders of the merging UCITS and those of the receiving UCITS, have been informed of the proposed merger in accordance with Article 43 and shall cease to exist five working days before the date for calculating the exchange ratio referred to in Article 47(1). 2. Without prejudice to paragraph 1, for mergers between UCITS and by way of derogation from Article 84(1), Member States may allow the competent authorities to require or to allow the temporary suspension of the subscription, repurchase or redemption of units provided that such suspension is justified for the protection of the unit-holders.

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A merger effected in accordance with point (p)(i) of Article 2(1) shall have the following consequences: (a) all the assets and liabilities of the merging UCITS are transferred to the receiving UCITS or. where applicable. and (c) the merging UCITS continues to exist until the liabilities have been discharged. or to any of their unit-holders. A merger which has taken effect as provided for in paragraph 1 shall not be declared null and void. 4. 2. where applicable. where applicable. the depositary of the receiving UCITS. where applicable. and (c) the merging UCITS cease to exist on the entry into effect of the merger. and (c) the merging UCITS cease to exist on the entry into effect of the merger. Member States shall ensure that any legal. For domestic mergers. (b) the unit-holders of the merging UCITS become unit-holders of the receiving UCITS and. those dates are after the approval of the merger by unit-holders of the receiving UCITS or the merging UCITS. (b) the unit-holders of the merging UCITS become unit-holders of the newly constituted receiving UCITS and. 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. Article 48 1. For cross-border mergers. where applicable. where applicable. Where the receiving UCITS has not designated a management company. they are entitled to a cash payment not exceeding 10 % of the net asset value of their units in the merging UCITS. Article 47 1. advisory or administrative costs associated with the preparation and the completion of the merger shall not be charged to the merging or the receiving UCITS. where applicable. the laws of the receiving UCITS home Member State shall determine those dates. the laws of the Member States shall determine the date on which a merger takes effect as well as the date for calculating the exchange ratio of units of the merging UCITS into units of the receiving UCITS and. they are entitled to a cash payment not exceeding 10 % of the net asset value of their units in the merging UCITS. where applicable. A merger effected in accordance with point (p)(ii) of Article 2(1) shall have the following consequences: (a) all the assets and liabilities of the merging UCITS are transferred to the newly constituted receiving UCITS or. Member States shall provide for the establishment of a procedure whereby the management company of the receiving UCITS confirms to the depositary of the receiving UCITS that transfer of assets and. and shall be notified to the competent authorities of the home Member States of the receiving and the merging UCITS. to the depositary of the receiving UCITS. it shall give that confirmation to the depositary of the receiving UCITS. liabilities is complete. 2. | Cross-border distribution of UCITS . (b) the unit-holders of the merging UCITS become unit-holders of the receiving UCITS.May 2011 | Appendix page 39 . to the depositary of the receiving UCITS. A merger effected in accordance with point (p)(iii) of Article 2(1) shall have the following consequences: (a) the net assets of the merging UCITS are transferred to the receiving UCITS or. Member States shall ensure that.SECTION 3 Costs and entry into effect Article 46 Except in cases where UCITS have not designated a management company. for determining the relevant net asset value for cash payments. 3. 3.

CHAPTER VII
OBLIGATIONS CONCERNING THE INVESTMENT POLICIES OF UCITS

Article 49
Where UCITS comprise more than one investment compartment, each compartment shall be regarded as a separate UCITS for the purposes of this Chapter.

Article 50
1. The investments of a UCITS shall comprise only one or more of the following: (a) transferable securities and money market instruments admitted to or dealt in on a regulated market as defined in Article 4(1) (14) of Directive 2004/39/EC; (b) transferable securities and money market instruments dealt in on another regulated market in a Member State, which operates regularly and is recognised and open to the public; (c) transferable securities and money market instruments admitted to 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 point (i) is secured within a year of issue; (e) units of UCITS authorised according to this Directive or other collective investment undertakings within the meaning of Article 1(2) (a) and (b), 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 competent authorities of the UCITS home Member State to be equivalent to that laid down in Community law, and that cooperation between authorities is sufficiently ensured; (ii) the level of protection for unit-holders in the other collective investment undertakings is equivalent to that provided for unit-holders in a UCITS, and in particular that the rules on asset segregation, borrowing, lending, and uncovered sales of transferable securities and money market instruments are equivalent to the requirements of this Directive; (iii) the business of the other collective investment undertakings is reported in half-yearly and annual reports to enable an assessment to be made of the assets and liabilities, income and operations over the reporting period; and (iv) no more than 10 % of the assets of the UCITS or of the other collective investment undertakings, whose acquisition is contemplated, can, according to their fund rules or instruments of incorporation, be invested in aggregate in units of other UCITS or other collective investment undertakings; (f) deposits with credit institutions which are repayable on demand or have the right to be withdrawn, and maturing in no more than 12 months, provided that the credit institution has its registered office in a Member State or, if the credit institution has its registered office in a third country, provided that it is subject to prudential rules considered by the competent authorities of the UCITS home Member State as equivalent to those laid down in Community law; (g) financial derivative instruments, including equivalent cash-settled instruments, dealt in on a regulated market referred to in points (a), (b) and (c) or financial derivative instruments dealt in over-the-counter (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 fund rules or instruments of incorporation;

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(ii) the counterparties to OTC derivative transactions are institutions subject to prudential supervision, and belonging to the categories approved by the competent authorities of the UCITS home Member State; and (iii) the OTC derivatives are subject to reliable and verifiable valuation on a daily basis and can be sold, liquidated or closed by an 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, which fall under Article 2(1)(o), if the issue or issuer of such instruments is itself regulated for the purpose of protecting investors and savings, provided that they are: (i) issued or guaranteed by a central, regional or local authority or central bank of a Member State, the European Central Bank, the Community or the European Investment Bank, a third country or, in the case of a Federal State, by one of the members making up the federation, or by a public international body to which one or more Member States belong; (ii) issued by an undertaking any securities of which are dealt in on regulated markets referred to in points (a), (b) or (c); (iii) issued or guaranteed by an establishment subject to prudential supervision, in accordance with criteria defined by Community law, or by an establishment which is subject to and complies with prudential rules considered by the competent authorities to be at least as stringent as those laid down by Community law; or (iv) issued by other bodies belonging to the categories approved by the competent authorities of the UCITS home Member State provided that investments in such instruments are subject to investor protection equivalent to that laid down in points (i), (ii) or (iii) and provided that the issuer is a company whose capital and reserves amount to at least EUR 10 000 000 and which presents and publishes its annual accounts in accordance with Fourth Council Directive 78/660/EEC of 25 July 1978 based on Article 54(3)(g) of the Treaty on the annual accounts of certain types of companies(1), is an entity which, within a group of companies which includes one or several listed companies, is dedicated to the financing of the group or is an entity which is dedicated to the financing of securitisation vehicles which benefit from a banking liquidity line. 2. A UCITS shall not, however: (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. UCITS may hold ancillary liquid assets. 3. An investment company may acquire movable or immovable property which is essential for the direct pursuit of its business.

Article 51
1. A management or investment company shall employ a risk-management process which enables it to monitor and measure at any time the risk of the positions and their contribution to the overall risk profile of the portfolio. It shall employ a process for accurate and independent assessment of the value of OTC derivatives. It shall communicate to the competent authorities of its home Member State regularly in regard to the types of derivative instruments, the underlying risks, the quantitative limits and the methods which are chosen in order to estimate the risks associated with transactions in derivative instruments regarding each managed UCITS. 2. Member States may authorise UCITS to employ techniques and instruments relating to transferable securities and money market instruments under the conditions and within the limits which they lay down provided that such techniques and instruments are used for the purpose of efficient portfolio management. When those operations concern the use of derivative instruments, the conditions and limits shall conform to the provisions laid down in this Directive. Under no circumstances shall those operations cause the UCITS to diverge from its investment objectives as laid down in the UCITS’ fund rules, instruments of incorporation or prospectus.
(1) OJ L 222, 14.8.1978, p. 11.

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3. A UCITS shall ensure that its global exposure relating to derivative instruments does not exceed the total net value of its portfolio. The exposure is calculated taking into account the current value of the underlying assets, the counterparty risk, future market movements and the time available to liquidate the positions. This shall also apply to the third and fourth subparagraphs. A UCITS may invest, as a part of its investment policy and within the limit laid down in Article 52(5), in financial derivative instruments provided that the exposure to the underlying assets does not exceed in aggregate the investment limits laid down in Article 52. Member States may provide that, when a UCITS invests in index-based financial derivative instruments, those investments are not required to be combined for the purposes of the limits laid down in Article 52. When transferable securities or money market instruments embed a derivative, the derivative shall be taken into account when complying with the requirements of this Article. 4. Without prejudice to Article 116, the Commission shall adopt, by 1 July 2010, implementing measures specifying the following: (a) criteria for assessing the adequacy of the risk management process employed by the management company in accordance with the first subparagraph of paragraph 1; (b) detailed rules regarding the accurate and independent assessment of the value of OTC derivatives; and (c) detailed rules regarding the content of and procedure to be followed for communicating the information referred to in the third subparagraph of paragraph 1 to the competent authorities of the management company’s home Member State. Those measures, designed to amend non-essential elements of this Directive by supplementing it, shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 112(2).

Article 52
1. A UCITS shall invest no more than: (a) 5 % of its assets in transferable securities or money market instruments issued by the same body; or (b) 20 % of its assets in deposits made with the same body. The risk exposure to a counterparty of the UCITS in an OTC derivative transaction shall not exceed either: (a) 10 % of its assets when the counterparty is a credit institution referred to in Article 50(1)(f); or (b) 5 % of its assets, in other cases. 2. Member States may raise the 5 % limit laid down in the first subparagraph of paragraph 1 to a maximum of 10 %. If they do so, however, the total value of the transferable securities and the money market instruments held by the UCITS in the issuing bodies in each of which it invests more than 5 % of its assets shall not exceed 40 % of the value of its assets. That limitation shall not apply to deposits or OTC derivative transactions made with financial institutions subject to prudential supervision. Notwithstanding the individual limits laid down in paragraph 1, a UCITS shall not combine, where this would lead to investment of more than 20 % of its assets in a single body, any of the following: (a) investments in transferable securities or money market instruments issued by that body; (b) deposits made with that body; or (c) exposures arising from OTC derivative transactions undertaken with that body. 3. Member States may raise the 5 % limit laid down in the first subparagraph of paragraph 1 to a maximum of 35 % if the transferable securities or money market instruments are issued or guaranteed by a Member State, by its local authorities, by a third country or by a public international body to which one or more Member States belong. 4. Member States may raise the 5 % limit laid down in the first subparagraph of paragraph 1 to a maximum of 25 % where bonds 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, would be used on a priority basis for the reimbursement of the principal and payment of the accrued interest.

page 42 - Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009

The competent authorities of the UCITS home Member State shall grant such a derogation only if they consider that unit-holders in the UCITS have protection equivalent to that of unit-holders in UCITS complying with the limits laid down in Article 52.Member States may raise the limit laid down in paragraph 1 to a maximum of 35 % where that proves to be justified by exceptional market conditions in particular in regulated markets where certain transferable securities or money market instruments are highly dominant. 2. Companies which are included in the same group for the purposes of consolidated accounts. Without prejudice to the limits laid down in Article 56. shall be regarded as a single body for the purpose of calculating the limits contained in this Article. or a public international body to which one or more Member States belong. and (c) it is published in an appropriate manner. the total value of these investments shall not exceed 80 % of the value of the assets of the UCITS. Such a UCITS shall hold securities from at least six different issues. Member States may allow cumulative investment in transferable securities and money market instruments within the same group up to a limit of 20 %. A notice specifying the status of the guarantees offered shall be attached to those lists. and thus investments in transferable securities or money market instruments issued by the same body or in deposits or derivative instruments made with this body carried out in accordance with paragraphs 1 to 4 shall not exceed in total 35 % of the assets of the UCITS. Member States may raise the limits laid down in Article 52 to a maximum of 20 % for investment in shares or debt securities issued by the same body when.May 2011 | Appendix page 43 . as defined in Directive 83/349/EEC or in accordance with recognised international accounting rules. The transferable securities and money market instruments referred to in paragraphs 3 and 4 shall not be taken into account for the purpose of applying the limit of 40 % referred to in paragraph 2. 2. Article 54 1. The limits provided for in paragraphs 1 to 4 shall not be combined.Where a UCITS invests more than 5 % of its assets in the bonds referred to in the first subparagraph which are issued by a single issuer. Such communications may be the subject of exchanges of views within the European Securities Committee referred to in Article 112(1). (b) the index represents an adequate benchmark for the market to which it refers. to issue bonds complying with the criteria set out in this Article. in accordance with the laws and supervisory arrangements mentioned in that subparagraph. local authorities. The Commission shall immediately forward that information to the other Member States together with any comments which it considers appropriate and shall make the information available to the public. Member States shall send to the Commission a list of the categories of bonds referred to in the first subparagraph together with the categories of issuers authorised. Such fund rules or instruments of incorporation shall be approved by the competent authorities. a third country. Article 53 1. or public international bodies issuing or guaranteeing securities in which they intend to invest more than 35 % of their assets. according to the fund rules or instruments of incorporation. but securities from any single issue shall not account for more than 30 % of its total assets. 5. By way of derogation from Article 52. on the following basis: (a) its composition is sufficiently diversified. | Cross-border distribution of UCITS . one or more of its local authorities. The UCITS referred to in paragraph 1 shall make express mention in the fund rules or in the instruments of incorporation of the investment company of the Member States. The investment up to that limit shall be permitted only for a single issuer. Member States may authorise UCITS to invest in accordance with the principle of risk-spreading up to 100 % of their assets in different transferable securities and money market instruments issued or guaranteed by a Member State. the aim of the UCITS’ investment policy is to replicate the composition of a certain stock or debt securities index which is recognised by the competent authorities.

by the same management company or by any other company with which the management company is linked by common management or control. directly or by delegation. Member States may raise that limit to a maximum of 20 %.Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 . 30 % of the assets of the UCITS. A UCITS may acquire no more than: (a) 10 % of the non-voting shares of a single issuing body. provided that no more than 10 % of its assets are invested in units of a single UCITS or other collective investment undertaking. (c) 25 % of the units of a single UCITS or other collective investment undertaking within the meaning of Article 1(2)(a) and (b). Member States shall take account of existing rules defining the principle stated in the first subparagraph in the law of other Member States.3. An investment company or a management company acting in connection with all of the common funds which it manages and which fall within the scope of this Directive shall not acquire any shares carrying voting rights which would enable it to exercise significant influence over the management of an issuing body. (b) transferable securities and money market instruments issued or guaranteed by a third country. Investments made in units of collective investment undertakings other than UCITS shall not exceed. or the net amount of the securities in issue. or public international bodies in the securities of which it intends to invest or has invested more than 35 % of its assets. A UCITS may acquire the units of UCITS or other collective investment undertakings referred to in Article 50(1)(e). A Member State may waive the application of paragraphs 1 and 2 as regards: (a) transferable securities and money market instruments issued or guaranteed by a Member State or its local authorities. in aggregate. Pending further coordination. cannot be calculated. provide that the assets of the respective UCITS or other collective investment undertakings are not required to be combined for the purposes of the limits laid down in Article 52. 2. page 44 . local authorities. Each UCITS referred to in paragraph 1 shall include a prominent statement in its prospectus and marketing communications drawing attention to such authorisation and indicating the Member States. Member States may. or (d) 10 % of the money market instruments of a single issuing body. that management company or other company shall not charge subscription or redemption fees on account of the UCITS’ investment in the units of such other UCITS or collective investment undertakings. The limits laid down in points (b). (c) transferable securities and money market instruments issued by a public international body to which one or more Member States belong. Article 56 1. Article 55 1. (b) 10 % of the debt securities of a single issuing body. (c) and (d) may be disregarded at the time of acquisition if at that time the gross amount of the debt securities or of the money market instruments. 2. or by a substantial direct or indirect holding. 3. Where a UCITS invests in the units of other UCITS or collective investment undertakings that are managed. 3. where a UCITS has acquired units of another UCITS or collective investment undertakings. It shall indicate in its annual report the maximum proportion of management fees charged both to the UCITS itself and to the other UCITS or collective investment undertaking in which it invests. A UCITS that invests a substantial proportion of its assets in other UCITS or collective investment undertakings shall disclose in its prospectus the maximum level of the management fees that may be charged both to the UCITS itself and to the other UCITS or collective investment undertakings in which it intends to invest.

in accordance with Article 50(1)(g) and Article 51(2) and (3). where under the legislation of that country such a holding represents the only way in which the UCITS can invest in the securities of issuing bodies of that country. or (b) the master UCITS’ potential maximum global exposure to financial derivative instruments provided for in the master UCITS’ fund rules or instruments of incorporation in proportion to the feeder UCITS investment into the master UCITS. which has been approved to invest. that UCITS shall adopt as a priority objective for its sales transactions the remedying of that situation. (c) movable and immovable property which is essential for the direct pursuit of the business. by way of derogation from Article 1(2)(a). among its unit-holders. which: (a) has. Member States may allow recently authorised UCITS to derogate from Articles 52 to 55 for six months following the date of their authorisation. A feeder UCITS is a UCITS.May 2011 | Appendix page 45 . For the purposes of compliance with Article 51(3). The derogation referred to in point (d) of the first subparagraph of this paragraph shall apply only if in its investment policy the company from the third country complies with the limits laid down in Articles 52 and 55 and in paragraphs 1 and 2 of this Article. A master UCITS is a UCITS. Articles 50. if the feeder UCITS is an investment company. 2. If the limits referred to in paragraph 1 are exceeded for reasons beyond the control of a UCITS or as a result of the exercise of subscription rights. taking due account of the interests of its unit-holders. or (e) shares held by an investment company or investment companies in the capital of subsidiary companies pursuing only the business of management. (b) financial derivative instruments. Where the limits set in Articles 52 and 55 are exceeded. at least 85 % of its assets in units of another UCITS or investment compartment thereof (the master UCITS). or an investment compartment thereof. 52 and 55. or an investment compartment thereof. Article 57 shall apply mutatis mutandis. 3. 2. Article 57 1. and Article 56(2)(c). While ensuring observance of the principle of risk spreading. UCITS are not required to comply with the limits laid down in this Chapter when exercising subscription rights attaching to transferable securities or money market instruments which form part of their assets. at least one feeder UCITS.(d) shares held by a UCITS in the capital of a company incorporated in a third country investing its assets mainly in the securities of issuing bodies having their registered offices in that country. CHAPTER VIII MASTER-FEEDER STRUCTURES SECTION 1 Scope and approval Article 58 1. which may be used only for hedging purposes. | Cross-border distribution of UCITS . advice or marketing in the country where the subsidiary is established. A feeder UCITS may hold up to 15 % of its assets in one or more of the following: (a) ancillary liquid assets in accordance with the second subparagraph of Article 50(2). in regard to the repurchase of units at unitholders’ request exclusively on its or their behalf. the feeder UCITS shall calculate its global exposure related to financial derivative instruments by combining its own direct exposure under point (b) of the first subparagraph with either: (a) the master UCITS’ actual exposure to financial derivative instruments in proportion to the feeder UCITS’ investment into the master UCITS.

4. to all unit-holders. its depositary and its auditor. Chapter XI and the second subparagraph of Article 108(1) shall not apply. or an investment compartment thereof. Documents shall be provided by the feeder UCITS in the official language. comply with all the requirements set out in this Chapter. Article 1(2)(a) and Article 3(b) shall not apply. giving the master UCITS the choice whether or not to raise capital from other investors. The feeder UCITS shall not invest in excess of the limit applicable under Article 55(1) in units of that master UCITS until the agreement referred to in the first subparagraph has become effective. which fulfils the conditions set out in Article 58(3)(b) and (c). of the feeder UCITS home Member State or in a language approved by its competent authorities. but only has one or more feeder UCITS in that Member State. Member States shall require that the master UCITS provide the feeder UCITS with all documents and information necessary for the latter to meet the requirements laid down in this Directive. or one of the official languages. For this purpose. Where the feeder UCITS is established in a Member State other than the master UCITS home Member State. SECTION 2 Common provisions for feeder and master UCITS Article 60 1.(b) is not itself a feeder UCITS. and (f) if the master UCITS and the feeder UCITS have different auditors. the feeder UCITS shall provide to the competent authorities of its home Member State the following documents: (a) the fund rules or instruments of incorporation of the feeder UCITS and the master UCITS. 2.Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 . page 46 . and (c) does not hold units of a feeder UCITS. Member States shall ensure that the investment of a feeder UCITS into a given master UCITS which exceeds the limit applicable under Article 55(1) for investments into other UCITS be subject to prior approval by the competent authorities of the feeder UCITS home Member State. on request and free of charge. (b) the prospectus and the key investor information referred to in Article 78 of the feeder and the master UCITS. whether or not the competent authorities have approved the feeder UCITS’ investment into the master UCITS. For such purposes. (b) If a master UCITS does not raise capital from the public in a Member State other than that in which it is established. (e) if the master UCITS and the feeder UCITS have different depositaries. The following derogations for a master UCITS shall apply: (a) if a master UCITS has at least two feeder UCITS as unit-holders. (d) where applicable. as well as the master UCITS. the feeder UCITS shall enter into an agreement with the master UCITS. the information-sharing agreement referred to in Article 62(1) between their respective auditors. the information-sharing agreement referred to in Article 61(1) between their respective depositaries. the information to be provided to unit-holders referred to in Article 64(1). 3. The feeder UCITS shall be informed within 15 working days following the submission of a complete file. (c) the agreement between the feeder and the master UCITS or the internal conduct of business rules referred to in Article 60(1). The competent authorities of the feeder UCITS home Member State shall grant approval if the feeder UCITS. Article 59 1. That agreement shall be made available. the feeder UCITS shall also provide an attestation by the competent authorities of the master UCITS home Member State that the master UCITS is a UCITS.

3. in Article 43 by 60 days before the proposed effective date. Those measures. if the master and the feeder UCITS have different depositaries. or (b) the amendment of its fund rules or instruments of incorporation in order to enable the feeder UCITS to convert into a UCITS which is not a feeder UCITS. unless the competent authorities of its home Member State approve: (a) the investment of at least 85 % of the assets of the feeder UCITS in units of another master UCITS. redemption or subscription of its units notwithstanding the conditions laid down in Article 84(2) within the same period of time as the master UCITS. unless the master UCITS has provided all of its unit-holders and the competent authorities of its feeder UCITS home Member States with the information referred to. Without prejudice to specific national provisions regarding compulsory liquidation. shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 112(2). or (c) amend its fund rules or its instruments of incorporation in order to convert into a UCITS which is not a feeder UCITS. 2. Member States shall require that. No merger or division of a master UCITS shall become effective. Unless the competent authorities of the feeder UCITS home Member State has granted approval pursuant to point (a) of the first subparagraph. If a master UCITS is liquidated. whether at its own initiative or at the request of its competent authorities. the master UCITS shall enable the feeder UCITS to repurchase or redeem all units in the master UCITS before the merger or division of the master UCITS becomes effective. redemption or subscription of its units. 5. the liquidation of a master UCITS shall take place no sooner than three months after the master UCITS has informed all of its unit-holders and the competent authorities of the feeder UCITS home Member State of the binding decision to liquidate. The master and the feeder UCITS shall take appropriate measures to coordinate the timing of their net asset value calculation and publication in order to avoid market timing in their units. preventing arbitrage opportunities. the agreement may be replaced by internal conduct of business rules ensuring compliance with the requirements set out in this paragraph. designed to amend non-essential elements of this Directive by supplementing it. if a master UCITS temporarily suspends the repurchase. Without prejudice to Article 84. merger or division of a master UCITS. The Commission may adopt implementing measures specifying: (a) the content of the agreement or of the internal conduct of business rules referred to in paragraph 1. (b) which measures referred to in paragraph 2 are deemed appropriate. the feeder UCITS shall also be liquidated.May 2011 | Appendix page 47 . 4. SECTION 3 Depositaries and auditors Article 61 1. each of its feeder UCITS is entitled to suspend the repurchase. If a master UCITS merges with another UCITS or is divided into two or more UCITS. unless the competent authorities of the feeder UCITS home Member State grant approval to the feeder UCITS to: (a) continue to be a feeder UCITS of the master UCITS or another UCITS resulting from the merger or division of the master UCITS. or comparable with that referred to.In the event that both master and feeder UCITS are managed by the same management company. the feeder UCITS shall be liquidated. (b) invest at least 85 % of its assets in units of another master UCITS not resulting from the merger or the division. and (c) the procedures for the required approvals pursuant to paragraphs 4 and 5 in the event of a liquidation. those depositaries enter into an information-sharing agreement in order to ensure the fulfilment of the duties of both depositaries. 6. | Cross-border distribution of UCITS .

Such compliance shall not give rise to any liability on the part of such auditor or any person acting on its behalf. the feeder UCITS or. regulation or administrative provision. the management company of the feeder UCITS be in charge of communicating to the depositary of the feeder UCITS any information about the master UCITS which is required for the completion of the duties of the depositary of the feeder UCITS. regulation or administrative provision. In its audit report. Member States shall require that the feeder UCITS or. The depositary of the master UCITS shall immediately inform the competent authorities of the master UCITS home Member State. Those measures. 3. 2. when applicable. Member States shall require that if the master and the feeder UCITS have different auditors. The Commission may adopt implementing measures further specifying the following: (a) the particulars that need to be included in the agreement referred to in paragraph 1. The feeder UCITS shall not invest in units of the master UCITS until such agreement has become effective. Where they comply with the requirements laid down in this Chapter. where applicable. 4. the management company and the depositary of the feeder UCITS about any irregularities it detects with regard to the master UCITS which are deemed to have a negative impact on the feeder UCITS. including the arrangements taken to comply with the requirements of paragraph 2. in particular. Article 62 1. Those measures. neither the depositary of the master UCITS nor that of the feeder UCITS shall be found to be in breach of any rules that restrict the disclosure of information or relate to data protection where such rules are provided for in a contract or in a law. neither the auditor of the master UCITS nor that of the feeder UCITS shall be found to be in breach of any rules that restrict the disclosure of information or relate to data protection where such rules are provided for in a contract or in a law.Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 . shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 112(2). report on any irregularities revealed in the audit report of the master UCITS and on their impact on the feeder UCITS. The Commission may adopt implementing measures specifying the content of the agreement referred to in the first subparagraph of paragraph 1. Where they comply with the requirements laid down in this Chapter. If the feeder and the master UCITS have different accounting years. the auditor of the feeder UCITS shall take into account the audit report of the master UCITS. and (b) the types of irregularities referred to in paragraph 2 which are deemed to have a negative impact on the feeder UCITS. 2. those auditors enter into an information-sharing agreement in order to ensure the fulfilment of the duties of both auditors. designed to amend non-essential elements of this Directive by supplementing it. designed to amend non-essential elements of this Directive by supplementing it. 3. The auditor of the feeder UCITS shall.The feeder UCITS shall not invest in units of the master UCITS until such agreement has become effective. page 48 . the auditor of the master UCITS shall make an ad hoc report on the closing date of the feeder UCITS. shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 112(2). Such compliance shall not give rise to any liability on the part of such depositary or any person acting on its behalf.

(b) the key investor information referred to in Article 78 concerning the feeder and the master UCITS. the annual report of the feeder UCITS shall include a statement on the aggregate charges of the feeder UCITS and the master UCITS. Member States shall require that a feeder UCITS which already pursues activities as a UCITS. the key investor information referred to in Article 78 and any amendment thereto. | Cross-border distribution of UCITS . and the annual and half-yearly reports of the master UCITS shall be delivered by the feeder UCITS to investors on request and free of charge. (b) the investment objective and policy. In addition to the information provided for in Schedule B of Annex I. SECTION 5 Conversion of existing UCITS into feeder UCITS and change of master UCITS Article 64 1. in addition to the information provided for in Schedule A of Annex I.SECTION 4 Compulsory information and marketing communications by the feeder UCITS Article 63 1. or to what extent and for which reasons they differ. including a description of investment made in accordance with Article 58(2). 4. to the competent authorities of its home Member State. (f) a description of all remuneration or reimbursement of costs payable by the feeder UCITS by virtue of its investment in units of the master UCITS. including the risk profile and whether the performance of the feeder and the master UCITS are identical. In addition to the requirements laid down in Articles 74 and 82. 5. as well as the annual and half-yearly reports of the master UCITS. shall provide the following information to its unit-holders: (a) a statement that the competent authorities of the feeder UCITS home Member State approved the investment of the feeder UCITS in units of such master UCITS. (e) how the unit-holders may obtain further information on the master UCITS and the agreement entered into between the feeder UCITS and the master UCITS pursuant to Article 60(1). including the risk profile. the feeder UCITS shall send the prospectus. and (g) a description of the tax implications of the investment into the master UCITS for the feeder UCITS. including those of a feeder UCITS of a different master UCITS. The annual and the half-yearly reports of the feeder UCITS shall indicate how the annual and the half-yearly report of the master UCITS can be obtained. (c) a brief description of the master UCITS. its investment objective and policy. 3. its organisation. (d) a summary of the agreement entered into between the feeder UCITS and the master UCITS or of the internal conduct of business rules pursuant to Article 60(1).May 2011 | Appendix page 49 . the prospectus of the feeder UCITS contains the following information: (a) a declaration that the feeder UCITS is a feeder of a particular master UCITS and as such permanently invests 85 % or more of its assets in units of that master UCITS. A feeder UCITS shall disclose in any relevant marketing communications that it permanently invests 85 % or more of its assets in units of such master UCITS. Member States shall require that. A paper copy of the prospectus. and an indication of how the prospectus of the master UCITS may be obtained. as well as of the aggregate charges of the feeder UCITS and the master UCITS. 2.

Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 . In the event that the feeder UCITS has been notified in accordance with Article 93. if it has already invested therein. That translation shall faithfully reflect the content of the original. SECTION 6 Obligations and competent authorities Article 65 1. The master UCITS shall not charge subscription or redemption fees for the investment of the feeder UCITS into its units or the divestment thereof. its management company. Where. where applicable. depositary and auditor. the depositary and the auditor of the feeder UCITS. the date when its investment will exceed the limit applicable under Article 55(1). If the master UCITS and the feeder UCITS are established in different Member States. where applicable. In performing that obligation. 2. The feeder UCITS shall monitor effectively the activity of the master UCITS. or (b) in the event that the feeder UCITS transfers all or parts of its assets to the master UCITS in exchange for units. the procedure for valuing and auditing such a contribution in kind and the role of the depositary of the feeder UCITS in that process. the applicable national law. other Community law. Article 66 1. in connection with an investment in the units of the master UCITS. or one of the official languages. page 50 . The feeder UCITS shall be responsible for producing the translation. The master UCITS shall immediately inform the competent authorities of its home Member State of the identity of each feeder UCITS which invests in its units. the fee. or any person acting on behalf of either the feeder UCITS or the management company of the feeder UCITS. the feeder UCITS may rely on information and documents received from the master UCITS or. 2. the competent authorities of the master UCITS home Member State shall immediately inform those of the feeder UCITS home Member State of such investment. 2. The master UCITS shall ensure the timely availability of all information that is required in accordance with this Directive. and to the competent authorities. shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 112(2). Member States shall ensure that the feeder UCITS does not invest into the units of the given master UCITS in excess of the limit applicable under Article 55(1) before the period of 30 days referred to in the second subparagraph of paragraph 1 has elapsed. That information shall be provided at least 30 days before the date referred to in point (c) of the first subparagraph. commission or other monetary benefit shall be paid into the assets of the feeder UCITS. The Commission may adopt implementing measures specifying: (a) the format and the manner in which to provide the information referred to in paragraph 1. commission or other monetary benefit is received by the feeder UCITS. its management company. the fund rules or the instruments of incorporation to the feeder UCITS or. a distribution fee. 3. 3. that right shall become effective from the moment the feeder UCITS has provided the information referred to in this paragraph. of the feeder UCITS host Member State or in a language approved by its competent authorities. Those measures.(c) the date when the feeder UCITS is to start to invest in the master UCITS or. its management company. the information referred to in paragraph 1 shall be provided in the official language. unless there is reason to doubt their accuracy. 4. and (d) a statement that the unit-holders have the right to request within 30 days the repurchase or redemption of their units without any charges other than those retained by the UCITS to cover disinvestment costs. designed to amend non-essential elements of this Directive by supplementing it.

and. 4. with effect from the end of the period to which they relate: (a) four months in the case of the annual report. (b) an annual report for each financial year. a report on the activities of the financial year and the other information provided for in Schedule B of Annex I as well as any significant information which will enable investors to make an informed judgement on the development of the activities of the UCITS and its results. If the master UCITS and the feeder UCITS are established in the same Member State. | Cross-border distribution of UCITS . for each of the common funds it manages. where applicable. 2. the competent authorities shall immediately inform the feeder UCITS of any decision. to the competent authorities of the feeder UCITS home Member State. of the risks attached thereto. The annual report shall include a balance-sheet or a statement of assets and liabilities. and (c) a half-yearly report covering the first six months of the financial year. or (b) two months in the case of the half-yearly report. The prospectus shall contain at least the information provided for in Schedule A of Annex I. shall publish the following: (a) a prospectus. where applicable. Article 69 1. An investment company and. the figures must indicate the results after tax for the half-year concerned and the interim dividend paid or proposed. CHAPTER IX OBLIGATIONS CONCERNING INFORMATION TO BE PROVIDED TO INVESTORS SECTION 1 Publication of a prospectus and periodical reports Article 68 1. a management company.May 2011 | Appendix page 51 . 3. in so far as that information does not already appear in the fund rules or instruments of incorporation annexed to the prospectus in accordance with Article 71(1). observation of non-compliance with the conditions of this Chapter or of any information reported pursuant to Article 106(1) with regard to the master UCITS or. in particular. a clear and easily understandable explanation of the fund’s risk profile.Article 67 1. The half-yearly report shall include at least the information provided for in Sections I to IV of Schedule B of Annex I. 2. If the master UCITS and the feeder UCITS are established in different Member States. The prospectus shall include the information necessary for investors to be able to make an informed judgement of the investment proposed to them. a detailed income and expenditure account for the financial year. depositary or auditor. observation of non-compliance with the conditions of this Chapter or information reported pursuant to Article 106(1) with regard to the master UCITS or. its management company. Where a UCITS has paid or proposes to pay an interim dividend. 2. The annual and half-yearly reports shall be published within the following time limits. depositary or auditor. The prospectus shall include. measure. the competent authorities of the master UCITS home Member State shall immediately communicate any decision. independent of the instruments invested in. The latter shall then immediately inform the feeder UCITS. measure. its management company.

including any qualifications. The documents referred to in paragraph 1 are not. however. Article 72 The essential elements of the prospectus shall be kept up to date. Where the net asset value of a UCITS is likely to have a high volatility due to its portfolio composition or the portfolio management techniques that may be used. its prospectus and. marketing communications shall include a prominent statement drawing attention to the investment policy. Article 74 UCITS shall send their prospectus and any amendments thereto. its prospectus and. where necessary. UCITS shall provide that documentation to the competent authorities of the management company’s home Member State on request. shall be reproduced in full in the annual report. page 52 . The fund rules or instruments of incorporation of an investment company shall form an integral part of the prospectus and shall be annexed thereto. 4. 2. The prospectus may be provided in a durable medium or by means of a website. The prospectus shall indicate in which categories of assets a UCITS is authorised to invest. Where a UCITS invests principally in any category of assets defined in Article 50 other than transferable securities or money market instruments. to the methods chosen to this end and to the recent evolution of the main risks and yields of the instrument categories. 3. Article 73 The accounting information given in the annual report shall be audited by one or more persons empowered by law to audit accounts in accordance with Directive 2006/43/EC. in each Member State in which the units are marketed. marketing communications shall include a prominent statement drawing attention to that characteristic. Article 75 1. The prospectus and the latest published annual and half-yearly reports shall be provided to investors on request and free of charge. where necessary. to the competent authorities of the UCITS home Member State.Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 . in which case it shall include a prominent statement indicating whether those operations may be carried out for the purpose of hedging or with the aim of meeting investment goals. on request. he or she will be sent those documents or be apprised of the place where. It shall mention if transactions in financial derivative instruments are authorised.Article 70 1. 2. 2. A paper copy shall be delivered to the investors on request and free of charge. he or she may consult them. required to be annexed to the prospectus provided that the investor is informed that. The auditor’s report. or where a UCITS replicates a stock or debt securities index in accordance with Article 53. and the possible outcome of the use of financial derivative instruments on the risk profile. the management company shall also provide supplementary information relating to the quantitative limits that apply in the risk management of the UCITS. Article 71 1. Upon request of an investor. as well as their annual and half-yearly reports.

permit a UCITS to reduce the frequency to once a month on condition that such derogation does not prejudice the interests of the unit-holders. A paper copy of the annual and half-yearly reports shall be delivered to the investors on request and free of charge. performance scenarios. any marketing communication comprising an invitation to purchase units of UCITS that contains specific information about a UCITS shall make no statement that contradicts or diminishes the significance of the information contained in the prospectus and the key investor information referred to in Article 78. (b) a short description of its investment objectives and investment policy. shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 112(2). Article 77 All marketing communications to investors shall be clearly identifiable as such. clear and not misleading. repurchases or redeems them. Those measures. Key investor information shall include appropriate information about the essential characteristics of the UCITS concerned. a management company draw up a short document containing key information for investors. including appropriate guidance and warnings in relation to the risks associated with investments in the relevant UCITS.3. Those essential elements shall be comprehensible to the investor without any reference to other documents. 3. to take investment decisions on an informed basis. They shall be fair. which is to be provided to investors so that they are reasonably able to understand the nature and the risks of the investment product that is being offered to them and. SECTION 3 Key investor information Article 78 1. SECTION 2 Publication of other information Article 76 A UCITS shall make public in an appropriate manner the issue. The competent authorities may. The annual and half-yearly reports shall be available to investors in the manner specified in the prospectus and in the key investor information referred to in Article 78. and at least twice a month. sells. designed to amend non-essential elements of this Directive. where relevant. repurchase or redemption price of its units each time it issues. and (e) risk/reward profile of the investment. sale. It shall indicate that a prospectus exists and that the key investor information referred to in Article 78 is available. The words ‘key investor information’ shall be clearly stated in that document. In particular. however. The Commission may adopt implementing measures which define the specific conditions which need to be met when providing the prospectus in a durable medium other than paper or by means of a website which does not constitute a durable medium.May 2011 | Appendix . (c) past-performance presentation or. consequently. 2. for each of the common funds it manages. It shall specify where and in which language such information or documents may be obtained by investors or potential investors or how they may obtain access to them. (d) costs and associated charges. in one of the languages referred to in Article 94(1)(b). 4. page 53 | Cross-border distribution of UCITS . Key investor information shall provide information on the following essential elements in respect of the UCITS concerned: (a) identification of the UCITS. Member States shall require that an investment company and. That document shall be referred to as ‘key investor information’ in this Directive.

capital protected and other comparable UCITS. inaccurate or inconsistent with the relevant parts of the prospectus. It shall be fair. unless it is misleading. the key investor information to be provided to investors in relation to the special characteristics of such UCITS. the key investor information to be provided to investors subscribing to a specific investment compartment. The Commission shall adopt implementing measures which define the following: (a) the detailed and exhaustive content of the key investor information to be provided to investors as referred to in paragraphs 2. the key investor information to be provided to investors subscribing to a UCITS. including any translation thereof. including how to pass from one investment compartment into another and the costs related thereto. for each of the common funds it manages. (iv) for master-feeder structures. 3 and 4. Article 79 1. shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 112(2). which sells UCITS directly or through another natural or legal person who acts on its behalf and under its full and unconditional responsibility provides investors with key investor information on such UCITS in good time before their proposed subscription of units in such UCITS. except translation. in all Member States where the UCITS is notified to market its units in accordance with Article 93. including but not limited to where and how the prospectus and the annual and half-yearly report can be obtained on request and free of charge at any time. clear and not misleading. (ii) for UCITS offering different share classes. which invests itself in other UCITS or other collective investment undertakings referred to in Article 50(1)(e). 7.4. for each of the common funds it manages. (b) the detailed and exhaustive content of the key investor information to be provided to investors in the following specific cases: (i) for UCITS having different investment compartments. a management company. and (c) the specific details of the format and presentation of the key investor information to be provided to investors as referred to in paragraph 5. Article 80 1. It shall be drawn up in a common format. the key investor information to be provided to investors subscribing to a feeder UCITS. Member States shall require that an investment company and. Key investor information shall clearly specify where and how to obtain additional information relating to the proposed investment. designed to amend non-essential elements of this Directive by supplementing it. allowing for comparison. Key investor information shall be written in a concise manner and in non-technical language. Member States shall require that an investment company and. Those measures. Key investor information shall constitute pre-contractual information. 6. Member States shall ensure that a person does not incur civil liability solely on the basis of the key investor information.Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 . 2. and the language in which such information is available to investors. 2. a management company. Key investor information shall contain a clear warning in this respect. It shall be consistent with the relevant parts of the prospectus. and (v) for structured. which does not sell UCITS directly or through another natural or legal person who acts on its behalf and under its full and unconditional responsibility to investors provides key investor information to product manufacturers and intermediaries selling page 54 . Key investor information shall be used without alterations or supplements. the key investor information to be provided to investors subscribing to a specific share class. (iii) for fund of funds structures. and shall be presented in a way that is likely to be understood by retail investors. 5.

UCITS shall send their key investor information and any amendments thereto. an up-to-date version of the key investor information shall be made available on the website of the investment company or management company. a Member State may authorise a UCITS to borrow provided that such borrowing is: (a) on a temporary basis and represents: . The Commission may adopt implementing measures which define the specific conditions which need to be met when providing key investor information in a durable medium other than on paper or by means of a website which does not constitute a durable medium. shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 112(2).in the case of an investment company. Key investor information shall be provided to investors free of charge. Article 82 1. no more than 10 % of the value of the fund. Member States shall require that the intermediaries selling or advising investors on potential investments in UCITS.in the case of a common fund. in the case of an investment company. to the competent authorities of their home Member State. Member States shall allow investment companies and. designed to amend non-essential elements of this Directive by supplementing it. 2. no more than 10 % of its assets. for each of the common funds they manage. page 55 | Cross-border distribution of UCITS .May 2011 | Appendix . or . CHAPTER X GENERAL OBLIGATIONS OF UCITS Article 83 1. A UCITS may. provide key investor information to their clients or potential clients. no more than 10 % of its assets. By way of derogation from paragraph 1. The essential elements of key investor information shall be kept up to date. A UCITS shall repurchase or redeem its units at the request of any unit-holder. Those measures. Where a UCITS is authorised to borrow under points (a) and (b).or advising investors on potential investments in such UCITS or in products offering exposure to such UCITS upon their request. to provide key investor information in a durable medium or by means of a website. (b) a management company or depositary acting on behalf of a common fund. such borrowing shall not exceed 15 % of its assets in total. 2. 2. acquire foreign currency by means of a‘back-to-back’ loan. Article 84 1. A paper copy shall be delivered to the investor on request and free of charge. Article 81 1. however. 3. In addition. The following shall not borrow: (a) a investment company. or (b) to enable the acquisition of immovable property essential for the direct pursuit of its business and represents. management companies.

Without prejudice to the application of Articles 50 and 51. a UCITS shall. Paragraph 1 shall not prevent the undertakings referred to therein from acquiring transferable securities. (b) a UCITS home Member State may allow its competent authorities to require the suspension of the repurchase or redemption of units in the interest of the unit-holders or of the public. The temporary suspension referred to in point (a) of the first subparagraph shall be provided for only in exceptional cases where circumstances so require and where suspension is justified having regard to the interests of the unit-holders. Article 87 A UCITS unit shall not be issued unless the equivalent of the net issue price is paid into the assets of the UCITS within the usual time limits. Article 85 The rules for the valuation of assets and the rules for calculating the sale or issue price and the repurchase or redemption price of the units of a UCITS shall be laid down in the applicable national law. (b) a management company or depositary acting on behalf of a common fund.Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 . the fund rules or the instruments of incorporation of the investment company.2. money market instruments or other financial instruments referred to in points (e). communicate its decision to its home Member State competent authorities and to the competent authorities of all Member States in which it markets its units. page 56 . This shall not preclude the distribution of bonus units. 3. 2. temporarily suspend the repurchase or redemption of its units. (g) and (h) of Article 50(1) which are not fully paid. in accordance with the applicable national law. Article 89 The following shall not carry out uncovered sales of transferable securities. Article 86 The distribution or reinvestment of the income of a UCITS shall be effected in accordance with the law and with the fund rules or the instruments of incorporation of the investment company. money market instruments or other financial instruments referred to in points (e). The law or the instruments of incorporation of an investment company shall prescribe the nature of the cost to be borne by the company. By way of derogation from paragraph 1: (a) a UCITS may. the following shall not grant loans or act as a guarantor on behalf of third parties: (a) an investment company. in the fund rules or in the instruments of incorporation of the investment company. (b) a management company or depositary acting on behalf of a common fund. Article 88 1. Article 90 The law of the UCITS home Member State or the fund rules shall prescribe the remuneration and the expenditure which a management company is empowered to charge to a common fund and the method of calculation of such remuneration. In the event of a temporary suspension under paragraph 2(a). without delay. (g) and (h) of Article 50(1): (a) an investment company.

regulations and administrative provisions which do not fall within the field governed by this Directive and which are specifically relevant to the arrangements made for the marketing of units of UCITS. where appropriate. The competent authorities of the UCITS home Member State shall verify whether the documentation submitted by the UCITS in accordance with paragraphs 1 and 2 is complete. Article 92 UCITS shall. including.May 2011 | Appendix . page 57 | Cross-border distribution of UCITS . where relevant. 3. and (b) its key investor information referred to in Article 78. A UCITS shall enclose with the notification letter. the competent authorities of the UCITS home Member State shall immediately notify the UCITS about the transmission. translated in accordance with Article 94(1)(b) and (d). is easily accessible from a distance and by electronic means. regulations and administrative provisions in force in the Member State where their units are marketed. take the measures necessary to ensure that facilities are available in that Member State for making payments to unitholders. UCITS host Member States shall ensure that UCITS are able to market their units within their territories upon notification in accordance with Article 93. no later than 10 working days of the date of receipt of the notification letter accompanied by the complete documentation provided for in paragraph 2. the latest version of the following: (a) its fund rules or its instruments of incorporation.CHAPTER XI SPECIAL PROVISIONS APPLICABLE TO UCITS WHICH MARKET THEIR UNITS IN MEMBER STATES OTHER THAN THOSE IN WHICH THEY ARE ESTABLISHED Article 91 1. in accordance with the laws. it shall include an indication that the UCITS is marketed by the management company that manages the UCITS. 2. Article 93 1. 2. For the purposes of this Chapter. Upon the transmission of the documentation. The UCITS may access the market of the UCITS host Member State as from the date of that notification. as referred to in paragraph 1. its prospectus and. 3. UCITS host Member States shall not impose any additional requirements or administrative procedures on UCITS as referred to in paragraph 1 in respect of the field governed by this Directive. Member States shall ensure that complete information on the laws. is provided in a clear and unambiguous manner and is kept up to date. it shall first submit a notification letter to the competent authorities of its home Member State. repurchasing or redeeming units and making available the information which UCITS are required to provide. If a UCITS proposes to market its units in a Member State other than its home Member State. The notification letter shall include information on arrangements made for marketing units of the UCITS in the host Member State. The competent authorities of the UCITS home Member State shall transmit the complete documentation referred to in paragraphs 1 and 2 to the competent authorities of the Member State in which the UCITS proposes to market its units. 4. They shall enclose with the documentation an attestation that the UCITS fulfils the conditions imposed by this Directive. established in another Member State within their territories. its latest annual report and any subsequent half-yearly report translated in accordance with the provisions of Article 94(1)(c) and (d). Member States shall ensure that that information is available in a language customary in the sphere of international finance. a UCITS shall include investment compartments thereof. In the context of Article 16(1). in respect of share classes.

The Commission may adopt implementing measures specifying: (a) the scope of the information referred to in Article 91(3). regulations and administrative provisions of the UCITS home Member State. to any translations thereof. The frequency of the publication of the issue. such information or documents shall be provided to investors in the way prescribed by the laws. the UCITS shall give written notice thereof to the competent authorities of the host Member State before implementing the change. Article 95 1. page 58 . unless the UCITS home and host Member States agree to that notification letter and that attestation being provided in an official language of both Member States. The requirements set out in paragraph 1 shall also be applicable to any changes to the information and documents referred therein. 5. the competent authorities of the Member State in which a UCITS proposes to market its units shall not request any additional documents.Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 . (c) information or documents other than key investor information referred to in Article 78 shall be translated. at the choice of the UCITS.4. For the purpose of the notification procedure set out in this Article. (b) the facilitation of access for the competent authorities of the UCITS host Member States to the information or documents referred to in Article 93(1). repurchase or redemption price of units of UCITS according to Article 76 shall be subject to the laws. Article 94 1. Member States shall ensure that the electronic transmission and filing of the documents referred to in paragraph 3 is accepted by their competent authorities. certificates or information other than those provided for in this Article. 6. into the official language. or a change regarding share classes to be marketed. 3. by electronic means. 2. Member States shall ensure that the notification letter referred to in paragraph 1 and the attestation referred to in paragraph 3 are provided in a language customary in the sphere of international finance. The UCITS shall notify any amendments to the documents referred to in paragraph 2 to the competent authorities of the UCITS host Member State and shall indicate where those documents can be obtained electronically. (b) key investor information referred to in Article 78 shall be translated into the official language. it shall provide to investors within the territory of such Member State all information and documents which it is required pursuant to Chapter IX to provide to investors in its home Member State. into a language approved by the competent authorities of that Member State or into a language customary in the sphere of international finance. (2) and (3) in accordance with Article 93(7). In the event of a change in the information regarding the arrangements made for marketing communicated in the notification letter in accordance with paragraph 1. or one of the official languages. 8. Where a UCITS markets its units in a UCITS host Member State. and (d) translations of information or documents under points (b) and (c) shall be produced under the responsibility of the UCITS and shall faithfully reflect the content of the original information. The UCITS home Member State shall ensure that the competent authorities of the UCITS host Member State have access. sale. if applicable. to the documents referred to in paragraph 2 and. It shall ensure that the UCITS keeps those documents and translations up to date. of the UCITS host Member State or into a language approved by the competent authorities of that Member State. Such information and documents shall be provided to investors in compliance with the following provisions: (a) without prejudice to the provisions of Chapter IX. 7. regulations or administrative provisions of the UCITS host Member State. or one of the official languages. of the UCITS host Member State.

including an indication as to which documents the translations refer to. competent authorities shall have the power. if necessary. 2. Under paragraph 1. The competent authorities shall be public authorities or bodies appointed by public authorities. Article 96 For the purpose of pursuing its activities. to summon and question a person with a view to obtaining information. designed to amend non-essential elements of this Directive by supplementing it. (e) require the cessation of any practice that is contrary to the provisions adopted in the implementation of this Directive. Member States shall designate the competent authorities which are to carry out the duties provided for in this Directive. The authorities of the UCITS home Member State shall be competent to supervise that UCITS including. CHAPTER XII PROVISIONS CONCERNING THE AUTHORITIES RESPONSIBLE FOR AUTHORISATION AND SUPERVISION Article 97 1. or (d) by application to the competent judicial authorities. The competent authorities shall be given all supervisory and investigatory powers that are necessary for the exercise of their functions. (c) the procedure for the exchange of information and the use of electronic communication between competent authorities for the purpose of notification under the provisions of Article 93. the authorities of the UCITS host Member State shall be competent to supervise compliance with the provisions falling outside the field governed by this Directive and requirements set out in Articles 92 and 94. 2. at least. a UCITS may use the same reference to its legal form (such as investment company or common fund) in its designation in a UCITS host Member State as it uses in its home Member State. The Commission may also adopt implementing measures specifying: (a) the form and contents of a standard model notification letter to be used by a UCITS for the purpose of notification referred to in Article 93(1). (b) require any person to provide information and. indicating any division of duties. 2. 3. (b) in collaboration with other authorities.Those measures.May 2011 | Appendix page 59 . They shall inform the Commission thereof. (c) under the responsibility of the competent authorities. (c) carry out on-site inspections. by delegation to entities to which tasks have been delegated. | Cross-border distribution of UCITS . shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 112(2). where relevant. (b) the form and contents of a standard model attestation to be used by competent authorities of Member States referred to in Article 93(3). Article 98 1. to: (a) access any document in any form and receive a copy thereof. pursuant to Article 19. (f) request the freezing or the sequestration of assets. However. (d) require existing telephone and existing data traffic records. Those measures shall be adopted in accordance with the regulatory procedure referred to in Article 112(3). Such powers shall be exercised: (a) directly.

(l) refer matters for criminal prosecution. (k) withdraw the authorisation granted to a UCITS. in particular. Member States shall lay down the rules on measures and penalties applicable to infringements of the national provisions adopted pursuant to this Directive and shall take all measures necessary to ensure that those rules are enforced. even in cases where the conduct under investigation does not constitute an infringement of any regulation in force in their Member State. repurchase or redemption of units in the interest of the unit-holders or of the public. Member States shall. management companies or depositaries continue to comply with the requirements of this Directive. in particular. unless such disclosure would seriously jeopardise the financial markets.Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 . Member States shall. a management company or a depositary. The measures and penalties provided for shall be effective. (j) require the suspension of the issue. The competent authorities of the Member States shall cooperate with each other whenever necessary for the purpose of carrying out their duties under this Directive or of exercising their powers under this Directive or under national law. (i) adopt any type of measure to ensure that investment companies. ensure. Without precluding rules on measures and penalties applicable to infringements of the other national provisions adopted pursuant to this Directive. management companies or depositaries to provide information. Article 100 1. Member States shall ensure that efficient and effective complaints and redress procedures are in place for the out-of-court settlement of consumer disputes concerning the activity of UCITS using existing bodies where appropriate. 2. Member States shall ensure that the bodies referred to in paragraph 1 are not prevented by legal or regulatory provisions from cooperating effectively in the resolution of cross-border disputes. 2. Competent authorities shall use their powers for the purpose of cooperation. Article 99 1.(g) request the temporary prohibition of professional activity. Member States shall take the necessary administrative and organisational measures to facilitate the cooperation provided for in this paragraph. proportionate and dissuasive measures and penalties concerning the duty to present key investor information in a way that is likely to be understood by retail investors according to Article 78(5). Article 101 1. 3. proportionate and dissuasive. (h) require authorised investment companies. lay down effective. Member States shall allow competent authorities to disclose to the public any measure or penalty that will be imposed for infringement of the provisions adopted in the implementation of this Directive. that the appropriate administrative measures can be taken or administrative penalties be imposed against the persons responsible where the provisions adopted in the implementation of this Directive have not been complied with. and (m) allow auditors or experts to carry out verifications or investigations. The competent authorities of the Member States shall immediately provide each other with the information required for the purposes of carrying out their duties under this Directive. in conformity with their national law. 2. be detrimental to the interests of investors or cause disproportionate damage to the parties involved. page 60 . Without prejudice to the procedures for the withdrawal of authorisation or to the right of Member States to impose criminal penalties.

8. 4. The recipient authorities shall take appropriate action.2009. of significant interim developments. The competent authorities shall notify the requesting competent authorities of any decision taken under paragraph 6. security or public policy of that Member State. (b) allow the requesting authority to carry out the verification or investigation. however. 29. 7. 18. p. Where a competent authority of one Member State has good reason to suspect that acts contrary to the provisions of this Directive.May 2011 | Appendix . If the verification or investigation is carried out on the territory of one Member State by a competent authority of another Member State. page 61 | Cross-border distribution of UCITS . to the extent possible. The verification or investigation shall. (c) final judgment in respect of the same persons and the same actions has already been delivered in that Member State.3. Competent authorities may bring to the attention of the Committee of European Securities Regulators.1. The competent authorities of one Member State may request the cooperation of the competent authorities of another Member State in a supervisory activity or for an on-the-spot verification or in an investigation on the territory of the latter within the framework of their powers pursuant to this Directive. on-the-spot verification or exchange of information might adversely affect the sovereignty. only where: (a) such an investigation. the competent authority of the Member State which has requested cooperation may request that its own officials accompany the officials carrying out the verification or investigation. established by Commission Decision 2009/77/EC(1). be subject to the overall control of the Member State on whose territory it is conducted. it shall: (a) carry out the verification or investigation itself. it shall notify the competent authorities of the other Member State thereof in as specific a manner as possible. 5. situations where a request: (a) to exchange information as provided for in Article 109 has been rejected or has not been acted upon within a reasonable time. are being or have been carried out by entities not subject to that competent authority’s supervision on the territory of another Member State. or (c) for authorisation for its officials to accompany those of the competent authority of the other Member State has been rejected or has not been acted upon within a reasonable time. This paragraph shall be without prejudice to the competences of the notifying competent authority. 6. (1) OJ L 25. shall inform the notifying competent authority of the outcome of that action and. (b) to carry out an investigation or on-the-spot verification as provided for in Article 110 has been rejected or has not been acted upon within a reasonable time. The competent authorities of the Member State where the verification or investigation is carried out may refuse to exchange information as provided for in paragraph 2 or to act on a request for cooperation in carrying out an investigation or on-the-spot verification as provided for in paragraph 4. the competent authority of the Member State on whose territory the verification or investigation is carried out may request that its own officials accompany the officials carrying out the verification or investigation. (b) judicial proceedings have already been initiated in respect of the same persons and the same actions before the authorities of that Member State. or (c) allow auditors or experts to carry out the verification or investigation. Where a competent authority receives a request with respect to an on-the-spot verification or investigation. That notification shall contain information about the motives of their decision. If the verification or investigation is carried out on the territory of one Member State by a competent authority of the same Member State.

without prejudice to cases covered by criminal law. Paragraphs 1 and 4 shall not preclude the exchange of information within a Member State or between Member States. 5. or with authorities or bodies of third countries. or authorities responsible for the supervision of financial markets. or (c) persons responsible for carrying out statutory audits of the accounts of insurance undertakings. The competent authorities exchanging information with other competent authorities under this Directive may indicate at the time of communication that such information must not be disclosed without their express consent. Those measures shall be adopted in accordance with the regulatory procedure referred to in Article 112(3). Such exchange of information shall be intended for the performance of the supervisory task of those authorities or bodies. investment undertakings. administrative and accounting procedures and internal-control mechanisms. (b) bodies involved in the liquidation or bankruptcy of UCITS or undertakings contributing towards their business activity. and (d) pursuing court proceedings initiated under Article 107(2). credit institutions. 2. 4. be bound by the obligation of professional secrecy. page 62 . or bodies involved in similar procedures. Article 102 1. in which case such information may be exchanged solely for the purposes for which those authorities gave their consent. However. Where the information originates in another Member State. Such obligation implies that no confidential information which those persons receive in the course of their duties shall be divulged to any person or authority whatsoever. 3. confidential information which does not concern third parties involved in rescue attempts may be divulged in the course of civil or commercial proceedings. as well as auditors and experts instructed by the competent authorities. The Commission may adopt implementing measures concerning procedures for on-the-spot verifications and investigations.9. when a UCITS or an undertaking contributing towards its business activity has been declared bankrupt or is being compulsorily wound up. Member States may conclude cooperation agreements providing for exchange of information with the competent authorities of third countries. save in summary or aggregate form such that UCITS. investment undertakings or other financial institutions. it shall not be disclosed without the express consent of the competent authorities which have disclosed it and. management companies and depositaries (undertakings contributing towards UCITS’ business activity) cannot be individually identified. (b) imposing penalties. insurance undertakings or other financial organisations. as determined in paragraph 5 of this Article and Article 103(1) only if the information disclosed is subject to guarantees of professional secrecy at least equivalent to those referred to in this Article. Paragraph 1 shall not prevent the competent authorities of the Member States from exchanging information in accordance with this Directive or other Community law applicable to UCITS or to undertakings contributing towards their business activity. The competent authorities receiving confidential information under paragraphs 1 or 2 may use the information only in the course of their duties for the purposes of: (a) checking that the conditions governing the taking-up of business of UCITS or of undertakings contributing towards their business activity are met and facilitating the monitoring of the conduct of that business. (c) conducting administrative appeals against decisions by the competent authorities. solely for the purposes for which those authorities gave their consent. Member States shall provide that all persons who work or who have worked for the competent authorities. That information shall be subject to the conditions of professional secrecy laid down in paragraph 1.Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 . where appropriate. where that exchange is to take place between a competent authority and: (a) authorities with public responsibility for the supervision of credit institutions.

solely for the purposes for which those authorities gave their consent. of the financial system. Notwithstanding Article 102(1) to (4). 2. Member States which have recourse to the derogation provided for in paragraph 4 shall require that at least the following conditions are met: (a) the information is used for the purpose of performing the task referred to in paragraph 4. it is not disclosed without the express consent of the competent authorities which have disclosed it and. and (c) where the information originates in another Member State. (b) the information received is subject to the conditions of professional secrecy provided for in Article 102(1). Information exchanged pursuant to the first subparagraph shall be subject to the conditions of professional secrecy imposed in paragraph 1. Where. in view of their specific competence. Article 103 1. it is not disclosed without the express consent of the competent authorities which have disclosed it and. 7. paragraphs 1 and 4 shall not preclude the performance by the competent authorities listed above of their supervisory functions.In particular. For the purposes of point (c). where appropriate. (b) authorities responsible for overseeing persons responsible for carrying out statutory audits of the accounts of insurance undertakings. including the integrity. the authorities or bodies referred to in paragraph 4 shall communicate to the competent authorities which have disclosed the information the names and precise responsibilities of the persons to whom it is to be sent. of persons appointed for that purpose and not employed in the public sector the possibility of exchanging information provided for in that paragraph may be extended to such persons under the conditions stipulated in paragraph 5. 3. (b) the information received is subject to the conditions of professional secrecy imposed in Article 102(1). investment firms or other financial institutions.May 2011 | Appendix . 6. the authorities or bodies referred to in paragraph 4 perform their task of detection or investigation with the aid. solely for the purposes for which those authorities gave their consent. Notwithstanding Article 102(1) to (4). or the disclosure to bodies which administer compensation schemes of information necessary for the performance of their functions. where appropriate. credit institutions. and (c) where the information originates in another Member State. in a Member State. Member States may. with the aim of strengthening the stability. 5. Member States shall communicate to the Commission and to the other Member States the names of the authorities or bodies which may receive information pursuant to paragraph 4. Member States may authorise exchanges of information between a competent authority and: (a) authorities responsible for overseeing bodies involved in the liquidation and bankruptcy of UCITS or undertakings contributing towards their business activity. Member States shall communicate to the Commission and to the other Member States the names of the authorities which may receive information pursuant to paragraph 1. 4. or bodies involved in similar procedures. Member States which have recourse to the derogation provided for in paragraph 1 shall require that at least the following conditions are met: (a) the information is used for the purpose of performing the task of overseeing referred to in paragraph 1. authorise the exchange of information between the competent authorities and the authorities or bodies responsible under the law for the detection and investigation of breaches of company law. page 63 | Cross-border distribution of UCITS .

however. 2. performing in a UCITS. shall have a duty to report promptly to the competent authorities any fact or decision concerning that undertaking of which he has become aware while carrying out that task and which is liable to bring about any of the following: (a) a material breach of the laws. financial institutions. be made only where necessary for reasons of prudential control. Such disclosures may. provide that information received under Article 102(2) and (5) is never disclosed in the circumstances referred to in this paragraph except with the express consent of the competent authorities which disclosed the information. within which he is carrying out that task. Information received in this context shall be subject to the conditions of professional secrecy imposed in Article 102(1). Member States shall. regulations or administrative provisions which lay down the conditions governing authorisation or which specifically govern pursuit of the activities of UCITS or undertakings contributing towards their business activity. Those measures shall be adopted in accordance with the regulatory procedure referred to in Article 112(3). The information received in this context shall be subject to the conditions of professional secrecy imposed in Article 102(1). Member States shall provide at least that any person approved in accordance with Directive 2006/43/EC. 2. The disclosure in good faith to the competent authorities. authorise the disclosure of certain information to other departments of their central government administrations responsible for legislation on the supervision of UCITS and of undertakings contributing towards their business activity. ensure that information received under Article 102(2) is not disclosed in the circumstances referred to in the first subparagraph of this paragraph without the express consent of the competent authorities which disclosed it. Articles 102 and 103 shall not prevent the competent authorities from communicating the information referred to in Article 102(1) to (4) to a clearing house or other similar body recognised under national law for the provision of clearing or settlement services for one of their Member State’s markets if they consider that it is necessary to communicate the information in order to ensure the proper functioning of those bodies in relation to defaults or potential defaults by market participants. the statutory audit referred to in Article 51 of Directive 78/660/EEC. however. (b) the impairment of the continuous functioning of the UCITS or an undertaking contributing towards its business activity.Article 104 1. 3. Article 105 The Commission may adopt implementing measures relating to the procedures for exchange of information between competent authorities.Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 . Article 37 of Directive 83/349/EEC or Article 73 of this Directive or any other statutory task. Articles 102 and 103 shall not prevent a competent authority from transmitting to central banks and other bodies with a similar function in their capacity as monetary authorities information intended for the performance of their tasks. or in an undertaking contributing towards its business activity. Article 106 1. nor shall those articles prevent such authorities or bodies from communicating to the competent authorities such information as they may need for the purposes of Article 102(4). Notwithstanding Article 102(1) and (4). or (c)a refusal to certify the accounts or the expression of reservations. Member States may. That person shall have a duty to report any facts and decisions of which he becomes aware in the course of carrying out a task as described in point (a) in an undertaking having close links resulting from a control relationship with the UCITS or an undertaking contributing towards its business activity. Member States shall. by virtue of provisions laid down by law. however. regulatory or administrative provision and shall not subject such persons to liability of any kind. page 64 . credit institutions. by persons approved in accordance with Directive 2006/43/EC of any fact or decision referred to in paragraph 1 shall not constitute a breach of any restriction on disclosure of information imposed by contract or by any legislative. investment undertakings and insurance undertakings and to inspectors instructed by those departments.

(b) consumer organisations having a legitimate interest in protecting consumers. page 65 | Cross-border distribution of UCITS . or any negative decision taken in the implementation of the general measures adopted in application of this Directive. or any other serious measure taken against a UCITS. or (b) if necessary. to the competent authorities of the management company’s home Member State. including where no decision is taken within six months of submission of an application for authorisation which provides all the information required. bring the matter to the attention of the Committee of European Securities Regulators. Only the authorities of the UCITS home Member State shall have the power to take action against that UCITS if it infringes any law. the UCITS persists in acting in a manner that is clearly prejudicial to the interests of the UCITS host Member State’s investors. regulation or administrative provision or any regulation laid down in the fund rules or in the instruments of incorporation of the investment company. repurchase or redemption of its units imposed upon it. including the possibility of preventing the UCITS concerned from carrying out any further marketing of its units within the territory of the UCITS host Member State. or because the UCITS home Member State fails to act within a reasonable timeframe. 3. However. or (c) professional organisations having a legitimate interest in protecting their members. the authorities of the UCITS host Member State may take action against that UCITS if it infringes the laws. Article 108 1. as determined by national law. as a consequence. may. 4. they shall refer those findings to the competent authorities of the UCITS home Member State. Member States shall provide that one or more of the following bodies.May 2011 | Appendix .Article 107 1. in the interests of consumers and in accordance with national law. regulations or administrative provisions adopted in accordance with this Directive is properly reasoned and subject to a right of appeal in the courts. Member States shall provide that any decision taken under the laws. shall be communicated without delay by the authorities of the UCITS home Member State to the authorities of the UCITS host Member States and. 3. The competent authorities shall give written reasons for any decision to refuse authorisation. take action before the courts or competent administrative bodies to ensure that the national provisions for the implementation of this Directive are applied: (a) public bodies or their representatives. if the management company of a UCITS is established in another Member State. The competent authorities of the management company’s home Member State or those of the UCITS home Member State may take action against the management company if it infringes rules under their respective responsibility. 2. Any decision to withdraw authorisation. take all the appropriate measures needed in order to protect investors. regulations and administrative provisions in force in that Member State that fall outside the scope of this Directive or the requirements set out in Articles 92 and 94. or any suspension of the issue. and communicate them to applicants. In the event that the competent authorities of the UCITS host Member State have clear and demonstrable grounds for believing that a UCITS. 2. the units of which are marketed within the territory of that Member State is in breach of the obligations arising from the provisions adopted pursuant to this Directive which do not confer powers on the competent authorities of the UCITS host Member State. may. the competent authorities of the UCITS host Member State. take either of the following actions: (a) after informing the competent authorities of the UCITS home Member State. If. which shall take the appropriate measures 5. despite the measures taken by the competent authorities of the UCITS home Member State or because such measures prove to be inadequate.

to carry out on-the-spot verifications of branches established within the territory of that Member State.The Commission shall be informed without delay of any measure taken pursuant to point (a) of the first subparagraph. In so far as it is necessary for the purpose of exercising the powers of supervision of the home Member State. the authorities of the management company’s home Member State shall cooperate to ensure that the authorities of the management company’s host Member State collect the particulars referred to in Article 21(2). notify the competent authorities of the UCITS home Member State of any problem identified at the level of the management company which may materially affect the ability of the management company to perform its duties properly with respect to the UCITS or of any breach of the requirements under Chapter III. Paragraph 1 shall not affect the right of the competent authorities of the management company’s host Member State. without delay. Where. 6. the competent authorities of the management company’s host Member State shall inform the competent authorities of the management company’s home Member State of any measures taken by the management company’s host Member State pursuant to Article 21(5) which involve measures or penalties imposed on a management company or restrictions on a management company’s activities. themselves or through the intermediary they instruct for the purpose. the competent authorities of all the Member States concerned shall collaborate closely. They shall supply one another on request with all the information concerning the management and ownership of such management companies that is likely to facilitate their supervision and all information likely to facilitate the monitoring of such companies. 3. Article 110 1. through the provision of services or by the establishment of branches. 2. The competent authorities of the UCITS home Member State shall. Member States shall ensure that within their territories it is legally possible to serve the legal documents necessary for the measures which may be taken by the UCITS host Member State in regard to UCITS pursuant to paragraphs 2 to 5. in discharging their responsibilities under this Directive. Each management company’s host Member State shall ensure that where a management company authorised in another Member State pursues business within its territory through a branch the competent authorities of the management company’s home Member State may. Article 109 1. without delay. The competent authorities of the management company’s home Member State shall. page 66 .Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 . In particular. after informing the competent authorities of the management company’s host Member State. 4. a management company operates in one or more management company’s host Member States. 2. carry out on-the-spot verification of the information referred to in Article 109. notify the competent authorities of the management company’s home Member State of any problem identified at the level of the UCITS which may materially affect the ability of the management company to perform its duties properly or to comply with the requirements of this Directive which fall under the responsibility of the UCITS home Member State.

2001. In that case. had two or more depositaries in accordance with their national law to maintain that number of depositaries if those authorities have guarantees that the functions to be performed under Article 22(3) and Article 32(3) will be performed in practice. TRANSITIONAL AND FINAL PROVISIONS SECTION 1 Derogations Article 113 1. as defined in Article 4(1)(1) of Directive 2004/39/EC.CHAPTER XIII EUROPEAN SECURITIES COMMITTEE Article 111 The Commission may adopt technical amendments to this Directive in the following areas: (a) clarification of the definitions in order to ensure uniform application of this Directive throughout the Community. shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 112(2). page 67 | Cross-border distribution of UCITS .7. Article 112 1. or (b) alignment of terminology and the framing of definitions in accordance with subsequent acts on UCITS and related matters. 45. (1) OJ L 191. designed to amend non-essential elements of this Directive. 2. Solely for the purpose of Danish UCITS. Investment firms. 3. may obtain authorisation under this Directive to manage UCITS as management companies. The Commission shall be assisted by the European Securities Committee established by Commission Decision 2001/528/EC(1). 2. 3.May 2011 | Appendix . By way of derogation from Article 16. By way of derogation from Articles 22(1) and 32(1). having regard to the provisions of Article 8 thereof. the competent authorities may authorise those UCITS which. Article 114 1. Articles 5 and 7 of Decision 1999/468/EC shall apply. The period laid down in Article 5(6) of Decision 1999/468/EC shall be set at three months. Management companies already authorised before 13 February 2004 in their home Member State under Directive 85/611/EEC to manage UCITS shall be deemed to be authorised for the purposes of this Article if the laws of that Member State provide that to take up such activity they must comply with conditions equivalent to those imposed in Articles 7 and 8. 2. p. Those measures. having regard to the provisions of Article 8 thereof. pantebreve issued in Denmark shall be treated as equivalent to the transferable securities referred to in Article 50(1)(b). Where reference is made to this paragraph. CHAPTER XIV DEROGATIONS. authorised to carry out only the services provided for in Section A(4) and (5) of the Annex to that Directive. 13. Where reference is made to this paragraph. on20 December 1985. Article 5a(1) to (4) and Article 7 of Decision 1999/468/EC shall apply. such investment firms shall give up the authorisation obtained under Directive 2004/39/EC. the Member States may authorise management companies to issue bearer certificates representing the registered securities of other companies.

the third subparagraph of Article 51(1). Article 13(1)(a) and (i). points (a) to (d). Article 43(1) to (5). Article 1(3)(a). the introductory phrase and Article 68(1)(a). points (a). Member States shall determine how such reference is to be made and how that statement is to be formulated. the introductory phrase of Article 50(1). they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. Article 56(1). (p). (n) and (o) of Article 2(1). the second subparagraph of Article 17(3). the first and third subparagraphs of Article 17(3). References to the simplified prospectus shall be construed as references to the key investor information referred to in Article 78. Article 2(6) and (7). Article 4. Article 13(1)(b) to (h). as amended by the Directives listed in Annex III. Article 18(1) except the introductory phrase and point (a). Article 22(2). Article 116 1. Article 50(3). Article 16(3). 72 and 74. the first subparagraph of Article 17(9). points (e). (8) and (9). points (a).SECTION 2 Transitional and final provisions Article 115 By 1 July 2013. They shall forthwith inform the Commission thereof. Article 6(2). This Directive shall enter into force on the 20th day following its publication in the Official Journal of the European Union. Article 70(2) and (3). (2) and (3). Article 22(1). (m). Article 12(1). Article 83(1)(b). the introductory part of Article 18(1). Article 17(2)(b). Article 3. the first and second subparagraphs of Article 18(2). Article 86. (4). Article 109(2). (c) and (d) of Article 17(2). Articles page 68 . without prejudice to the obligations of the Member States relating to the time limits for transposition into national law and application of the Directives set out in Annex III. Article 21(2) to (6). the laws. References to the repealed Directive shall be construed as references to this Directive and shall be read in accordance with the correlation table in Annex IV. Article 89(b). Articles 71. Article 6(1). Article 117 Directive 85/611/EEC. Part A. the introductory phrase of the first subparagraph of Article 56(2). Article 1(3)(b). Article 18(1)(b). Article 63. the Commission shall submit to the European Parliament and to the Council a report on the application of this Directive. Article 23(1). Article 1(4) to (7). 66 and 67. Article 23(3). the second indent of Article 83(2)(a). Article 110 and Annex I. the third and fourth subparagraphs of Article 18(2). Article 12(2). Part B. 2. (6) and (7). (2) and (3). Article 29(2). Article 5(5). Article 16(1). Article 2(2). regulations and administrative provisions to Directive 85/611/EEC shall be construed as references to this Directive. Article 33(2). Article 102(5). Article 13(2). Article 75(1). Article 15. Member States shall adopt and publish by 30 June 2011. Article 17(8). Article 16(2). Article 62(1). They shall also include a statement that references in existing laws. Article 61(1) and (2). (d) and (e) of Article 22(3). Article 1(1). the second subparagraph of Article 17(9). (f) to (l). the second subparagraph of Article 102(2). the introductory phase of Article 13(1). and (5). Article 69(1) and (2). Article 5(1) to (4). (3) and (4). Article 21(1)and (7). Articles 58 and 59. Article 118 1. They shall apply those measures from 1 July 2011. (q) and (r) of Article 2(1). Article 54(3). (2). Article 64(1). Member States shall communicate to the Commission the text of the main provisions of national law which they adopt in the field covered by this Directive. and (5). Article 17(1). Articles 107 and 108. the third paragraph of Article 27. Articles 44 to 49. Articles 65. Article 2(5). Article 88(1)(b). Articles 19 and 20. Article 17(4) to (7). (4). Article 101(1) to (8). Article 14(1). Articles 37 to 42. is repealed with effect from 1 July 2011. Articles 7 to 11. Article 24. Article 18(3) and (4). (3) and (4). Articles 77 to 82. Articles 90 to 94. Article 22(3)(b) and (c). regulations and administrative provisions necessary to comply with the second subparagraph of Article 1(2). When Member States adopt those measures. (2) and (3). (3) and (4).Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 . Article 60(1) to (5). the first subparagraph of Article 1(2). Articles 96 to 100.

the competent authorities of the UCITS host Member States shall continue to accept the simplified prospectus for UCITS marketed on the territory of those Member States. Article 88(1) except point (b). Article 102(1). the first subparagraph of Article 56(2). Article 109(1). Articles 111. Article 119 This Directive is addressed to the Member States.May 2011 | Appendix . Articles 103 to 106. Article 50(1)(a) to (h). Article 28. III and IV shall apply from 1 July 2011. Article 54(1) and (2). Article 83(2)(a) except the second indent. in national law. Article 68(2). 85 and 87. the first and second paragraphs of Article 27. Article 57. Articles 34. 13 July 2009. For the European Parliament The President H. all the implementing measures referred to in Article 78(7) has expired. PÖTTERING For the Council The President E. Article 70(1) and (4). and (4). Article 69(3) and (4). ERLANDSSON page 69 | Cross-border distribution of UCITS . Article 102(3) and (4). Article 89 except point (b).25 and 26. 112. and 117 and Annexes II. (3). 2. Article 83(1) except point (b). Done at Brussels. the second subparagraph of Article 56(2). During that period. Article 88(2). Article 56(3). Articles 73 and 76. 113. the first and second subparagraphs of Article 51(1). Article 29(1). Article 51(2) and (3). Article 33(1) and (3).-G. Articles 84. 31 and 32. 35 and 36. Articles 30. the first subparagraph of Article 102(2). Member States shall ensure that UCITS replace their simplified prospectus drawn up in accordance with the provisions of Directive 85/611/EEC with key investor information drawn up in accordance with Article 78 as soon as possible and in any event no later than 12 months after the deadline for implementing. Articles 52 and 53. Article 55. Article 50(2).

. 1.7 Names of the persons responsible for auditing the accounting information referred to in Article 68. 1. Indication of any denominations which may be provided for. Indication of any denominations which may be provided for. management and supervisory bodies. Characteristics of the units: Registered or bearer. in particular as regards the rights of unit-holders.5 Brief indications relevant to unit-holders of the tax system applicable to the common fund. 1.7 Names of the persons responsible for auditing the accounting information referred to in Article 68.4 Statement of the place where the instruments of incorporation. 1. 1. Information concerning the management company1 1. Indication of duration.6 Accounting and distribution dates 1. 1.1 Name 1.4 Statement of the place where the fund rules. . . in particular as regards the rights of unit-holders.Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 .10 Details of the types and main characteristics of the units and in particular: .10 Details of the types and main characteristics of the units and in particular: . Circumstances in which winding-up of the common fund can be decided on and winding-up procedure. if limited. if limited. Indication of duration. if they are not annexed. if they are not annexed. .9 Amount of the subscribed capital with an indication of the capital paid-up 1.9 Capital 1.12 Procedures and conditions of issue and sale of units 1 including an indication whether the management company is domiciled in another Member State than in the UCITS home Member State page 70 . .2 Date of incorporation of the company. Details of whether deductions are made at source from the income and capital gains paid by the company to unit-holders.1 Name or style. indication of stock exchanges or markets where the units are listed or dealt in. Information concerning the common fund 1. the indication of the compartments. 1. Details of whether deductions are made at source from the income and capital gains paid by the common fund to unit-holders.3 If the company manages other common funds. 1.2 Date of the incorporation of the company. Characteristics of the units: Registered or bearer. 1.12 Procedures and conditions of issue and sale of units 1. Entry in a register or in an account. form in law. 1. Details of their main activities outside the company where these are of significance with respect to that company. 1. if limited 1. . 1. registered office and head office if different from the registered office 1. 11 Where applicable. 1. indication of stock exchanges or markets where the units are listed or dealt in. Indication of duration. Entry in a register or in an account. management and supervisory bodies. Details of their main activities outside the company where these are of significance with respect to that company 1.11 Where applicable. Circumstances in which winding-up of the investment company can be decided on and winding-up procedure.2 Date of establishment of the common fund. and periodic reports may be obtained. personal or other) represented by the unit. Indication of unit-holders’ voting rights.8 Names and positions in the company of the members of the administrative.ANNEX I . Accounting and distribution dates. 1. indication of those other funds 1.3 In the case of investment companies having different investment compartments. Indication of unit-holders’ voting rights if these exist.5 Brief indications relevant to unit-holders of the tax system applicable to the company.6. registered office and head office if different from the registered office 1. Original securities or certificates providing evidence of title. form in law. and periodical reports may be obtained.8 Names and positions in the company of the members of the administrative. 1. Original securities or certificates providing evidence of title. The nature of the right (real.Information concerning the investment company 1.1 Name or style. .SCHEDULE A 1.

16 Rules for the valuation of assets 1. . 2. information on how a unit-holder may pass from one compartment into another and the charges applicable in such cases.2. investment policy (e.The method and frequency of calculation of the net asset value of units. Main activity. 3. to the depositary or to third parties. in particular: . capital growth or income). . capital growth or income). including its financial objectives (e. registered office and head office if different from the registered office. specialisation in geographical or industrial sectors). 1 Investment companies within the meaning of Article 32 (5) of the Directive shall also indicate: .2. 2. . places and frequency of the publication of those prices. and reimbursement of costs by the common fund to the management company.1. 1. or to third parties. Information concerning the depositary: 2.The means.14 Description of rules for determining and applying income.g. 1. page 71 | Cross-border distribution of UCITS . amount and calculation of remuneration payable by the common fund to the management company.15 Description of the common fund’s investment objectives.Information concerning the charges relating to the sale or issue and the re-purchase or redemption of units. 1. and circumstances in which re-purchase or redemption may be suspended. places and frequency of the publication of those prices.3. form in law.g.1.Information concerning the charges relating to the sale or issue and the re-purchase or redemption of units. management and supervisory bodies. amount and calculation of remuneration paid by the company to its directors. and members of the administrative. excluding those relating to remuneration. to the depositary.13 Procedures and conditions for repurchase or redemption of units.g. any limitations on that investment policy and an indication of any techniques and instruments or borrowing powers which may be used in the management of the common fund 1. any limitations on that investment policy and an indication of any techniques and instruments or borrowing powers which may be used in the management of the company 1. . in particular: . In the case of investment companies having different investment compartments. to the depositary or to third parties. 3. 1.14 Description of rules for determining and applying income. 1. .16 Rules for the valuation of assets 1. Name or style. place and frequency of the publication of that value. Other significant activities.The method and frequency of the calculation of those prices. specialisation in geographical or industrial sectors). and circumstances in which re-purchase or redemption may be suspended.The means. and reimbursement of costs by the company to its directors. Information concerning the advisory firms or external investment advisers who give advice under contract which is paid for out of the assets of the UCITS: 3. including its financial objectives (e. Name or style of the firm or name of the adviser. 1. 3.15 Description of the company’s investment objectives.13 Procedures and conditions for repurchase or redemption of units. Material provisions of the contract with the management company or the investment company which may be relevant to the unit-holders.The stock exchange in the country of marketing the price on which determines the price of transactions effected outwith stock exchanges in that country.17 Determination of the sale or issue price and the re-purchase or redemption price of units. 1. .g. the depositary or third parties.May 2011 | Appendix .The means.1.17 Determination of the sale or issue price and the re-purchase or redemption price of units. investment policy (e.18 Information concerning the manner.18 Information concerning the manner.The method and frequency of the calculation of those prices.

II. 5. Information concerning the arrangements for making payments to unit-holders. Number of units in circulation III. The net asset value per unit. . (c) Recently issued transferable securities of the type referred to in Article 50 (1) (d). at the end of the financial year: The total net asset value. . Net asset value per unit IV. page 72 . such information shall be given in respect of that Member State in the prospectus published there.Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 .2. Statement of the developments concerning the assets of the UCITS during the reference period including the following: Income from investments. Depositary’s charges. and analysed in accordance with the most appropriate criteria in the light of the investment policy of the UCITS (e. other than the charges mentioned in point 1. . Such information must in any case be given in the Member State in which the UCITS is established. re-purchasing or redeeming units and making available information concerning the UCITS.Liabilities. Historical performance of the common fund or of the investment company (where applicable) — such information may be either included in or attached to the prospectus. In addition. Any other changes affecting the assets and liabilities of the UCITS. VI. Transaction costs. Economic information: 6. . Statement of changes in the composition of the portfolio during the reference period.Net asset value. (d) Other transferable securities of the type referred to in Article 50 (2) (a).1. of the resulting amount of commitments. distinguishing between those to be paid by the unit-holder and those to be paid out of the common fund’s or of the investment company’s assets. (b) Transferable securities dealt in on another regulated market. Appreciation or depreciation of investments. 6. . Possible expenses or fees. ANNEX I . for each financial year. Portfolio. by category of transaction within the meaning of Article 46 carried out by the UCITS during the reference period.. Distributions and income reinvested.17.1. Details. 5. A comparative table covering the last three financial years and including. for each of the above investments the proportion it represents of the total assets of the UCITS should be stated. Changes in capital account. which are costs incurred by a UCITS in connection with transactions on its portfolio.Bank balances. distinguishing between: (a) Transferable securities admitted to of ficial stock exchange listing. VII. in accordance with economic. Other income.Transferable securities.Total assets. geographical or currency criteria) as a percentage of net assets. Other investment information: 5. where units are marketed in another Member State. Profile of the typical investor for whom the common fund or the investment company is designed.g. V.4. Statement of assets and liabilities: .SCHEDULE B Information to be included in the periodic reports I.Other assets. Other charges and taxes. Net income. Management charges.

p. (e) Maintenance of unit-holder register.3.42) Article 1 fourth indent. 17.2. (c) Valuation and pricing (including tax returns). p.7.3. (b) Customer inquiries. 13. 9) Directive 2008/18/EC of the European Parliament and of the Council (OJ L 76.ANNEX I I Functions included in the activity of collective portfolio management: Investment management. p.1985. 30.2000. p.2002. Marketing. 18. ANNEX I II . Administration: (a) Legal and fund management accounting services.PART B List of time-limits for transposition into national law and application (referred to in Article 78) Directive 85/611/EEC 88/220/EEC 95/26/EC 2000/64/EC 2001/107/EC 2001/108/EC 2004/39/EC 2005/1/EC Time-limit for transposition 1 October 1989 1 October 1989 18 July 1996 17 November 2002 13 August 2003 13 August 2003 13 May 2005 Date of application 13 February 2004 13 February 2004 30 April 2006 - page 73 | Cross-border distribution of UCITS .PART A Repealed Directive with list of its successive amendments (referred to in Article 117) Council Directive 85/611/EEC (OJ L 375.12. (g) Unit issues and redemptions.May 2011 | Appendix . 27) Directive 2001/107/EC of the European Parliament and of the Council (OJ L 41. 20) Directive 2001/108/EC of the European Parliament and of the Council (OJ L 41. 31.1988.4. 1) Directive 2005/1/EC of the European Parliament and of the Council (OJ L 79.1995. 35) Directive 2004/39/EC of the European Parliament and of the Council (OJ L 145.2005. Article 4(7) and Article 5 fifth indent only Article 1 only Article 66 only Article 9 only ANNEX I II . 19. 13. p.2. 24. (h) Contract settlements (including certificate dispatch). 31) Directive 95/26/EC of the European Parliament and of the Council (OJ L 168. p.2004. 3) Council Directive 88/220/EEC (OJ L 100. (d) Regulatory compliance monitoring. p.2002.4. (i) Record keeping.11. 19. (f) Distribution of income. p. p.2008. 7) Directive 2000/64/EC of the European Parliament and of the Council (OJ L 290.

APPENDIX 2 Regulation at domestic level as at April 2011 You will find hereafter the references to the main legal texts regarding cross-border distribution of UCITS for the top 7 target markets in terms of foreign fund registration as per PwC figures at the end of 2010. Germany Austria Switzerland Netherlands Spain United Kingdom France Belgium Ireland Luxembourg Hong Kong page 1 | Cross-border distribution of UCITS | Appendices . as well as for the other countries where CACEIS is established.

Placements collectifs étrangers .Chapitre 1 .freshfields.Chapitre 1 . 130 .Chapter IIa . 144 Source: www. 131 to Art.Art.Chapitre 3 .Art.Art.bafin.LPCC RS 951.Penal provisions.Approbation .Chapter III .Chapitre 2 .7.Autorisation et approbation .de and www.section 24 to 32 .Art.Art.Placements collectifs étrangers . 13 to Art.sfa. 125 • Collective Investment Scheme Ordinance (« Ordonnance sur les placements collectifs de capitaux » OPCC RS 951.31) Titre 1 . 122 .Représentant de placements collectifs étrangers .section 33 to 39a • FMA’s instructions for notifications under Article 30 of the Investment Funds Act (InvFG) • Guidelines for notifications under Section 36 of the Investment Funds Act (InvFG) – Notification of UCITS Source: www.Représentant de placements collectifs étrangers .Définition et approbation .com/locations/germany/briefings/ Austria • Federal Act on Investment Funds [Investment Funds Act (Investmentfondsgesetz/invFG) 1993] .Dispositions générales .Chapter 6 .ch and www. 127 to Art.section 32a .Section 2:65 to 2:74 page 3 | Cross-border distribution of UCITS | Appendices 2 .art. 121 to 142 .Chapter 5 – Marketing provisions .Art. 133 • Guidelines on the Distribution of Collective Investment Schemes (self regulation) • SFBC Circular 03/1 relating to public advertising within the meaning of the Collective Investment Schemes legislation Sources: www. Germany • Investmentgesetz (German Investment Act) .gv. 119 to Art.But et champ d’application .311) Titre 4 .Chapitre 2 . provisions on administrative fines and transitional provisions .Chapter II . 2 .Rules concerning the marketing of units of foreign investment funds .Rules concerning the marketing of units of an EEA investment fund .admin.art.2. 17 Titre 4 .Freedom to provide services and freedom of establishment . Offering units in collective investment schemes .Part 2. 123 to Art.ch Netherlands • Act on Financial Supervision [Wet financieel toezicht] (Wft) Chapter 2 – Market access of financial enterprises .at Switzerland • Collective Investment Schemes Act (« Loi fédérale sur les placements collectifs de capitaux » .Chapitre 1 .fma.

Undertakings for collective investment in transferable securities (UCITS) .Regulation at domestic levels .Other foreign collective investment schemes .Title I .Capítulo II .cnmv.Collective investment schemes Chapter I .Chapitre 1 .Artículo 15 y 16 • Real decreto 1309/2005 (enforcement decree of Law 35/2003) • Circular 2/2006 regarding information of the foreign collective investment schemes registered at the CNMV relevant registries • Memorandum relating to methods of fund distribution in Spain Source: www.gov.uk France • General regulation of the Autorité des Marchés Financiers (AMF) Book IV .Common requirements . containing rules for the provision of financial services (Financial Services Decree) Chapter 7 .OPCVM étrangers désirant être commercialisés en France .nl Spain • Law 35/2003 on the regulation of Collective Investment Schemes Título II .es/ United Kingdom • The Financial Services and Markets Act 2000 (FSMA) • The Collective Investment Scheme Information Guide (COLLG).Article 42 to 45 Appendix 2 . February 2009 • The Perimeter Guidance Manual (PERG) Source: www.sections 38 to 49 • Decree of 12 October 2006.Provision of information .Article 411-60 .fsa.Article 411-57 to 411-59 .Sub-section 3 .Marketing foreign collective investment schemes in France .page 4 .OPCVM européens coordonnés . Section 1 . • Act of 12 May 2005.Disposiciones comunes .Article 411-61 • AMF instruction n0 2005-01 of 25 January 2005 defining the fund registration procedure in France and the centralizing agent’s role Titre IV .Common provisions for collective investment schemes Section 4 .Sub-section 2 . containing rules relating to the supervision of the conduct of financial enterprises (Decree on the Supervision of the Conduct of Financial Enterprises pursuant to the Act on Financial Supervision) Source: www.Collective investment products .Procédure d’autorisation de commercialisation en France .Comercialización transfronteriza de acciones y participaciones de IIC . containing rules for the provision of financial services (Financial Services Act) • Decree of 15 December 2005.Sub-section 1 .afm.

entemp. companies & miscellaneous provisions Act 2006 Source: www.cssf.be Ireland • UCITS Notices issued by the Central Bank of Ireland relating to Undertakings for Collective Investment in Transferable Securities authorised under European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2003.Chapter 7: UCITS situated in other Member States of the European Union which market their units in Luxembourg .Article 46 to 48 .amf-france. L621-5-3 and D621-27 Source: www. October 2010 • Marketing requirements: UCITS 15 Notice relating to supervisory requirements for UCITS authorised in another Member State intending to market units in Ireland.ie/ and www.lu page 5 | Cross-border distribution of UCITS | Appendices 2 .UCITS .Autres OPCVM étrangers.cbfa. October 2010 • Investment funds..ie Luxembourg • Law of 20 December 2002 relating to undertakings for collective investment and amending the law of 12 February 1979 concerning the value added tax as amended: Part I .Article 49 • CMF (Code Monétaire et Financier) General regulation Art.Chapter 6: UCITS situated in Luxembourg which market their units in other Member States of the European Union . Section 2 .Correspondant(s) en France de l’OPCVM et obligations d’information .Chapitre 2 .financialregulator.Articles 59 to 64 • Circular CSSF 07/277 relating to the new notification procedure in line with the guidelines of CESR regarding the simplification of the UCITS notification procedure Source: www.Articles 53 to 58 .org Belgium • Circulaire CBFA OPC 1/2007 relative à la procédure de notification pour les OPC relevant du droit d’un autre Etat membre de l’Espace Economique Européen et répondant aux conditions de la Directive 85/611/CEE • Circulaire CBFA OPC 2/2007 relative à la procédure de notification pour les organismes de placement collectif de droit belge qui répondent aux conditions de la Directive 85/611/CE • Circulaire CBFA OPC 4/2007 relative à la détention de titres d’organismes de placement collectif par l’entremise d’un intermédiaire (nominee) • Loi du 20 juillet 2004 relative à certaines formes de gestion collective de portefeuilles d’investissement • Royal Decree of 4 March 2005 relating to certain public undertakings for collective investment Source: www.

Hong Kong • The Unit Trust Code.page 6 .authorised Collective Investment Schemes.Implementation arrangements to the Code on Unit Trusts and Mutual Funds. October 2008 Source: www. 25 June 2010 Part I: General matters Part II: Authorisation requirements Part III: Post-authorization requirements • Circular to management companies / product issuers of SFC-authorised schemes .Regulation at domestic levels . December 2008 • Circular to issuers of retail investment products.sfc.hk Appendix 2 . December 2010 • Circular to issuers of advertisements relating to SFC .