COLL 15.4 Prospectus and other pre-sale notifications

1

Document status

A statement that this document is the prospectus of the authorised fund valid as at a particular date which shall be the date of the document.

2

Description of the authorised fund

Information detailing:

(1)

the name of the authorised fund;

(2)

its FCA product reference number (PRN);

(3)

that the authorised fund is either an ICVC, ACS or an AUT;

(4)

that the scheme is a long-term asset fund;

(5)

where relevant, that the shareholders in an ICVC are not liable for the debts of the authorised fund;

(6)

where relevant, the address of the ICVC’s head office and the address in the United Kingdom for service on the ICVC of documents required or authorised to be served on it;

(7)

the effective date of the authorisation order made by the FCA and, if the duration of the authorised fund is not unlimited, when it will or may terminate;

(8)

the base currency for the authorised fund;

(9)

where relevant, the maximum and minimum sizes of the ICVC’s capital;

(10)

for an ACS that is a limited partnership scheme, the address of the proposed principal place of business of the limited partnership scheme; and

(11)

a description of the other main legal implications of the contractual relationship entered into for the purpose of investment, including information on jurisdiction, the applicable law and the existence or absence of any legal instruments providing for the recognition and enforcement of judgments.

[Note: FUND 3.2.2R(3).]

3

Investment objectives, policy and strategy

The following particulars, which must be set out fairly, clearly and in plain language:

(1)

Information to enable a unitholder to ascertain:

(a)

the investment objectives of the authorised fund;

(b)

the authorised fund’s investment policy for achieving those investment objectives, including:

(i)

the general nature of the portfolio and any intended specialisation;

(ii)

the policy for providing a prudent spread of risk in the scheme property; and

(iii)

the policy in relation to the exercise of powers to borrow cash and use leverage, including:

(A)

the purposes for which cash borrowing and leverage may be used;

(B)

the nature of the cash borrowing, including whether it is short- or long-term, temporary or otherwise;

(C)

the types and sources of leverage permitted and the associated risks;

(D)

any restrictions on the use of leverage and any collateral and asset reuse arrangements;

(E)

the maximum level of leverage which the authorised fund manager is entitled to employ on behalf of the LTAF;

(F)

an explanation of how and why that is compatible with the objectives of the LTAF;

(c)

whether there are any restrictions in the assets which may be held in the scheme property; and

(d)

the extent (if any) to which that investment policy does not envisage remaining fully invested at all times.

(2)

A description of the investment strategy of the long-term asset fund which must comply with COLL 15.6.6R (Long-term asset funds: investment strategy).

[Note: FUND 3.2.2R(1)(a), FUND 3.2.2R(1)(f) and FUND 3.2.2R(1)(g) to 3.2.2R(1)(j).]

4

Feeder LTAFs

If the LTAF is a feeder LTAF:

(1)

the name and (where applicable) the FCA product reference number (PRN) of the qualifying master LTAF;

(2)

the country or territory where the qualifying master LTAF is established; and

(3)

the following details of the qualifying master LTAF:

(a)

its investment objective, policy and strategy, including its risk profile;

(b)

the minimum and (if relevant) maximum investment that the feeder LTAF may make in it;

(c)

how copies of its prospectus may be obtained;

(d)

how the unitholders of the feeder LTAF may obtain further information about it; and

(e)

a description of all remuneration or reimbursement of costs payable by the feeder LTAF by virtue of its investment in units of the qualifying master LTAF, as well as the aggregate charges of the two schemes.

[Note: FUND 3.2.2R(1)(b).]

5

Fund of funds

If the LTAF is a fund of funds, information on where the underlying funds are established.

[Note: FUND 3.2.2R(1)(c).]

6

Assets in which the LTAF may invest

A description of the types of assets in which the LTAF may invest, including, where relevant:

(1)

for investment in immovables:

(a)

the countries or territories in which the authorised fund may invest in immovables;

(b)

the authorised fund manager’s policy in relation to insuring any immovables which form part of the scheme property; and

(c)

the policy of the authorised fund manager in relation to the granting of options over immovables in the scheme property and the purchase of options on immovables.

(2)

if intended, whether the scheme property may consist of units in collective investment schemes (“second schemes”) which are managed by or operated by the authorised fund manager or by one of its associates and a statement as to:

(a)

the basis of the maximum amount of the charges in respect of transactions in a second scheme; and

(b)

the extent to which any such charges will be reimbursed to the scheme;

(3)

if intended, whether the scheme may enter into stock lending arrangements and repo contracts and, if so, what procedures will operate and what collateral will be required.

[Note: FUND 3.2.2R(1)(d).]

7

Investment techniques and associated risks

At least the following information, which must be set out fairly, clearly and in plain language, about the investment techniques that the authorised fund manager may employ and all associated risks, including:

(1)

having regard to the investment strategy of the long-term asset fund and the type of assets in which the scheme may invest, an explanation of the risks associated with the scheme investing in those assets and how those risks might crystallise;

(2)

any other risks for unitholders investing in the long-term asset fund;

(3)

a description of the tools and arrangements the authorised fund manager would propose using, including those required by rules, to mitigate the risks referred to in (1) and (2); and

(4)

an explanation of the circumstances in which those tools and arrangements would typically be deployed and the likely consequences for investors.

[Note: FUND 3.2.2R(1)(e).]

8

Procedures to change of strategy or policy

A description of the procedures by which the authorised fund manager of the LTAF may change its investment objective and policy or its investment strategy, or both.

[Note: FUND 3.2.2R(2).]

9

Classes of units

Information as to:

(1)

the names of the classes of units in issue or available for issue and the rights attached to them in so far as they vary from the rights attached to other classes;

(2)

how unitholders may exercise their voting rights and what these are; and

(3)

the circumstances where a mandatory redemption, cancellation or conversion of units from one class to another may be required.

[Note: FUND 3.2.2R(3), (8), (9), (11) and (12).]

10

Identity and duties of the authorised fund manager, depositary, auditor and other service providers, and investors’ rights

(1)

The following particulars of the authorised fund manager:

(a)

its name and the nature of its corporate form;

(b)

the country or territory of its incorporation;

(c)

the date of its incorporation and if the duration of its corporate status is limited, when that status will or may cease;

(d)

if it is a subsidiary, the name of its ultimate holding company and the country or territory in which that holding company is incorporated;

(e)

the address of its registered office, its head office, and, if different, the address of its principal place of business in the United Kingdom;

(f)

the amount of its issued share capital and how much of it is paid up;

(g)

for an ICVC, a summary of the material provisions of the contract between the ICVC and the authorised fund manager which may be relevant to unitholders including provisions (if any) relating to termination, compensation on termination and indemnity;

(h)

the names of the directors of the authorised fund manager; and

(i)

a description of the duties of the authorised fund manager.

(2)

Where the LTAF is an ICVC, other than for the ACD:

(a)

the names and positions in the ICVC of the directors; and

(b)

the manner, amount and calculation of the remuneration of the directors.

(3)

The following particulars of the depositary

(a)

its name and the nature of its corporate form;

(b)

the country or territory of its incorporation;

(c)

the address of its registered office and the address of its head office if that is different from the address of its registered office;

(d)

if neither its registered office nor its head office is in the United Kingdom, the address of its principal place of business in the United Kingdom; and

(e)

a description of the duties of the depositary.

(4)

If an investment adviser or any other person is retained to provide services in connection with the business of the authorised fund:

(a)

the name of the person;

(b)

whether or not the person is authorised by the FCA; and

(c)

a description of the duties of the person.

(5)

The name of the auditor of the authorised fund and a description of the duties of the auditor.

[Note: FUND 3.2.2R(4).]

11

Professional liability

A description of how the authorised fund manager complies with the requirements referred to in IPRU-INV 11.3.11G (Professional negligence) relating to professional liability risk.

[Note: FUND 3.2.2R(5).]

12

Delegation arrangements

To the extent not covered by (10), a description of:

(1)

any AIFM management function delegated by the authorised fund manager;

(2)

any safe-keeping function delegated by the depositary;

(3)

the identity of each delegate appointed under FUND 3.10 (Delegation); and

(4)

any conflicts of interest that may arise from such delegation.

[Note: FUND 3.2.2R(6).]

13

Valuation of scheme property and due diligence

(1)

A statement setting out whether the valuation function is performed by an external valuer or the authorised fund manager and:

(a)

where an external valuer is used to perform the valuation function, an explanation of how that person meets the requirements set out in FUND 3.9.7R(3) (Performance of the valuation function) and the relevant requirements in articles 67 to 74 of the AIFMD level 2 regulation, and how the authorised fund manager is able to demonstrate the matters specified in FUND 3.9.9R (Appointment of an external valuer) and FUND 3.10.2R(2)(f) (General delegation requirements); or

(b)

where the authorised fund manager performs the valuation function itself, details of the depositary’s determination of the matters referred to in COLL 15.2.6R(2) (Appointment of external valuer or authorised fund manager with knowledge, skills and experience of valuing long-term assets).

2

A description of the valuation procedure and of the pricing methodology for valuing assets, including the methods used in valuing hard-to-value assets, in line with FUND 3.9 (Valuation), and details as to:

(a)

how frequently and at what times of the day the scheme property will be regularly valued to determine the price at which units in the scheme may be purchased from or redeemed by the authorised fund manager and a description of any circumstance where the scheme property may be specially valued;

(b)

in relation to each purpose for which the scheme property must be valued and each category of asset held in the scheme property, the basis on which it will be valued, identifying any codes of good practice used by the external valuer (where relevant) or the authorised fund manager; and

(c)

how the price of units of each class will be determined, including a statement that a forward price basis is to be applied.

(3)

Details as to:

(a)

the authorised fund manager’s policies and procedures in relation to the selection and ongoing monitoring of investments (see article 18(2) of the AIFMD level 2 regulation);

(b)

the arrangements for ensuring that investment decisions on behalf of the long-term asset fund are carried out in compliance with the objectives and the investment strategy of the scheme (see article 18(3) of the AIFMD level 2 regulation);

(c)

how the authorised fund manager will carry out due diligence in line with good market practice.

[Note: FUND 3.2.2R(7).]

[Note 2: Articles 67 to 71 of the AIFMD level 2 regulation contain detailed requirements relating to the valuation of assets by full-scope UK AIFMs. Articles 18 and 19 of the AIFMD level 2 regulation also contain detailed requirements relating to the due diligence obligations of full-scope UK AIFMs.]

14

Fees, charges and expenses

A description of all fees, charges and expenses, including:

(1)

the maximum amounts directly or indirectly borne by investors;

(2)

the payments that may be made out of the scheme property to any person whether by way of remuneration for services, reimbursement of expense, or charge or other payment and for each category of remuneration, expense, charge or payment the following should be specified:

(a)

(i)

the person to whom the remuneration, charge, expense or payment is payable or made;

(ii)

what that payment is for;

(iii)

the current rates or amounts of such remuneration, charge, expense or payment;

(iv)

how the remuneration, charge, expense or payment will be calculated;

(v)

when it will be paid; and

(vi)

where a performance fee is taken, whether by the authorised fund manager or any other person providing services to the authorised fund manager or the long-term asset fund in relation to the operation of the scheme, examples of how the performance fee works in plain English and the maximum it can amount to;

(b)

if notice has been given to unitholders of the authorised fund manager’s intention to:

(i)

introduce a new category of remuneration for its services;

(ii)

increase the basis of any current charge; or

(iii)

change the basis of the treatment of a payment from the capital property set out in COLL 15.8.16R(2) (Payments),

particulars of that introduction or increase and when it will take place; and

(c)

if, in accordance with COLL 15.8.16R(2) (Payments), all or part of the remuneration or expense are to be treated as a capital charge:

(i)

that fact; and

(ii)

the basis of the charge which may be so treated; and

(3)

if the authorised fund manager makes any charges on sale or redemption of units, details of the charging structure and how notice will be provided to unitholders of any increase.

[Note: FUND 3.2.2R(9).]

[Note 2: Annex VI of the onshored Commission Delegated Regulation (EU) 2017/653 laying down regulatory technical standards with regard to the presentation, content, review and revision of key information documents, sets out detailed requirements in relation to the costs to be disclosed in a key information document.]

15

Fair treatment of investors and investor rights

(1)

A description of how the authorised fund manager ensures a fair treatment of investors.

(2)

Whenever an investor obtains preferential treatment or the right to obtain preferential treatment, a description of:

(a)

that preferential treatment;

(b)

the type of investors who obtain such preferential treatment; and

(c)

where relevant, their legal or economic links with the LTAF or the authorised fund manager.

(3)

A description of the rights of investors.

[Note: FUND 3.2.2R(4), FUND 3.2.2R(10) and FUND 3.2.2R(11).]

16

Dealing

The procedure and conditions for the issue, sale, redemption and cancellation of units or shares including details of the following, in fair, clear and plain language, using worked examples to explain how these procedures might apply to unitholders in practice:

(1)

the dealing days and times in the dealing day on which the authorised fund manager will receive and determine requests for the sale and redemption of units, including any cut-off point for receiving redemption requests before the authorised fund manager makes the next redemption determination (see COLL 15.8.12R(2)(a) (Dealing: redemption of units));

(2)

the procedures for effecting the issue and cancellation of units;

(3)

the procedures for effecting the sale and redemption of units and the settlement of transactions;

(4)

the steps required to be taken by a unitholder in redeeming units in the long-term asset fund (see COLL 15.8.12R (Dealing: redemption of units)), using worked examples to explain how these arrangements may affect unitholders in the scheme, including:

(a)

the notice period, and the normal period that unitholders will need to wait from the authorised fund manager accepting a unitholder’s instruction to redeemunits in the LTAF to payment of the appropriate proceeds of redemption to the unitholder;

(if applicable) the circumstances and periods where:(b)

(i)

the execution of a redemption request may be deferred;

(ii)

payment may be deferred; or

(iii)

a limit on the amount that can be redeemed may be applied, and

if so, the effect on the unitholder of such a deferral or limit (see COLL 15.8.12R(6) (Dealing: redemption of units));

(c)

that the notice period may be extended when the scheme is suspended in accordance with COLL 15.10.3R (Suspension); and

(d)

that once the authorised fund manager has accepted a unitholder’s request to redeem units in the LTAF it is irrevocable and they will not be able to withdraw that request;

(5)

a description of the LTAF’s liquidity risk management, including how an investor’s ability to redeem units in the LTAF may be affected in exceptional circumstances, and the circumstances in which the redemption of units may be suspended;

(6)

the days and times in the day on which recalculation of the price will commence;

(7)

details of the minimum number or value of each type of unit in the authorised fund which:

(a)

any one person may hold; and

(b)

may be the subject of any one transaction of sale or redemption;

(8)

the circumstances in which the authorised fund manager may arrange for, and the procedure for, a redemption of units in specie;

(9)

the circumstances in which the further issue of units in any particular class may be limited and the procedures relating to this;

(10)

the circumstances in which direct issue or cancellation of units by the ICVC or the depositary of an AUT or ACS (as appropriate) may occur and the relevant procedures for such issues and cancellations;

(11)

whether a unitholder may effect transfer of title to units on the authority of an electronic communication and if so the conditions that must be satisfied in order to effect a transfer;

(12)

if the authorised fund manager deals as principal in units of the scheme and holds them for that purpose, a statement of its policy for doing so and, where applicable:

(a)

a description of when the authorised fund manager may retain any profits it earns and absorb any losses it incurs for these activities; and

(b)

a statement of non-accountability as referred to in COLL 15.8.17G; and

(13)

any other features relating to dealing in units in the scheme which unitholders would reasonably expect to be aware of, including (but not limited to):

(a)

any minimum periods for which unitholders must hold units in any class of the scheme;

(b)

any limits or caps on the number or value of units in any class that a unitholder may redeem, whether on one occasion or over a period of time;

(c)

whether the scheme may use side-pockets, and if so the procedures for their use,

using worked examples to explain the effects or consequences that these features may have on unitholders in the scheme.

[Note: FUND 3.2.2R(8).]

17

Issue of units in ACSs: eligible investors

(1)

A statement that units may not be issued to a person other than to a person:

(a)

who is a:

(i)

professional ACS investor; or

(ii)

large ACS investor; or

(iii)

person who already holds units in the scheme; and

(b)

to whom units in a long-term asset fund may be promoted under COBS 4.12.4R.

(2)

A statement that the authorised contractual scheme manager of an ACS must redeem units as soon as practicable after becoming aware that those units are vested in anyone (whether as a result of subscription or transfer of units) other than a person meeting the criteria in (1).

[Note: FUND 3.2.2R(12).]

18

Transfer of units in ACSs

(1)

A statement whether the transfer of units in the ACS scheme is either:

(a)

prohibited; or

(b)

allowed;

by the instrument constituting the fund and prospectus.

(2)

A statement that where transfer of units is allowed by the instrument constituting the fund and prospectus in accordance with (1)(b), units may only be transferred in accordance with the conditions specified by FCA rules, including that units may not be transferred to a person other than a person:

(a)

who is a:

(i)

professional ACS investor; or

(ii)

large ACS investor; or

(iii)

person who already holds units in the scheme; and

(b)

to whom units in a long-term asset fund may be promoted under COBS 4.12.4R.

(3)

For a co-ownership scheme which is an umbrella, a statement in accordance with (1)(a) or (1)(b) and, where appropriate, a statement in accordance with (2), must also be made for the sub-funds. Where individual sub-funds have differing policies in relation to transfer of units, separate statements are required.

[Note: FUND 3.2.2R(12).]

19

Prime brokerage firms

(1)

The identity of any prime brokerage firm.

(2)

A description of any material arrangements of the LTAF with its prime brokerage firm and the way any conflicts of interest are managed.

(3)

The provision in the contract with the depositary on the possibility of transfer and reuse of the scheme property of the LTAF.

(4)

Information about any transfer of liability to the prime brokerage firm that may exist.

[Note: FUND 3.2.2R(16).]

20

Distributions and accounting dates

Relevant details of accounting and distribution dates and a description of the procedures:

(1)

for determining and applying income (including how any distributable income is paid); and

(2)

relating to unclaimed distributions.

21

The register of unitholders

Details of the address in the United Kingdom where the register of unitholders is kept and can be inspected by unitholders.

22

Property Authorised Investment Funds

For a property authorised investment fund, a statement that:

(1)

it is a property authorised investment fund;

(2)

no body corporate may seek to obtain or intentionally maintain a holding of more than 10% of the net asset value of the scheme; and

(3)

in the event that the authorised fund manager reasonably considers that a body corporate holds more than 10% of the net asset value of the scheme, the authorised fund manager is entitled to delay any redemption or cancellation of units if the authorised fund manager reasonably considers such action to be:

(a)

necessary in order to enable an orderly reduction of the holding to below 10%; and

(b)

in the interests of the unitholders as a whole.

23

General information

Details as to:

(1)

when annual and half-yearly reports will be published; and

(2)

the address at which copies of the instrument constituting the fund, any amending instrument and the most recent annual reports may be inspected and from which copies may be obtained.

24

Winding up of the LTAF

Information detailing the circumstances in which the authorised fund may be wound up under the rules in COLL and a summary of the procedure for, and the rights of unitholders under, such a winding up.

25

Information on the umbrella

In the case of a scheme which is an umbrella, the following information:

(1)

that a unitholder may exchange units in one sub-fund for units in another sub-fund and that such an exchange is treated as a redemption and sale;

(2)

what charges may be made on exchanging units in one sub-fund for units in other sub-funds;

(3)

the policy for allocating between sub-funds any assets of, or costs, charges and expenses payable out of, the scheme property which are not attributable to any particular sub-fund;

(4)

in respect of each sub-fund, the currency in which the scheme property allocated to it will be valued and the price of units calculated and payments made, if this currency is not the base currency of the umbrella;

(5)

the circumstances in which a sub-fund may be terminated under the rules in COLL and a summary of the procedures for, and the rights of unitholders under, such a termination;

(6)

for an ICVC or a co-ownership scheme, that:

(a)

for an ICVC, its sub-funds are segregated portfolios of assets and, accordingly, the assets of a sub-fund belong exclusively to that sub-fund and shall not be used to discharge directly or indirectly the liabilities of, or claims against, any other person or body, including the umbrella, or any other sub-fund, and shall not be available for any such purpose;

(b)

for a co-ownership scheme, the property subject to a sub-fund is beneficially owned by the participants in that sub-fund as tenants in common (or, in Scotland, is the common property of the participants in that sub-fund) and must not be used to discharge any liabilities of, or meet any claims against, any person other than the participants in that sub-fund; and

(c)

for an ICVC or a co-ownership scheme, while the provisions of the OEIC Regulations, and section 261P (Segregated liability in relation to umbrella co-ownership schemes) of the Act in the case of co-ownership schemes, provide for segregated liability between sub-funds, the concept of segregated liability is relatively new. Accordingly, where claims are brought by local creditors in foreign courts or under foreign law contracts, it is not yet known how those foreign courts will react to regulations 11A and 11B of the OEIC Regulations or, as the case may be, section 261P of the Act; and

(7)

the FCA product reference number (PRN) of each sub-fund.

26

Application of the prospectus contents to an umbrella

For a scheme which is an umbrella, information required must be stated:

(1)

in relation to each sub-fund where the information for any sub-fund differs from that for any other; and

(2)

for the umbrella as a whole, but only where the information is relevant to the umbrella as a whole.

27

Investment in overseas property through an intermediate holding vehicle

If investment in an overseas immovable is to be made through an intermediate holding vehicle or a series of intermediate holding vehicles, a statement:

(1)

disclosing the existence of that intermediate holding vehicle or series of intermediate holding vehicles; and

(2)

confirming that the purpose of that intermediate holding vehicle or series of intermediate holding vehicles is to enable the holding of overseas immovables by the scheme.

28

Information on authorised contractual schemes

A statement that:

(1)

a unitholder in a co-ownership scheme is not liable to make any further payment after having paid the price of the units held and that no further liability can be imposed on the unitholder in respect of those units;

(2)

a unitholder in a limited partnership scheme is not liable for the debts or obligations of the limited partnership scheme beyond the amount of the scheme property which is available to the authorised contractual scheme manager to meet such debts or obligations, provided that the unitholder does not take part in the management of the partnership business;

(3)

the exercise of rights conferred on limited partners by FCA rules does not constitute taking part in the management of the partnership business; and

(4)

the scheme property of a co-ownership scheme is beneficially owned by the participants as tenants in common (or, in Scotland, is the common property of the participants).

29

Additional information

Any other material information which is within the knowledge of the directors of an ICVC or the authorised fund manager of an AUT or ACS, or which the directors or authorised fund manager would have obtained by the making of reasonable enquiries which investors and their professional advisers would reasonably require, and reasonably expect to find in the prospectus, for the purpose of making an informed judgement about the merits of investing in the authorised fund and the extent and characteristics of the risks accepted by participating.