1. (1)

   1This chapter applies to:

   1. (a)

      an authorised fund manager of an AUT, ACS or an ICVC;

   2. (b)

      any other director of an ICVC;

   3. (c)

      the depositary of an AUT, ACS or an ICVC; and

   4. (d)

      an ICVC,

      which is a long-term asset fund.

2. (2)

   Where this chapter refers to rules in any other chapter of this sourcebook, those rules and any relevant guidance should be applied as if they referred to long-term asset funds.

1. (1)

   1Subject to (3), the authorised fund manager of a long-term asset fund must take reasonable care to ensure that ownership of units in that scheme is recorded in the register only for a person to whom such units may be promoted under COBS 4.12.4R (Exemptions from the restrictions on the promotion of non-mainstream pooled investments).

2. (2)

   In addition to (1), the authorised contractual scheme manager of a long-term asset fund which is an ACS must take reasonable care to ensure that ownership of units in that scheme is only recorded in the register for a person that meets the criteria set out in COLL 15 Annex 1R (ACS Long-term asset funds: eligible investors).

3. (3)

   The authorised fund manager will be regarded as complying with (1) and (2) to the extent that it can show that it was reasonable for it to rely on relevant information provided by another person.

1This section applies to:

1. (1)

   the authorised fund manager of an AUT, ACS or an ICVC;

2. (2)

   any other director of an ICVC;

3. (3)

   the depositary of an AUT, ACS or an ICVC; and

4. (4)

   an ICVC,

   which is a long-term asset fund.

1The authorised fund manager of a long-term asset fund must be a full-scope UK AIFM.

1. (1)

   1The authorised fund manager of a long-term asset fund must, having regard to the investment objectives, policy and strategy of the LTAF:

   1. (a)

      possess the knowledge, skills and experience necessary to understand the activities of the LTAF and, in particular, the risks involved in those activities and the assets which the LTAF holds (or is to hold) in the scheme property; and

   2. (b)

      employ sufficient personnel with the skills, knowledge and expertise necessary for discharging the responsibilities allocated to them.

2. (2)

   The authorised fund manager may not rely on a delegation or outsourcing arrangement to satisfy (1).

1The authorised fund manager of a long-term asset fund must at all times be able to demonstrate to the FCA that it complies with COLL 15.2.4R.

[Note: Article 22 of the AIFMD level 2 regulation.]

1. (1)

   1The authorised fund manager of a long-term asset fund must appoint an external valuer to perform the valuation function for the LTAF, but this is subject to (2) and (5).

2. (2)

   The authorised fund manager need not appoint an external valuer under (1) if:

   1. (a)

      the authorised fund manager possesses the knowledge, skills and experience necessary to be able to carry out a proper and independent valuation of the assets and types of assets which the long-term asset fund holds or is to hold (see FUND 3.9.4R); and

   2. (b)

      the depositary of the long-term asset fund, having made an assessment of the matters in (a), has determined that the authorised fund manager has the resources and procedures for carrying out a valuation of those assets in accordance with the applicable law, the instrument constituting the fund and FUND 3.9 (Valuation).

3. (3)

   1The depositary must:

   1. (a)

      review its determination under (2)(b):

      1. (i)

         regularly, and in any event at least annually; and

      2. (ii)

         whenever the depositary becomes aware of any circumstances which could affect the determination;

   2. (b)

      for a period of six years, keep a written record of its determination under (2)(b) and any review under (3)(a), and the reasons for the assessment; and

   3. (c)

      provide the FCA with a copy of the written record on request.

4. (4)

   Where the authorised fund manager performs the valuation function itself in accordance with (2), the authorised fund manager may appoint, as applicable:

   1. (a)

      for the purpose of valuing immovables in accordance with COLL 15.6.18R (Investment in property), an appropriate valuer;

   2. (b)

      for the purpose of valuing immovables in accordance with COLL 15.6.22R (Standing independent valuer and valuation), a standing independent valuer;

   3. (c)

      for the purpose of valuing an asset other than an immovable or property, a delegate appointed in accordance with FUND 3.10 (Delegation) and the relevant provisions of section 8 (Delegation of AIFM functions) of Chapter III of the AIFMD level 2 regulation.

5. (5)

   The authorised fund manager need not appoint an external valuer under (1) if:

   1. (a)

      the scheme property of the long-term asset fund is constituted solely of units or shares in other collective investment schemes or AIFs; and

   2. (b)

      an external valuer performs the valuation function of each such collective investment scheme or AIF.

[Note: FUND 3.9 (Valuation), FUND 3.10 (Delegation), FUND 3.11.25R (Depositary functions: oversight), article 19(5) of AIFMD, and articles 67 to 74 (Valuation) and article 94(4) (Duties regarding the valuation of shares/units) of the AIFMD level 2 regulation.]

1The governing body of the authorised fund manager of a long-term asset fund must:

1. (1)

   possess the collective knowledge, skills and experience to be able to understand the authorised fund manager’s activities, in particular, the main risks involved in those activities and the assets in which the long-term asset fund is invested;

2. (2)

   have members that commit sufficient time to properly perform their functions in the authorised fund manager; and

3. (3)

   have members that act with honesty, integrity and independence of mind.

[Note: Article 21 of the AIFMD level 2 regulation.]

1This section applies to an authorised fund manager of a long-term asset fund.

1A long-term asset fund may issue such classes of unit as are set out in the instrument constituting the fund, provided the rights of any class are not unfairly prejudicial as against the interests of the unitholders of any other class of units in that scheme.

1. (1)

   1The authorised fund manager must ensure that the name of the scheme, a sub-fund or a class of unit is not undesirable or misleading.

2. (2)

   The authorised fund manager of a long-term asset fund must include the term ‘long-term asset fund’ or ‘LTAF’ in the name of the scheme and in relation to any sub-fund which is also a long-term asset fund.

1. (1)

   The statements and provisions required by COLL 15.3.6R must be included in the instrument constituting the fund of a long-term asset fund.

2. (2)

   The instrument constituting the fund must not contain any provision that conflicts with any applicable rule.

1 Units whose issue may be limited can only be issued if permitted by the instrument constituting the fund, under the conditions set out in the prospectus and provided that this will not materially prejudice any existing unitholders in the scheme.

1This section applies to:

1. (1)

   the authorised fund manager of an AUT, ACS or an ICVC; and

2. (2)

   an ICVC,

   which is a long-term asset fund.

1. (1)

   1An authorised fund manager must ensure that a prospectus of a long-term asset fund is drawn up which contains:

   1. (a)

      the information specified in COLL 15.4.5R (Table: contents of long-term asset fund prospectus);

   2. (b)

      the information for investors required by FUND 3.2.2R and FUND 3.2.3R (Prior disclosure of information to investors); and

   3. (c)

      the information for investors required by FUND 3.2.5R and FUND 3.2.6R (Periodic disclosure), unless the up-to-date information has been published in the scheme’s most recent annual report or half-yearly report.

2. (2)

   An authorised fund manager must:

   1. (a)

      revise the prospectus immediately upon the occurrence of any materially significant change in the information required to be stated within it;

   2. (b)

      include the date of any revision in a prominent manner in the revised prospectus;

   3. (c)

      send a copy of the original and any revised prospectus to the FCA; and

   4. (d)

      review the prospectus periodically and revise it to take account of any significant change or new matter.

3. (3)

   The prospectus must not contain any provision which is unfairly prejudicial to the interests of unitholders generally or to the unitholders of any class of units.

4. (4)

   The authorised fund manager must ensure that the prospectus does not contain any provision that conflicts with any applicable rule.

5. (5)

   An ICVC or the authorised fund manager of an AUT or ACS must offer a copy of the scheme’s most recent prospectus free of charge to any person eligible to invest in a long-term asset fund, prior to the purchase of any units.

1The authorised fund manager must ensure that the prospectus does not contain any untrue or misleading statement or omit any matter required by the rules in this sourcebook to be included in it.

1This section applies to:

1. (1)

   the authorised fund manager of an AUT, ACS or an ICVC; and

2. (2)

   an ICVC,

   which is a long-term asset fund.

1. (1)

   1The authorised fund manager must prepare a report in respect of each annual accounting period, half-yearly accounting period and quarterly reporting period.

2. (2)

   Where the first annual accounting period of a scheme is less than 12 months, a half-yearly report need not be prepared.

3. (3)

   The authorised fund manager must:

   1. (a)

      publish the annual report not more than four months after the end of each relevant annual accounting period;

   2. (b)

      publish the half-yearly report not more than two months after the end of each relevant half-yearly accounting period; and

   3. (c)

      publish the quarterly report not more than 20 business days after the end of each relevant quarterly reporting period,

      and in each case provide a copy free of charge on request to any unitholder.

4. (4)

   The authorised fund manager must provide free of charge, on the request of any person eligible to invest in the scheme, a copy of the latest:

   1. (a)

      annual report and (if more recent) half-yearly report; and

   2. (b)

      quarterly report,

      before the conclusion of any sale to such a person.

5. (5)

   The authorised fund manager must provide a copy of each annual, half-yearly and quarterly report to the FCA.

6. (6)

   For a scheme which is an umbrella, any annual report provided under (3) or (4) may be a report prepared under COLL 15.5.3R(3), but the authorised fund manager must nevertheless provide free of charge the report prepared under COLL 15.5.3R(2) if a unitholder or any other person eligible to invest in the scheme requests it.

1. (1)

   1An annual report, other than for a scheme which is an umbrella, must contain:

   1. (a)

      the accounts for the annual accounting period prepared in accordance with the requirements of the IMA SORP;

   2. (b)

      the report of the authorised fund manager in accordance with COLL 15.5.6R (Authorised fund manager’s report);

   3. (c)

      comparative information in accordance with COLL 4.5.10R (1A) and (2A) (Comparative information);

   4. (d)

      the report of the depositary in accordance with COLL 15.5.7R (Report of the depositary); and

   5. (e)

      the report of the auditor in accordance with COLL 4.5.12R (Report of the auditor).

2. (2)

   An annual report on a scheme which is an umbrella must be prepared for the umbrella as a whole and must contain:

   1. (a)

      for each sub-fund:

      1. (i)

         the accounts required by (1)(a);

      2. (ii)

         the report of the authorised fund manager in accordance with COLL 15.5.6R; and

      3. (iii)

         comparative information in accordance with COLL 4.5.10R(1A) and (2A)

   2. (b)

      the report of the depositary in accordance with COLL 15.5.7R; and

   3. (c)

      the report of the auditor in accordance with COLL 4.5.12R.

3. (3)

   The authorised fund manager of a scheme which is an umbrella may, in addition to complying with (2), prepare a further annual report for any one or more individual sub-funds of the umbrella, in which case it must contain:

   1. (a)

      for the sub-fund:

      1. (i)

         the accounts required by (1)(a);

      2. (ii)

         the report of the authorised fund manager in accordance with COLL 15.5.6R; and

      3. (iii)

         comparative information in accordance with COLL 4.5.10R(1A) and (2A);

   2. (b)

      the report of the depositary in accordance with COLL 15.5.7R; and

   3. (c)

      the report of the auditor in accordance with COLL 4.5.12R.

4. (4)

   The directors of an ICVC or the authorised fund manager of an AUT or ACS must ensure that the accounts referred to in (1)(a), (2)(a) and (3)(a) give a true and fair view of the net revenue and the net capital gains or losses on the scheme property of the authorised fund or sub-fund for the relevant annual accounting period, and of the financial position of the authorised fund or sub-fund as at the end of that period.

5. (5)

   An annual report of a long-term asset fund must also contain a statement setting out a description of the assessment of value required by COLL 15.7.17R including:

   1. (a)

      a separate discussion and conclusion for the matters covered in each paragraph of COLL 6.6.21R, and for each other matter that formed part of the assessment, covering the considerations taken into account in the assessment, a summary of its findings and the steps undertaken as part of or as a consequence of the assessment;

   2. (b)

      an explanation for any case in which benefits from economies of scale that were identified in the assessment have not been passed on to unitholders;

   3. (c)

      an explanation for any case in which unitholders hold units in a class for which the payments out of scheme property in relation to that class as set out in the prospectus (in this rule, “charges”) are higher than those applying to other classes of the same scheme with substantially similar rights;

   4. (d)

      the conclusion of the authorised fund manager’s assessment of whether the charges are justified in the context of the overall value delivered to the unitholders in the scheme; and

   5. (e)

      if the assessment has identified that the charges are not justified in the context of the overall value delivered to the unitholders, a clear explanation of what action has been or will be taken to address the situation.

6. (6)

   An annual report of a long-term asset fund must also contain a statement setting out a description of the assessment required by COLL 15.7.20R (Assessment of investment valuations, due diligence, conflicts of interest and liquidity management), including:

   1. (a)

      a separate discussion and conclusion for each of the matters specified in COLL 15.7.21R (Table: minimum considerations – assessment of investment valuations, due diligence, conflicts of interest and liquidity management) and for each other matter that formed part of the assessment;

   2. (b)

      a summary of the assessment’s findings and the steps undertaken as part of or as a consequence of the assessment; and

   3. (c)

      the conclusion of the authorised fund manager’s assessment of how it managed the LTAF in the best interests of the scheme, its investors and the integrity of the market.

1. (1)

   1A half-yearly report on an authorised fund or sub-fund must contain:

   1. (a)

      the accounts for the half-yearly accounting period which must be prepared in accordance with the requirements of the IMA SORP; and

   2. (b)

      the report of the authorised fund manager in accordance with COLL 15.5.6R.

2. (2)

   For a scheme which is an umbrella, the authorised fund manager may choose whether the half-yearly report is prepared for the umbrella as a whole, or for each individual sub-fund, or both.

1The report of the authorised fund manager must include:

1. (1)

   a review of the investment activities during the period to which the report relates;

2. (2)

   a portfolio statement prepared in accordance with the requirements of the IMA SORP;

3. (3)

   in the case of an umbrella which has more than one sub-fund, particulars in the form of a table showing, as at the end of the period to which the report relates:

   1. (a)

      for each sub-fund, the number of units in that sub-fund that were held by a second sub-fund of that umbrella; and

   2. (b)

      the value of each such holding;

      or, alternatively, a statement that there were no such holdings as at the end of that period;

4. (4)

   particulars of any fundamental or significant change to the authorised fund made since the date of the last report;

5. (5)

   in relation to each scheme or sub-fund which is a long-term asset fund:

   1. (a)

      the amount of any remuneration, charge, payment or expense paid out of the scheme property during the period to which the report relates;

   2. (b)

      the person to whom that amount was paid;

   3. (c)

      what that remuneration, charge, payment or expense was for; and

   4. (d)

      how the remuneration, charge, payment or expense was calculated; and

6. (6)

   any other information which would enable unitholders to make an informed judgement on the development of the activities of the authorised fund during the period and the results of those activities as at the end of the period.

1. (1)

   1The depositary must make an annual report to unitholders which must be included in the annual report.

2. (2)

   The depositary’s report must contain:

   1. (a)

      a description, which may be in summary form, of the duties of the depositary under COLL 15.7.6R and COLL 15.7.7R (Duties of the depositary) and in respect of the safekeeping of the scheme property;

   2. (b)

      in relation to its oversight and monitoring obligations:

      1. (i)

         a description of the reasonable steps the depositary has taken to ensure that the LTAF has been managed in accordance with each of the matters specified in COLL 15.7.6R(2)(e) (Duties of the depositary); and

      2. (ii)

         where an external valuer has not been appointed, a statement setting out the depositary’s determination of the matters in COLL 15.2.6R(2)(a) (Appointment of external valuer or authorised fund manager with knowledge, skills and experience of valuing long-term assets); and

   3. (c)

      a statement as to whether in any material respect:

      1. (i)

         the issue, sale, redemption and cancellation and calculation of the price of the units and the application of the authorised fund’s revenue, have not been carried out in accordance with the rules in this sourcebook and, where applicable, the OEIC Regulations and the instrument constituting the fund; and

      2. (ii)

         the investment and borrowing powers and restrictions applicable to the authorised fund have been exceeded.

1The annual reports in COLL 15.5.3R(1) and (2) and the half-yearly reports in COLL 15.5.5R(1) must:

1. (1)

   in the case of an ICVC, if there is:

   1. (a)

      more than one director, be approved by the board of directors and signed on their behalf by the ACD and at least one other director; or

   2. (b)

      no director other than the ACD, be signed by the ACD;

2. (2)

   in the case of an AUT or ACS, if the authorised fund manager has:

   1. (a)

      more than one director, be signed by at least two directors of the authorised fund manager; or

   2. (b)

      only one director, be signed by the director of the authorised fund manager.

1. (1)

   1A quarterly report must contain details of any transactions executed by, or for or on behalf of, the long-term asset fund in the relevant quarterly reporting period which have resulted in assets being held in the LTAF’sscheme property, including:

   1. (a)

      the date of each transaction;

   2. (b)

      details of the asset and type of asset which was the subject of the transaction; and

   3. (c)

      an explanation of how the transaction is consistent with the LTAF’s investment objectives, investment policy and investment strategy.

2. (2)

   A quarterly reporting period for a long-term asset fund must be determined in accordance with (a) to (c).

   1. (a)

      Each quarterly reporting period must be three months long.

   2. (b)

      There must be four consecutive quarterly reporting periods in each annual accounting period.

   3. (c)

      The first quarterly reporting period in each annual accounting period must begin when the annual accounting period begins.

1. (1)

   1Any proposed change which would be reasonably considered to be a fundamental change to the scheme requires the prior sanction of an extraordinary resolution of the unitholders.

2. (2)

   Any proposed change to the scheme which is not within (1) but which would be reasonably considered to be significant, requires the giving of reasonable notice to unitholders to become effective.

3. (3)

   Alterations affecting only a particular sub-fund or class of units may be approved in accordance with (1) or (2) for the particular sub-fund or class of units, with the consent of, or, as the case may be, notice to, the relevant unitholders.

4. (4)

   This rule and COLL 15.5.12R (Meetings) will apply (unless the context requires otherwise) to alterations concerning unitholders of a particular sub-fund or class of units rather than the scheme or sub-fund as a whole.

1. (1)

   1Details of the procedures for the convening and conducting of meetings and resolutions must be set out in the instrument constituting the fund and be reasonable and fair as between all relevant parties.

2. (2)

   The authorised fund manager must record and keep minutes for six years of all proceedings to which COLL 15.5.10R (Alterations to the scheme and notices to unitholders) and this rule are relevant.

3. (3)

   The provisions in COLL 4.4.12R (Notices to unitholders), COLL 4.4.13R (Other notices) and COLL 4.4.14G (References to writing and electronic documents) apply in relation to long-term asset funds.

1This section applies to:

1. (1)

   the authorised fund manager of an AUT, ACS or an ICVC;

2. (2)

   the depositary of an AUT, ACS or an ICVC; and

3. (3)

   an ICVC,

   which is a long-term asset fund.

1. (1)

   1Where this section refers to a second scheme, and the second scheme is a feeder scheme, which (in respect of investment in units in collective investment schemes) is dedicated to units in a single collective investment scheme, the reference in this section to the second scheme must be read as if it were a reference to the feeder scheme’s master scheme.

2. (2)

   Where this section refers to a second scheme, and the second scheme is a master scheme to which (in respect of investment in units in collective investment schemes) the relevant long-term asset fund is dedicated, the reference in this section to the second scheme must be read as if it were a reference to any scheme into which that master scheme invests.

1An authorised fund manager must ensure that, taking account of the investment objectives, policy and strategy of the long-term asset fund as stated in its most recently published prospectus, the scheme property of the long-term asset fund aims to provide a prudent spread of risk.

1. (1)

   1The scheme property of a long-term asset fund may, subject to the rules in this chapter, comprise any assets or investments to which it is dedicated.

2. (2)

   The instrument constituting the fund and the prospectus may further restrict:

   1. (a)

      the kinds of assets in which the scheme property may be invested;

   2. (b)

      the types of transactions permitted and any relevant limits; and

   3. (c)

      the borrowing powers of the scheme.

1The investment strategy of a long-term asset fund must be to invest mainly in long-term illiquid assets.

1The scheme property of a long-term asset fund must, except where otherwise provided by the rules in this chapter, consist only of one or more of the following to which it is dedicated:

1. (1)

   any specified investment:

   1. (a)

      within articles 74 to 86 of the Regulated Activities Order;

   2. (b)

      within article 89 (Rights to or interests in investments) of the Regulated Activities Order where the right or interest relates to a specified investment within (a);

2. (2)

   (to the extent not within (a)), an interest in a loan, provided that the loan was not originated to:

   1. (a)

      a natural person;

   2. (b)

      the authorised fund manager of the long-term asset fund;

   3. (c)

      the depositary of the long-term asset fund;

   4. (d)

      an affiliated company of the person in (b) or (c); or

   5. (e)

      a person who intends to use, or uses, the credit for the purpose of investing in a derivative, cryptoasset derivative, an unregulated transferable cryptoasset, precious metals or a commodity contract within (5);

3. (3)

   an interest in an immovable under COLL 15.6.18R (Investment in property);

4. (4)

   precious metals; or

5. (5)

   a commodity contract traded on an RIE or a recognised overseas investment exchange.

   [Note: Full-scope UK AIFMs are subject to specific requirements relating to conflicts of interest (see articles 30 to 36 in the AIFMD level 2 regulation and SYSC 10.1.23R to SYSC 10.1.26R (Additional requirements for an AIFM)).]

   [Note 2: In relation to (2), a borrower who receives money by way of deposit from a person who is not a bank may (if the borrower is acting by way of business) be carrying on the regulated activity of accepting deposits, but an exclusion in the Regulated Activities Order may be available. See also article 2 of the Business Order.]

1. (1)

   1Subject to (2), a long-term asset fund may invest in units in a scheme (a ‘second scheme’) only if the second scheme is:

   1. (a)

      a regulated collective investment scheme; or

   2. (b)

      a scheme not within (a) where the authorised fund manager has taken reasonable care to determine that:

      1. (i)

         it is the subject of an independent annual audit conducted in accordance with international standards on auditing;

      2. (ii)

         the calculation of the net asset value of each of the second schemes and the maintenance of their accounting records is segregated from the investment management function; and

      3. (iii)

         it (and any master scheme to whose units it is dedicated) is prohibited from investing in the long-term asset fund, or, if there is no such prohibition, the authorised fund manager is satisfied, on reasonable grounds and after making all reasonable enquiries, that no such investment will be made by either the second scheme or any fund in which the second scheme invests.

2. (2)

   A long-term asset fund must not invest more than 20% in value of the scheme property in units in second schemes which are unregulated schemes, qualified investor schemes or long-term asset funds unless the authorised fund manager has carried out appropriate due diligence on each of the second schemes and has taken reasonable care to determine that, after making all reasonable enquiries and on reasonable grounds, the second scheme complies with relevant legal and regulatory requirements.

3. (3)

   The authorised fund manager of a long-term asset fund with more than 20% in value of the scheme property invested in one or more second schemes which are unregulated schemes, qualified investor schemes or long-term asset funds must carry out appropriate due diligence on those schemes on an ongoing basis.

1Where the second scheme in COLL 15.6.9R is an umbrella, the provisions apply to each sub-fund as if it were a separate scheme.

1. (1)

   1An authorised fund manager must take reasonable care to determine the following when entering into any transaction in derivatives or any commodity contract which may result in any asset becoming part of the scheme property:

   1. (a)

      if it is an asset in which the scheme property could be invested, that the transaction:

      1. (i)

         can be readily closed out; or

      2. (ii)

         would at the expected time of delivery relate to an asset which could be included in the scheme property under the rules in this chapter; or

   2. (b)

      in any other case, that the transaction can be readily closed out.

2. (2)

   An authorised fund manager may acquire an asset within (1) if its determination has proved incorrect and if it determines that acquisition is in the interests of the unitholders, provided it has the consent of the depositary.

3. (3)

   Any asset within (1) acquired in accordance with (2) may form part of the scheme property despite any other rule in this chapter until the position can be rectified.

1. (1)

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

2. (2)

   Exposure is globally covered if adequate cover from within the scheme property is available to meet the scheme’s total exposure taking into account any reasonably foreseeable market movement.

3. (3)

   The total exposure relating to derivatives held in a long-term asset fund may not exceed the net value of the scheme property.

4. (4)

   No element of cover may be used more than once.

1A transaction in an OTC derivative must be capable of valuation which it will only be if the authorised fund manager having taken reasonable care determines that, throughout the life of the derivative (if the transaction is entered into), it will be able to value the investment concerned with reasonable accuracy:

1. (1)

   on the basis of the pricing model; or

2. (2)

   on some other reliable basis reflecting an up-to-date market value,

   which has been agreed between the authorised fund manager and the depositary.

1. (1)

   1An authorised fund manager must, as frequently as necessary to ensure compliance with COLL 15.6.13R(2) and COLL 15.6.13R(4), re-calculate the amount of cover required in respect of derivatives and forward transactions in existence under this chapter.

2. (2)

   Derivatives and forward transactions may be retained in the scheme property only so long as they remain covered globally under COLL 15.6.13R.

3. (3)

   An authorised fund manager must use a risk management process enabling it to monitor and measure as frequently as appropriate the risk of a scheme’s derivatives positions and their contribution to the overall risk profile of the scheme.

1. (1)

   1The ICVC, or the depositary at the request of the ICVC, or the depositary of an AUT or ACS at the request of the authorised fund manager, may enter into a repo contract or a stock lending arrangement within section 263B of the Taxation of Chargeable Gains Act 1992 (without extension by section 263C).

2. (2)

   The depositary must ensure that the value of any collateral for the stock lending arrangement is at all times at least equal to the value of the securities transferred by the depositary.

3. (3)

   In the case of the expiry of validity of any collateral, the duty in (2) is satisfied if the depositary or the authorised fund manager, as appropriate, takes reasonable care to determine that sufficient collateral will be transferred by close of business on the day of expiry.

1. (1)

   1The ICVC or depositary of an AUT or ACS (on the instructions of the authorised fund manager) may borrow money for the use of the authorised fund on terms that the borrowing is to be repayable out of the scheme property.

2. (2)

   The authorised fund manager must ensure that the authorised fund’s borrowing does not, on any day, exceed 30% of the net value of the scheme property and must take reasonable care to ensure that arrangements are in place that will enable borrowings to be closed out to ensure such compliance.

3. (3)

   In this rule “borrowing” also includes any arrangement (including a combination of derivatives) designed to achieve a temporary injection of money into the scheme property in the expectation that the sum will be repaid.

4. (4)

   Where the limit in (2) is breached, the authorised fund manager must take action in accordance with the principles set out in COLL 15.7.3R(3) to COLL 15.7.3R(5) (Duties of the authorised fund manager: investment and borrowing powers) to deal with that breach.

1. (1)

   1Any investment in land or a building held within the scheme property of a long-term asset fund must be in an immovable within (2).

2. (2)

   For an immovable:

   1. (a)

      it must be situated in a country or territory identified in the prospectus;

   2. (b)

      the authorised fund manager must have taken reasonable care to determine that the title to the interest in the immovable is a good marketable title; and

   3. (c)

      the authorised fund manager of an AUT or ACS or the ICVC must have received a report from an appropriate valuer that:

      1. (i)

         contains a valuation of the interest in the immovable (with and without any relevant existing mortgage); and

      2. (ii)

         states that in the appropriate valuer’s opinion the interest in the immovable would, if acquired by the scheme, be capable of being disposed of at that valuation in a timeframe which is consistent with the LTAF’s liquidity profile and redemption policy;

   4. (d)

      unless (c) is satisfied, the authorised fund manager of an AUT or ACS or the ICVC must have received a report from an appropriate valuer valuing the interest in the immovable and stating that:

      1. (i)

         the immovable is adjacent to or in the vicinity of another immovable included in the scheme property; and

      2. (ii)

         in the opinion of the appropriate valuer, the total value of the interests in both immovables would at least equal the sum of the price payable for the interest in the immovable and the existing value of the interest in the other immovable; and

   5. (e)

      it must not be bought:

      1. (i)

         if it becomes apparent to the authorised fund manager that the report in either (c) or (d) could no longer reasonably be relied upon; or

      2. (ii)

         at a price more than 105% of the valuation relevant to the interest for that immovable in the report in either (c) or (d).

3. (3)

   Any contents of any building may be regarded as part of the relevant immovable.

4. (4)

   An appropriate valuer must be a person who:

   1. (a)

      has knowledge of and experience in the valuation of immovables of the relevant kind in the relevant area;

   2. (b)

      is qualified to be a standing independent valuer of an authorised fund or is considered by the scheme’s standing independent valuer to hold an equivalent qualification;

   3. (c)

      is independent of the ICVC, the depositary and each of the directors of the ICVC or of the authorised fund manager and depositary of the AUT or ACS; and

   4. (d)

      has not been engaged, and whose associates have not been engaged, in relation to the finding of the immovable for the scheme or the finding of the scheme for the immovable.

1. (1)

   1An overseas immovable may be held by a scheme through an intermediate holding vehicle whose purpose is to enable the holding of immovables by the scheme or a series of such intermediate holding vehicles, provided that the interests of unitholders are adequately protected. Any investment in an intermediate holding vehicle for the purpose of holding an overseas immovable shall be treated for the purposes of this section as if it were a direct investment in that immovable.

2. (2)

   An intermediate holding vehicle must be wholly owned by the scheme or another intermediate holding vehicle or series of intermediate holding vehicles wholly owned by the scheme, unless and to the extent that local legislation or regulation relating to the intermediate holding vehicle holding the immovable requires a proportion of local ownership.

1The following limits apply in respect of immovables held as part of the scheme property:

1. (1)

   the amount secured by mortgages over any immovable must not exceed 100% of the latest valuation by an appropriate valuer under COLL 15.6.18R(2)(c) or COLL 15.6.18R(2)(d) or COLL 15.6.22R, as appropriate;

2. (2)

   no option may be granted to a person to buy or obtain an interest in any immovable comprised in the scheme property if this might unduly prejudice the ability to provide redemption; and

3. (3)

   the total of all premiums paid for options to purchase immovables must not exceed 10% of the scheme value in any 12-month period, calculated at the date of the granting of the option.

1. (1)

   1 In relation to the appointment of a valuer the authorised fund manager must:

   1. (a)

      at the outset appoint the standing independent valuer with the approval of the depositary and likewise upon any vacancy; and

   2. (b)

      ensure that any immovables in the scheme property are valued by an appropriate valuer (standing independent valuer) appointed by the authorised fund manager.

2. (2)

   1The following apply in relation to the functions of the standing independent valuer:

   1. (a)

      the authorised fund manager must ensure that the standing independent valuer appointed under (1), procures the valuation of all the immovables held within the scheme property, on the basis of a full valuation with physical inspection (including, where the immovable is or includes a building, internal inspection) at least once a year;

   2. (b)

      for the purposes of (a), any inspection in relation to adjacent properties of a similar nature and value may be limited to that of only one such representative property;

   3. (c)

      the authorised fund manager must ensure that the standing independent valuer values the immovables, on the basis of a review of the last full valuation, at least once a month;

   4. (d)

      if either the authorised fund manager or the depositary becomes aware of any matter which appears likely to:

      1. (i)

         affect the outcome of a valuation of an immovable; or

      2. (ii)

         cause the valuer to decide to value under (a), instead of under (c),

         it must immediately inform the standing independent valuer of that matter;

   5. (e)

      the authorised fund manager must use its best endeavours to ensure that any other affected person reports to the standing independent valuer immediately upon that person becoming aware of any matter within (d); and

   6. (f)

      any valuation by the standing independent valuer must be undertaken in accordance with UKVPS 3 and 2.3 of UKVPGA 2 of the RICS Valuation – Global Standards 2017 UK national supplement 2018 (the RICS Red Book) or, in the case of overseas immovables, on an appropriate basis but subject to any provisions of the instrument constituting the fund.

3. (3)

   In relation to immovables:

   1. (a)

      any valuation under this rule has effect, until the next valuation under this rule, for the purposes of the value of immovables; and

   2. (b)

      an agreement to transfer an immovable or an interest in an immovable is to be disregarded for the purpose of the valuation of the scheme property unless it reasonably appears to the authorised fund manager to be legally enforceable.

1This section applies to:

1. (1)

   an authorised fund manager of an AUT, ACS or an ICVC;

2. (2)

   any other director of an ICVC;

3. (3)

   the depositary of an AUT, ACS or an ICVC; and

4. (4)

   an ICVC,

   which is a long-term asset fund.

1. (1)

   1The authorised fund manager must manage the scheme in accordance with:

   1. (a)

      the instrument constituting the fund;

   2. (b)

      the applicable rules;

   3. (c)

      the most recently published prospectus; and

   4. (d)

      for an ICVC, the OEIC Regulations.

2. (2)

   1The authorised fund manager must carry out such functions as are necessary to ensure compliance with the rules that impose obligations on the authorised fund manager or ICVC, as appropriate.

3. (3)

   The authorised fund manager must:

   1. (a)

      make decisions as to the constituents of the scheme property in accordance with the investment objectives and policy of the scheme;

   2. (b)

      instruct the depositary how rights attaching to the ownership of scheme property are to be exercised;

   3. (c)

      take action immediately to rectify any breach of the pricing methodology set out in the prospectus, which must (unless the authorised fund manager determines on reasonable grounds that the breach is of minimal significance) extend to payment of money:

      1. (i)

         by the authorised fund manager to unitholders and former unitholders;

      2. (ii)

         by the ACD to the ICVC;

      3. (iii)

         by the ICVC to the ACD;

      4. (iv)

         by the authorised fund manager of the AUT or ACS to the depositary; or

      5. (v)

         by the depositary (for the account of the AUT or ACS) to the authorised fund manager;

   4. (d)

      ensure where relevant that the ICVC complies with the relevant obligations imposed by, and when appropriate exercises the relevant powers provided under, the OEIC Regulations;

   5. (e)

      maintain such records as are necessary to enable the authorised fund manager or the ICVC, as appropriate, to comply with and demonstrate compliance with the rules in this sourcebook and also in the case of an ICVC, the OEIC Regulations; and

   6. (f)

      maintain for a period of six years a daily record of the units held, acquired or disposed of by the authorised fund manager including the classes of such units, and of the balance of any acquisitions and disposals.

1. (1)

   1An authorised fund manager may give instructions to deal in the scheme property.

2. (2)

   An authorised fund manager must avoid the scheme property being used or invested contrary to any provision in COLL 15.6 (Investment and borrowing powers).

3. (3)

   An authorised fund manager must immediately on becoming aware of any breach of COLL 15.6 take action, at its own expense, to rectify that breach.

4. (4)

   An authorised fund manager must take the action in (3) immediately, except in circumstances where doing so would not be in the best interests of unitholders, in which case the action must be taken as soon as such circumstances cease to apply.

5. (5)

   An authorised fund manager must not postpone taking action in accordance with (3) unless the depositary has given its consent.

1Where reasonable grounds exist for an ACD of an ICVC, or an authorised contractual scheme manager of a co-ownership scheme which is an umbrella, to consider that a foreign law contract entered into by the ICVC or authorised contractual scheme manager on behalf of the co-ownership scheme may have become inconsistent with the principle of limited recourse stated in the instrument constituting the fund of the ICVC or co-ownership scheme (see COLL 15.3.6R(3)(5) and COLL 15.3.6R(3)(6)), the ACD or authorised contractual scheme manager of the co-ownership scheme must:

1. (1)

   promptly investigate whether there is an inconsistency; and

2. (2)

   if the inconsistency still appears to exist, take appropriate steps to remedy that inconsistency.

1. (1)

   1The depositary is responsible for the safekeeping of all the scheme property.

2. (2)

   The depositary must:

   1. (a)

      take all steps to ensure that transactions properly entered into for the account of the scheme are completed;

   2. (b)

      take all steps to ensure that instructions properly given by the authorised fund manager in respect of the exercise of rights related to scheme property are carried out;

   3. (c)

      ensure that any resulting benefit of a derivatives or forward transaction is received by itself in respect of the scheme;

   4. (d)

      hold and deal with any income received in respect of the scheme property in accordance with COLL 15.8.18R (Income);

   5. (e)

      take reasonable care to ensure that the scheme is managed by the authorised fund manager in accordance with:

      1. (i)

         the investment objectives, policy and strategy set out in the LTAF’s most recent prospectus;

      2. (ii)

         COLL 15.6 (Investment and borrowing powers);

      3. (iii)

         COLL 15.8.2R (Valuation, pricing and dealing);

      4. (iv)

         COLL 15.8.18 (Income); and

      5. (v)

         any provision of the instrument constituting the fund or the prospectus that relates to the provisions in (ii) to (iv);

   6. (f)

      where applicable, comply with its obligations under COLL 15.2.6R (Appointment of external valuer or authorised fund manager with knowledge, skills and experience of valuing long-term assets);

   7. (g)

      keep records so as to comply with the rules in this sourcebook and so as to demonstrate such compliance; and

   8. (h)

      be responsible for any other duties as set out in the instrument constituting the fund.

3. (3)

   If a relevant ICVC ceases to have any directors, the depositary may act in accordance with COLL 6.5.6R (ICVC without a director).

4. (4)

   This rule applies to the depositary of a long-term asset fund to the extent the provisions are consistent with the requirements of the AIFMD level 2 regulation.

   [Note: Articles 88 to 90 of the AIFMD level 2 regulation make provision relating to custody and safekeeping of scheme property. The AIFMD level 2 regulation applies to the depositary of a long-term asset fund because an LTAF must be managed by a full-scope UK AIFM.]

1The depositary must also:

1. (1)

   ensure that any scheme property in registered form is as soon as reasonably practicable registered in its name or that of its nominee or delegate, as appropriate; and

2. (2)

   take into its custody or control all documents of title of the scheme property other than in respect of derivatives or forward transactions.

1. (1)

   1The authorised fund manager and the depositary must ensure that any transaction in respect of the scheme property undertaken with an affected person is on terms at least as favourable to the scheme as any comparable arrangement on normal commercial terms negotiated at arm’s length with an independent third party.

2. (2)

   Paragraph (1) is subject to any provision in the instrument constituting the fund and the prospectus imposing a prohibition in relation to any type of transaction.

[Note: See articles 30 to 36 of the AIFMD level 2 regulation.]

1. (1)

   1The authorised fund manager or the depositary of an AUT or ACS (in accordance with their responsibilities as set out in the instrument constituting the fund) must maintain a register of unitholders as a document in accordance with this rule.

2. (2)

   The register must contain:

   1. (a)

      the name and address of each unitholder (for joint unitholders no more than four need to be registered);

   2. (b)

      the number of units (including fractions of a unit) of each class held by each unitholder; and

   3. (c)

      the date on which the unitholder was registered in the register for those units.

3. (3)

   The authorised fund manager or the depositary of an AUT or ACS (as appropriate) must take all reasonable steps and exercise all due diligence to ensure the register is kept complete and up to date.

4. (4)

   Where relevant, the authorised fund manager must immediately notify the depositary of an AUT or ACS of any information it receives which may affect the accuracy of any entry in the register.

5. (5)

   In the case of a limited partnership scheme, unregistered units may be held by the authorised contractual scheme manager as the agent for the scheme provided the authorised contractual scheme manager is not entered in the register as the new unitholder.

1Subject to any legal requirements which apply to the valuation of investments held or to be held in the scheme property of a long-term asset fund, the authorised fund manager of a long-term asset fund which carries on the valuation function itself must follow good market practice to value the investments held or to be held in the scheme property.

[Note: See FUND 3.9 (Valuation) and articles 67 to 71 of the AIFMD level 2 regulation.]

1Subject to any applicable legal requirements, the authorised fund manager of a long-term asset fund must use good market practice to:

1. (1)

   establish, implement and apply written policies and procedures on due diligence; and

2. (2)

   implement effective arrangements for ensuring that investment decisions on behalf of the long-term asset fund are carried out in compliance with the objectives, investment strategy and, where applicable, the risk limits of the scheme.

[Note: See articles 18 to 20 of the AIFMD level 2 regulation.]

1 COLL 15.7.17R to COLL 15.7.24R apply to an authorised fund manager of an AUT, ACS or ICVC.

1. (1)

   1An authorised fund manager must conduct an assessment at least annually for each scheme it manages of whether the payments out of scheme property set out in the prospectus are justified in the context of the overall value delivered to unitholders.

2. (2)

   In carrying out the assessment required by (1), the AFM must, separately for each class of units in a scheme, consider at least the matters set out in COLL 6.6.21R (Table: minimum considerations – assessment of value).

1Failure by an AFM to take sufficient steps to address any instance where a scheme’s charges are not justified in the context of the overall value delivered to unitholders may be relied on as tending to establish contravention of COBS 2.1.1R or COBS 2.1.4R as applicable.

1. (1)

   1An authorised fund manager of a long-term asset fund must conduct an assessment at least annually of how it has managed the LTAF in the best interests of the LTAF, the LTAF’s investors and the integrity of the market (see COBS 2.1.4R (AIFMs’ best interests rules)).

2. (2)

   In carrying out the assessment required by (1), the authorised fund manager must consider at least the matters set out in COLL 15.7.21R (Table: minimum considerations – valuation of investments, due diligence, conflicts of interest and liquidity management assessment).

1. (1)

   1An authorised fund manager must ensure that at least one quarter of the members of its governing body are independent natural persons. If the AFM’s governing body comprises fewer than eight members, the AFM must instead ensure that at least two of its members are independent natural persons.

2. (2)

   The authorised fund manager, in appointing an independent member of its governing body, must determine whether such a member is independent in character and judgement and whether there are relationships or circumstances which are likely to affect, or could appear to affect, that member’s judgement.

3. (3)

   The authorised fund manager must take reasonable steps to ensure that independent members appointed to its governing body have sufficient expertise and experience to be able to make judgements on whether the AFM is managing each scheme in the best interests of unitholders.

4. (4)
   1. (a)

      Independent members of an AFM’s governing body must be appointed for terms of no longer than five years, with a cumulative maximum duration of ten years.

   2. (b)

      If an independent member is appointed to more than one governing body within an AFM’s group, the cumulative maximum duration of ten years referred to in (a) is calculated by adding the durations of each separate appointment and discounting periods during which appointments overlapped to avoid double counting.

   3. (c)

      In relation to a person who served as an independent director of an AFM’s governing body before 1 October 2019, the five-year term(s) and cumulative maximum duration of ten years run from that date.

5. (5)

   Independent members are not eligible for reappointment to an AFM’s governing body until five years have elapsed from the end of the ten-year period referred to in (4).

6. (6)

   The terms of employment on which independent members are appointed must be such as to secure their independence.

1. (1)

   1An AFM must allocate responsibility for ensuring its compliance with COLL 15.7.17R, COLL 15.7.20R, COLL 15.7.22R and COBS 2.1.4R (AIFMs’ best interests rules) to an approved person.

2. (2)

   Where the chair of the AFM’s governing body is an approved person, the AFM must allocate the responsibility set out in (1) to that person.

   [Note: See SYSC 24 (Senior managers and certification regime: Allocation of prescribed responsibilities).]

1This section applies to:

1. (1)

   an authorised fund manager of an AUT, ACS or an ICVC;

2. (2)

   any other director of an ICVC;

3. (3)

   the depositary of an AUT, ACS or an ICVC; and

4. (4)

   an ICVC,

   which is a long-term asset fund.

1. (1)

   1The value of the scheme property is the net value of the scheme property after deducting any outstanding borrowings (including any capital outstanding on a mortgage of an immovable).

2. (2)

   Any part of the scheme property which is not an investment (save an immovable) must be valued at fair value.

3. (3)

   For the purposes of (2), any charges that were paid, or would be payable, on acquiring or disposing of the asset must be excluded from the value of that asset.

4. (4)

   The value of the scheme property of an authorised fund must, save as otherwise provided in this section, be determined in accordance with the provisions of the instrument constituting the fund and the prospectus, as appropriate.

5. (5)

   The scheme must have a valuation point on each dealing day and there must be at least one valuation point every month.

6. (6)

   The authorised fund manager must prepare a valuation in accordance with (4) for each relevant type of unit at each relevant valuation point.

7. (7)

   The price of a unit must be calculated on the basis of the valuation in (6) in a manner that is fair and reasonable as between unitholders.

8. (8)

   In respect of each valuation point under (5), the authorised fund manager must publish in an appropriate manner the price of any type of unit based on the valuation carried out in accordance with (6).

9. (9)

   The authorised fund manager must also provide on request to any unitholder at any time an estimated price for any type of unit in the scheme.

10. (10)

    The period of any initial offer and how it should end must be set out in the prospectus and must not be of unreasonable length.

1. (1)

   1Where an authorised fund manager:

   1. (a)

      accepts instructions to sell and redeem units as principal; and

   2. (b)

      is able to execute a sale instruction by selling units it has redeemed at the same valuation point, without placing its own capital at risk,

      subject to (2), the AFM must not retain for its own account, or the account of any of its associates, the difference between the price at which a unit was redeemed (before deduction of any redemption charge) and the price at which the same unit was sold (after deduction of any preliminary charge). Any such difference must be allocated in a way that is fair to unitholders.

2. (2)

   In calculating the profit arising under (1), the AFM may offset any loss it incurs at the same valuation point, calculated in accordance with (3), when dealing as principal in relation to:

   1. (a)

      a unit issued at that valuation point to fulfil a sale instruction that cannot be matched against any redeemed unit or any other unit of that class held by the manager as principal; and

   2. (b)

      a unit redeemed and cancelled at that valuation point.

3. (3)

   The amount of the loss referred to in (2) is:

   1. (a)

      for units issued in accordance with (2)(a), the difference between the issue price of a unit and the sale price of that unit, less any preliminary charge;

   2. (b)

      for units cancelled in accordance with (2)(b), the difference between the cancellation price of a unit and the redemption price of that unit, before any redemption charge is applied.

4. (4)

   Where any loss arising under (2) is greater than any profit arising under (1), that loss cannot be offset against any profit arising at a subsequent valuation point.

5. (5)

   This rule applies to the redemption and sale of units of different classes at the same valuation point, if those classes are treated as one for the purpose of COLL 15.8.6R (Issue and cancellation of units in multiple classes).

1. (1)

   1The authorised fund manager must:

   1. (a)

      ensure that at each valuation point there are at least as many units in issue of any class as there are units registered to unitholders of that class; and

   2. (b)

      not do or omit anything that would, or might, confer on itself a benefit or advantage at the expense of a unitholder or potential unitholder.

2. (2)

   For the purposes of (1) the authorised fund manager may take into account sales and redemptions after the valuation point, provided it has systems and controls to ensure compliance with (1).

3. (3)

   The authorised fund manager must arrange for the issue and cancellation of units and pay money or assets to or from the depositary for the account of the scheme as required by the prospectus.

4. (4)

   The authorised fund manager must keep a record of issues and cancellations made under this rule.

5. (5)

   The authorised fund manager may arrange for the ICVC, or instruct the depositary of the AUT or ACS, to issue or cancelunits where the authorised fund manager would otherwise be obliged to sell or redeem the units in the manner set out in the prospectus.

6. (6)

   Where the authorised fund manager has not complied with (1), it must correct the error as soon as possible and must reimburse the scheme any costs it may have incurred in correcting the position, subject to any reasonable minimum level for such reimbursement as set out in the prospectus.

1If a long-term asset fund has two or more classes of unit in issue, the authorised fund manager may treat any or all of those classes as one for the purpose of determining the number of units to be issued or cancelled by reference to a particular valuation point, if:

1. (1)

   the depositary gives its prior agreement; and

2. (2)

   the relevant classes:

   1. (a)

      have the same entitlement to participate in, and the same liability for charges, expenses and other payments that may be recovered from, the scheme property; or

   2. (b)

      differ only as to whether income is distributed or accumulated by periodic credit to capital, provided the price of the units in each class is calculated by reference to undivided shares in the scheme property.

1. (1)

   1Where transfer of units in an ACS is allowed by its contractual scheme deed and prospectus in accordance with the conditions specified by FCA rules, the authorised contractual scheme manager of the ACS must take reasonable care to ensure that units are only transferred if the conditions specified by the FCA under (2) are met.

2. (2)

   The FCA specifies that for the purposes of (1), and for the purposes of COLL 15.3.6R(3)(9)(a)(vii)(B) (Table: contents of the instrument constituting the fund) and COLL 15.4.5R(18)(2) (Table: contents of long-term asset fund prospectus), units in the ACS may only be transferred to a person:

   1. (a)

      who is a:

      1. (i)

         professional ACS investor; or

      2. (ii)

         large ACS investor; or

      3. (iii)

         person who already holds units in the scheme; and

   2. (b)

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

1. (1)

   1The authorised contractual scheme manager of an authorised contractual scheme which is a long-term asset fund must take reasonable care to ensure that rights or interests in units in the scheme are not acquired by any person from or through an intermediate unitholder in a long-term asset fund, unless:

   1. (a)

      that person is a:

      1. (i)

         professional ACS investor; or

      2. (ii)

         large ACS investor; or

      3. (iii)

         person who already holds units in the scheme; and

   2. (b)

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

2. (2)

   The authorised contractual scheme manager will be regarded as complying with (1) to the extent that it can show that it was reasonable for it to rely on relevant information provided by another person.

1The authorised contractual scheme manager of a long-term asset fund which is an ACS must redeemunits in the scheme 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 COLL 15 Annex 1R(1) and (2) (ACS Long-Term Asset Funds: eligible investors).

1The authorised fund manager must, at all times during the dealing day, be willing to effect the sale of units to any eligible investor (subject to any conditions in the instrument constituting the fund and the prospectus, which must be fair and reasonable as between all unitholders and potential unitholders) for whom the authorised fund manager does not have reasonable grounds to refuse such sale.

1. (1)

   1In this rule, a ‘redemption determination’ is a determination by the authorised fund manager of the long-term asset fund to:

   1. (a)

      accept a request by a unitholder to redeem units in the scheme;

   2. (b)

      refuse a redemption request (see paragraph (2)(c)); or

   3. (c)

      make such other determination in relation to the redemption request as may be provided for in the instrument constituting the fund and the prospectus (see paragraph (6) below, and COLL 15.8.13G(6) and (7)).

2. (2)

   The redemption arrangements for a long-term asset fund must ensure the following:

   1. (a)

      A unitholder must be able to submit a request to redeem units before the next date on which the authorised fund manager makes a redemption determination, subject to any cut-off point which may be specified in the prospectus for this purpose.

   2. (b)

      The authorised fund manager must not make redemption determinations more frequently than the dealing frequency of the scheme and, in any event, not more than once a month.

   3. (c)

      The authorised fund manager must accept a unitholder’s request to redeemunits in the scheme in accordance with any conditions in the instrument constituting the fund and the prospectus unless the authorised fund manager has reasonable grounds to refuse the redemption request.

   4. (d)

      The authorised fund manager must inform the unitholder of the outcome of the redemption determination.

   5. (e)

      If the authorised fund manager accepts the unitholder’s request to redeem units in the scheme:

      1. (i)

         the redemption request is deemed to be irrevocable;

      2. (ii)

         the authorised fund manager must undertake to effect the redemption at the applicable time, in accordance with any conditions in the instrument constituting the fund and the prospectus; and

      3. (iii)

         the authorised fund manager must confirm to the unitholder:

         1. (A)

            that the redemption request has been accepted and cannot be revoked; and

         2. (B)

            having regard to the period specified for the purposes of (f), the dates on which it is expected that the redemption will be effected and the appropriate proceeds paid.

   6. (f)

      The authorised fund manager must determine the price for the units being redeemed pursuant to the unitholder’s redemption request at the first valuation point following the end of the notice period specified in the instrument constituting the fund and the prospectus (the ‘notice period’).

   7. (g)

      The notice period must be at least 90 days after the day on which the request to redeem units in the scheme was accepted.

   8. (h)

      The authorised fund manager must redeem the units at the price determined in accordance with (f) and pay the unitholder the appropriate proceeds of redemption in accordance with paragraphs (4) and (5).

3. (3)

   Subject to COBS 2.1.4R (AIFMs’ best interests rule) and COLL 15.3.2R (Classes of unit), where the long-term asset fund has more than one class of unit, the arrangements for the redemption of units may differ between classes provided the arrangements for all classes of unit ensure the matters specified in (2).

4. (4)

   After having effected a redemption request, the authorised fund manager must pay the full proceeds of the redemption to the unitholder within any reasonable period specified in the prospectus, unless it has reasonable grounds for withholding payment.

5. (5)

   Payment of proceeds on redemption must be made by the authorised fund manager in any manner provided for in the prospectus which must be fair and reasonable as between redeeming unitholders and continuing unitholders.

6. (6)

   If the instrument constituting the fund and the prospectus of a long-term asset fund permit the authorised fund manager to defer or limit a requested redemption, those arrangements must not result in:

   1. (a)

      the authorised fund manager making redemption determinations more frequently than once a month (see paragraph (2)(b)); or

   2. (b)

      the notice period being shorter than 90 days (see paragraph (2)(g)).

1. (1)

   The authorised fund manager of a long-term asset fund that is also a property authorised investment fund must take reasonable steps to ensure that no body corporate holds more than 10% of the net asset value of that scheme (the “maximum allowable”).

2. (2)

   For the purposes of (1), a body corporate shall not be treated as holding more than the maximum allowable to the extent that:

   1. (a)

      the body corporate holds units in a unit trust scheme which holds shares in the property authorised investment fund; and

   2. (b)

      in their capacity as trustees of the unit trust scheme, the trustees are chargeable in the United Kingdom either to income tax or to corporation tax.

3. (3)

   1Where the authorised fund manager of a property authorised investment fund becomes aware that a body corporate holds more than the maximum allowable, the authorised fund manager must:

   1. (a)

      notify the body corporate of that event;

   2. (b)

      not pay any income distribution to the body corporate; and

   3. (c)

      redeem or cancel units forming the body corporate’s holding down to the maximum allowable within a reasonable timeframe.

4. (4)

   For the purpose of (3)(c), a reasonable timeframe means the timeframe which the authorised fund manager reasonably considers to be appropriate having regard to the interests of the unitholders as a whole.

1. (1)

   1An ICVC must not incur any expense in respect of the use of any movable or immovable property unless the scheme is dedicated to such investment or such property is necessary for the direct pursuit of its business.

2. (2)

   Payments out of the scheme property may be made from capital property rather than from income, provided the basis for this is set out in the prospectus.

1. (1)

   1A long-term asset fund must have:

   1. (a)

      an annual accounting period;

   2. (b)

      a half-yearly accounting period; and

   3. (c)

      an accounting reference date;

      the details of which must be set out in the prospectus.

2. (2)

   COLL 6.8.2R(2) to COLL 6.8.2R(7) (Accounting periods) also apply to the half-yearly accounting period and annual accounting period of a long-term asset fund.

3. (3)

   A long-term asset fund must have an annual income allocation date, which must be within four months of the accounting reference date.

4. (4)

   A long-term asset fund may have an interim income allocation date and interim accounting periods and if it does, the interim income allocation date must be within a reasonable period of the end of the relevant interim accounting period as set out in the prospectus.

5. (5)

   COLL 6.8.3R(3) (Income allocation and distribution) to COLL 6.8.3AG (Allocation of income to difference classes of unit) also apply to a long-term asset fund.