CIS 8.5 Charges and other payments: AUTs

The only payment which may be made to the manager out of the scheme property by way of remuneration for the manager's services is a periodic charge (and value added tax on it if any) arrived at and accruing under this rule (CIS 8.5.1 R).

A periodic charge is payable only where its payment is authorised by the trust deed.

The amount of periodic charge is calculated by the manager as follows:

1. (a)

   take the scheme property at the valuation point coinciding with or immediately before the start of the relevant accrual interval;

2. (b)

   take the value (or for a dual-priced AUT take the average of the issue and cancellation valuations) of the scheme property as at the point at (a);

3. (c)

   multiply that value (or in the case of a dual-priced AUT multiply the average at (b)) by a fraction (or "rate") not exceeding the maximum percentage (for example, 1/100) arrived at under (4);

4. (d)

   divide the resulting figure by 365 (366 in a leap year); and

5. (e)

   multiply the result of the division at (d) by the number of days (including fractions of a day) in the accrual interval.

The maximum percentage in (3)(c) is:

1. (a)

   if the accrual interval is the first since inception, the annual percentage stated in the original prospectus as the rate of the manager's periodic charge;

2. (b)

   if it is not the first accrual interval since inception, either:

   1. (i)

      the rate actually used at (3)(c) for the previous accrual interval; or

   2. (ii)

      a higher rate (still however not exceeding the maximum to the rate of the manager's periodic charge stated in the trust deed) which the manager is permitted to use if it complies with (5).

The manager may not rely on any increase in the maximum percentage unless not less than 90 days before implementing the increase:

1. (a)

   it has given notice in writing to the trustee and to the Unitholders of its intention to increase the amount currently charged by way of periodic charge; and

2. (b)

   it has revised the prospectus to reflect the proposed increase in that amount.

In the case of a single-priced AUT the manager may, if the trust deed permits, make a redemption charge for its own benefit.

1. (a)

   A redemption charge must not exceed the amount or rate of redemption charge stated in the prospectus current at the date when the relevant units were issued, other than to the manager, or sold; and

2. (b)

   the amount or rate referred to in (a) may be expressed as diminishing over the time during which the Unitholder has held the units, but may not be expressed as liable to vary in any other respect.

In (2) and (7), "issued" or "sold" in the case of units in a scheme which has absorbed the whole or part of the property of another scheme, is (when relevant) a reference to the issue or sale of units in that other scheme so far as it is practicable for the manager to ascertain the timing of that issue or sale as opposed to the issue of other units held by that holder.

The manager must not introduce a redemption charge, or change the rate or method of calculation of a current redemption charge, in a manner which is adverse to Unitholders, unless at least 90 days before the introduction or change, the manager:

1. (a)

   gave notice in writing of that introduction or change and of the date of its commencement, to the trustee and to all the persons who ought reasonably to be known to the manager to have made an arrangement for the purchase of units at regular intervals; and

2. (b)

   has revised the prospectus to reflect the introduction or change and the date of its commencement and has made the revised prospectus available.

A modification of the rate or method which is adverse to redeeming Unitholders (or Unitholders selling under CIS 4.5.3 R) must be limited so as to apply only to units which have been issued (whether at the request of the current Unitholder or otherwise) after the date on which the modification takes effect.

Where the trust deed, whenever executed, is modified so as to authorise a redemption charge, the modification must be expressed so as to apply only to units issued after the date on which the modification takes effect.

In deciding whether and to what extent a charge is deductible for the purposes of this rule, units held by a Unitholder are to be taken to be redeemed in the order in which they were issued (other than to the manager) or sold (whether or not to their current Unitholder), unless:

1. (a)

   the manager has the Unitholder's instructions to the contrary; or

2. (b)

   the manager selects as the units first to be redeemed units which are not subject to the deduction; or

3. (c)

   the manager and the trustee have agreed on another way of deciding the order in which units are redeemed which appears to them unlikely materially to prejudice the holder concerned.

A manager must not make a redemption charge which might reasonably be regarded as restricting the right of redemption.

In the case of a single-priced AUT and in the circumstance envisaged by (2), an introduction of, or change to, either of the charges permitted by CIS 8.2.2 R (Preliminary charge : ICVCs and single-priced AUTs) or CIS 8.5.2 R (Redemption charge : single-priced AUTs) must not take effect unless:

1. (a)

   the trust deed is modified under CIS 11.4.2 R (Amendment to the trust deed: with meeting); or

2. (b)

   the prospectus is amended following approval of the introduction or change by an extraordinary resolution at a meeting of the holders called for the purpose.

The circumstance mentioned in (1) is that (for any individual unit notionally issued and redeemed on the same day) the maximum amount or percentage of any preliminary charge and of any redemption charge would in aggregate exceed the maximum amount or percentage for the preliminary charge alone which is stated in the trust deed.

No payment may be made to the trustee out of the scheme property, whether by way of reimbursement of expenses or otherwise, except:

1. (a)

   remuneration for the trustee in respect of its services and in respect of which the following have been stated in the prospectus:

   1. (i)

      the actual amount or rate of the remuneration together with the current maximum (or how these are determined);1

   2. (ii)

      the periods in respect of which the remuneration is to be paid;

   3. (iii)

      how the remuneration is to accrue; and

   4. (iv)

      when the remuneration is to be paid;

2. (b)

   value added tax on the remuneration specified in (a); and

3. (c)

   reimbursement of expenses properly incurred by the trustee in performing or arranging for the performance of the functions conferred on the trustee by the rules in this sourcebook.

Payment under (1)(a) must not be made unless authorised by the trust deed.

In the case of a dual-priced AUT the actual amount or rate of the trustee's or any third party's or any affected person's remuneration maybe raised up to any maximum stated in the prospectus by the authorised fund manager using the procedure in CIS 8.2.6 R (1).1

No payments may be made out of the scheme property of an AUT other than payments permitted by the rules in this sourcebook, and:

1. (a)

   broker'scommission, fiscal charges and other disbursements which are:

   1. (i)

      necessary to be incurred in effecting transactions for the scheme; and

   2. (ii)

      normally shown in contract notes, confirmation notes and difference accounts as appropriate;

2. (b)

   interest on permitted borrowings under the AUT and charges incurred in effecting or terminating such borrowings or in negotiating or varying the terms of such borrowings;

3. (c)

   taxation and duties payable in respect of the scheme property, the trust deed or the issue of units and any stamp duty reserve tax charged in accordance with Schedule 19 of the Finance Act 1999 (or any statutory modification or re-enactment of it);

4. (d)

   payments properly required, in the case of a property scheme, for the maintenance, repair, refurbishment, management, preservation, protection, development or redevelopment of an immovable owned or leased by the property scheme;

5. (e)

   any costs incurred in modifying the trust deed, including costs incurred in respect of meetings of Unitholders convened for purposes which include the purpose of modifying the trust deed, where the modification is:

   1. (i)

      necessary to implement, or necessary as a direct consequence of, any change in the law (including changes in the rules in this sourcebook); or

   2. (ii)

      expedient having regard to any change in the law made by or under any fiscal enactment and which the manager and the trustee agree is in the interest of Unitholders; or

   3. (iii)

      to remove from the trust deed obsolete provisions;

6. (f)

   any costs incurred in respect of meetings of Unitholders convened on a requisition by Unitholders not including the manager or an associate of the manager;

7. (g)

   the audit fee properly payable to the auditor and any proper expenses of the auditor;

8. (h)

   the fees and expenses properly payable to the standing independent valuer of a property scheme;

9. (i)

   the fees of the FSA under Schedule 1, Part III of the Act or the corresponding periodic fees of any regulatory authority in a country or territory outside the United Kingdom in which units in the AUT are or may be marketed;

10. (j)

    any payment permitted by CIS 8.4.1 R (Payment of liabilities on transfer of assets);1

11. (k)

    value added tax payable in connection with any of (a) to (j); and1

12. (l)

    any costs incurred in connection with obtaining a guarantee for the scheme's capital value.1

The manager is not liable to account to the trustee or the Unitholders for the amount of any charge properly taken in accordance with the rules in this sourcebook.

The trustee is not liable to account to the manager or the Unitholders for the amount of any remuneration (or expenses) properly paid to the trustee in accordance with this chapter.

The manager, or another specified affected person, is not required to account to the trustee, or the Unitholders, for any profit made on the issue, sale, redemption or cancellation of units where prominent disclosure of the non-accountability has been made in the prospectus.

A person who is an affected person is not liable to account either to another affected person or to the Unitholders for any benefits or profits made or derived from or in connection with:

1. (a)

   his acting as agent for either or both of the trustee and the manager in the sale or purchase of property to or from the trustee for the account of the AUT; or

2. (b)

   his part in any transaction or the supply of services permitted by CIS 7.10.6 R (Conflict of interests); or

3. (c)

   his dealing in property equivalent to any owned by (or dealt in for the account of) the AUT.

In the case of an AUT, any payments permitted by this chapter (except under CIS 8.5.5 R (1)(a), (b) or (c) (Payments out of the scheme property)) must be made from the income account in the first instance.

Any payment under CIS 8.5.5 R (1)(a) must be made from the capital account; and any payment under CIS 8.5.5 R (1)(b)or (c) must be made from the capital account or the income account as the trustee having taken reasonable care determines is appropriate in accordance with the governing law of trusts.

Following a payment made from the income account under (1) or (2), a transfer of the debit item from the income account to the capital account may be made:

1. (a)

   if the manager and the trustee agree that the payment is for an item of expense which is capital in nature; and

2. (b)

   if the governing law of trusts allows.

The manager and the trustee may agree that all or any agreed part of:

1. (a)

   any charge permitted by CIS 8.5.1 R (Manager's periodic charge); and

2. (b)

   any payments permitted to be made out of the scheme property by CIS 8.5.4 R (Remuneration of the trustee and reimbursement of trustee expenses) or CIS 8.5.5 R (Payments out of the scheme property);

may be treated as a capital expense and, if met from the income account in the first instance, a transfer of the relevant debit made from the income account to the capital account.

Where the trustee considers that there are insufficient funds to cover any payments made, or to be made, from the income account under (1) or (2), a transfer of credit to the income account from the capital account may be made to meet these payments. The credit must be re-transferred as soon as sufficient funds are available in the income account in respect of the same annual accounting period.

Where, in respect of any annual accounting period, taken as a whole, the amount of income received or receivable is less than the net amount of payments made from the income account, the shortfall must, as from the end of that period, be charged to the capital account and must not subsequently be transferred to the income account.