COLL 5.8 Investment powers and borrowing limits for feeder UCITS 1

1. (1)

   2This section applies to:

   1. (a)

      the authorised fund manager of a feeder UCITS;

   2. (b)

      the depositary of a feeder UCITS; and

   3. (c)

      an ICVC which is a feeder UCITS;

   where the scheme is a UCITS scheme.

2. (2)

   Where this section refers to a rule or guidance in COLL 5.1 to COLL 5.5 , those rules and guidance, and any rules and guidance to which they refer, must be read as if a reference to a UCITS scheme were a reference to a feeder UCITS.

3. (3)

   Where the sub-fund of a UCITS scheme is a feeder UCITS, the provisions in this section apply to each sub-fund as they would for an authorised fund.

A feeder UCITS must invest at least 85% in value of the scheme property in units of a single master UCITS.

4The authorised fund manager of a pension feeder fund that is a feeder UCITS must ensure that the single master UCITS is:

1. (1)

   a UCITS scheme; or

2. (2)

   an EEA UCITS scheme that is a recognised scheme under section 264 of the Act.

A feeder UCITS may hold up to 15% in value of the scheme property in one or more of the following:

1. (1)

   cash or near cash in accordance with COLL 5.5.3 R (Cash and near cash);

2. (2)

   derivatives and forward transactions which may be used only for the purposes of hedging and in accordance with the rules set out at COLL 5.8.7 R (Other provisions applicable to a feeder UCITS); and

3. (3)

   (for an ICVC) movable and immovable property which is essential for the direct pursuit of the business.

In calculating the global exposure of a feeder UCITS to derivatives and forward transactions in accordance with COLL 5.3.3A R (Cover for investment in derivatives and forward transactions), the feeder UCITS must combine its own direct exposure under COLL 5.8.3R (2) with either:

1. (1)

   the master UCITS' actual exposure to derivatives and forward transactions in proportion to the feeder UCITS' investment into the master UCITS; or

2. (2)

   the master UCITS' potential maximum global exposure to derivatives and forward transactions provided for in the master UCITS' instrument constituting the fund3 or its prospectus in proportion to the feeder UCITS investment into the master UCITS.

   3

An authorised fund manager must ensure that, to the extent that the feeder UCITS invests in assets other than units of a master UCITS, the feeder UCITS complies with COLL 5.2.3 R (1) (Prudent spread of risk).

The scheme property of a feeder UCITS must be invested only in accordance with the relevant provisions in this section and up to any maximum limit so stated, but the instrument constituting the fund3 may restrict the investment and borrowing powers of a scheme further than the relevant restrictions in this section.

The following rules and guidance in COLL 5.1 (Introduction), COLL 5.2 (General investment powers and limits for UCITS schemes) and COLL 5.5 (Cash, borrowing, lending and other provisions) apply to the authorised fund manager of a UCITS scheme which is a feeder UCITS and to an ICVC which is a feeder UCITS:

1. (1)

   COLL 5.1.1 R (Application), COLL 5.1.2G (1) (Purpose) and COLL 5.1.3 R (Treatment of obligations);

2. (2)

   COLL 5.2.1 R (Application), COLL 5.2.2 R (Table of application) and COLL 5.2.2A G;

3. (3)

   COLL 5.2.5 R (Valuation) and COLL 5.2.6 G (Valuation guidance);

4. (4)

   COLL 5.2.10 R (Eligible markets: requirements);

5. (5)

   COLL 5.2.11R (7) (Spread: general);

6. (6)

   COLL 5.2.11B R (Counterparty risk and issuer concentration);

7. (7)

   COLL 5.2.15R (1) (Investment in associated collective investment schemes);

8. (8)

   COLL 5.2.19 R (1), COLL 5.2.19 R (2) and COLL 5.2.19R (4) (Derivatives: general);

9. (9)

   COLL 5.2.20 R (Permitted transactions (derivatives and forwards));

10. (10)

    COLL 5.2.20A R (Financial indices underlying derivatives), COLL 5.2.20BG (1) and COLL 5.2.20BG (4) (Guidance on financial indices underlying derivatives);

11. (11)

    COLL 5.2.21 R (Transactions for the purchase of property);

12. (12)

    COLL 5.2.22 R (Requirement to cover sales) and COLL 5.2.22A G (Guidance on requirement to cover sales);

13. (13)

    COLL 5.2.23 R (OTC Transactions in derivatives), COLL 5.2.23A R and COLL 5.2.23B R);

14. (14)

    COLL 5.2.23C R (Valuation of OTC derivatives);

15. (15)

    COLL 5.2.26 R (Investment in deposits);

16. (16)

    COLL 5.5.1 R to COLL 5.5.7A G (Cash, borrowing, lending and other provisions); and

17. (17)

    COLL 5.5.9 R (Guarantees and indemnities) and COLL 5.5.10 G (Guidance on restricting payments).