COLL 7.7 UCITS mergers

1This section applies to an ICVC, an authorised fund manager of an AUT, ACS3 or ICVC, any other director of an ICVC and the depositary of any such scheme where, in each case, the AUT, ACS3 or ICVC is a UCITS scheme that is a party to:

1. (1)

   a domestic UCITS merger.6

2. (2)

   [deleted]6

In this section references to:

1. (1)

   a UCITS scheme, a merging UCITS or to a receiving UCITS6 include the sub-fund of any such scheme.6

2. (2)

   [deleted]6

A domestic UCITS merger between two or more UCITS schemes6 is permissible provided:

1. (1)

   it is effected in accordance with the requirements of:

   1. (a)

      the UCITS Regulations 2011, which include the need for the FCA to have made a prior order approving the proposed merger (which may be made subject to (2)); and

   2. (b)

      this chapter; and

2. (2)

   in the case of a UCITS scheme that is:

   1. (a)

      a merging UCITS6, an extraordinary resolution is approved by unitholders in accordance with COLL 7.6.2 R (3) and (4) (Schemes of arrangement: requirements); and

   2. (b)

      a receiving UCITS6, the authorised fund manager3 and depositary3 of the AUT or ACS3 and the directors of the ICVC comply with COLL 7.6.2 R (5) and (6).

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1. (1)

   The authorised fund manager of a UCITS scheme that is a merging UCITS or a receiving UCITS in a proposed UCITS merger, must in conjunction with any other authorised fund manager 6draw up common draft terms of the proposed UCITS merger.

2. (2)

   The common draft terms in (1) must set out the following particulars:

   1. (a)

      6the UCITS involved;

   2. (b)

      the background to and the rationale for the proposed UCITS merger;

   3. (c)

      the expected impact of the proposed UCITS merger on the unitholders of both the merging UCITS and the receiving UCITS;

   4. (d)

      the criteria adopted for valuation of the assets and, where applicable, the liabilities of the UCITS on the date for calculating the exchange ratio as referred to in regulation 13 (Consequences of a merger) of the UCITS Regulations 2011;

   5. (e)

      the calculation method of the exchange ratio;

   6. (f)

      the planned effective date of the UCITS merger;

   7. (g)

      the rules applicable respectively to the transfer of assets and the exchange of units; and

   8. (h)

      in the case of a UCITS merger where the receiving UCITS or the sub-fund is being specially formed for the purpose, the instrument constituting the fund5 of the newly constituted receiving UCITS.

      5

1. (1)

   8This rule applies where:

   1. (a)

      a person who is or was at any time the authorised fund manager or (where relevant) the depositary of a merging UCITS transferred eligible CIS amounts as dormant assets to the dormant asset fund operator; and

   2. (b)

      such dormant assets are or were attributable to the merging UCITS.

2. (2)

   The authorised fund manager of the merging UCITS must ensure that under the terms of the proposed UCITS merger the records required under COLL 6.6.6R(5) and COLL 6.6.6R(6):

   1. (a)

      will be properly maintained;

   2. (b)

      will be updated, where appropriate; and

   3. (c)

      will remain accessible,

   so that the amount of any repayment claim can be readily calculated and verified by the appropriate person.

The depositary of a UCITS scheme that is either a merging UCITS or a receiving UCITS in a proposed UCITS merger must verify that the statements in the common draft terms of merger required under COLL 7.7.7 R (2)(a), (f) and (g), to the extent they relate to the scheme for which it is the depositary, conform with the provisions of the regulatory system and the instrument constituting the fund.5

1. (1)

   The authorised fund manager of a UCITS scheme that is a merging UCITS or a receiving UCITS in a proposed UCITS merger must ensure that a document containing appropriate and accurate information on the merger is provided to the unitholders of that scheme so as to enable them to:

   1. (a)

      make an informed judgment about the impact of the proposal on their investment;

   2. (b)

      exercise their rights under regulation 12 (Right of redemption) of the UCITS Regulations 2011; and

   3. (c)

      where applicable, exercise their right to vote on whether or not to approve the merger in accordance with COLL 7.7.4 R (2)(a) (UCITS mergers).

2. (2)

   Where a UCITS scheme is the merging UCITS in a domestic UCITS merger6 its authorised fund manager must provide the information document in (1):

   1. (a)

      to the unitholders of the merging UCITS and (in the case of a domestic UCITS merger) the receiving UCITS only after the FCA has given its approval to the UCITS merger proposal under regulation 9 of the UCITS Regulations 2011,6

   2. (b)

      [deleted]6

   6

   at least 30 days before the last date by which unitholders may request repurchase or redemption of their units or, where applicable, conversion without additional charge.

3. (3)

   The information document to be provided to the unitholders of the merging UCITS and the receiving UCITS under (1) must include the following:

   1. (a)

      the background to and the rationale for the proposed UCITS merger;

   2. (b)

      the possible impact of the proposed UCITS merger on unitholders, including but not limited to any material differences in respect of investment policy and strategy, costs, expected outcome, periodic reporting, possible dilution in performance, and, where relevant, a prominent warning to investors that their tax treatment may be changed following the UCITS merger;

   3. (c)

      any specific rights unitholders have in relation to the proposed UCITS merger, including but not limited to:

      1. (i)

         the right to obtain additional information;

      2. (ii)

         the right to obtain a copy of the report of the independent auditor or the depositary on request prepared for the purposes of regulation 11 of the UCITS Regulations 20116;

         4
      3. (iii)

         the right to request the repurchase or redemption or, where applicable, the conversion of their units without charge under regulation 12 of the UCITS Regulations 20116; and

      4. (iv)

         the last date for exercising that right;

   4. (d)

      the relevant procedural aspects and the planned effective date of the merger; and

   5. (e)

      a copy of the key investor information of the receiving UCITS.

4. (4)

   If a UCITS marketing notification in respect of the merging UCITS or receiving UCITS has been made, the information document referred to in (3) must be provided in the official language, or one of the official languages, of the relevant EEA State6 in which units of the UCITS scheme have been6 marketed, or in a language approved by the overseas regulator in that EEA State6. The authorised fund manager of the relevant UCITS scheme must provide an accurate translation of the information document.

1. (1)

   The information document that must be provided to unitholders under COLL 7.7.10 R (Information to be given to unitholders) by the authorised fund manager of a UCITS scheme must be written in a concise manner and in non-technical language.

2. (2)

   [deleted]6

3. (3)

   The information to be provided to the unitholders of the merging UCITS must meet the needs of investors who have no prior knowledge of the features of the receiving UCITS or of the manner of its operation, drawing their attention to the key investor information of the receiving UCITS and emphasising the desirability of reading it.

4. (4)

   The information to be provided to the unitholders of the receiving UCITS must focus on the operation of the merger and its potential impact on the receiving UCITS.

1. (1)

   The6 information document that the 6 authorised fund manager of a merging UCITS6 must provide to its unitholders under COLL 7.7.10 R (3)(b) must also include:

   1. (a)

      details of any differences in the rights of unitholders of the merging UCITS before and after the proposed UCITS merger takes effect;

   2. (b)

      if the key investor information of the merging UCITS and the receiving UCITS show synthetic risk and reward indicators in different categories, or identify different material risks in the accompanying narrative, a comparison of those differences;

   3. (c)

      a comparison of all charges, fees and expenses for both schemes, based on the amounts disclosed in their respective key investor information;

   4. (d)

      if the merging UCITS applies a performance-related fee, an explanation of how it will be applied up to the point at which the merger becomes effective;

   5. (e)

      if the receiving UCITS applies a performance-related fee, how it will subsequently be applied to ensure fair treatment of those unitholders who previously held units in the merging UCITS;

   6. (f)

      in cases where costs associated with the preparation and the completion of the merger may be charged to either the merging or the receiving UCITS or any of their unitholders, details of how those costs are to be allocated; and

   7. (g)

      an explanation of whether the authorised fund manager of the merging UCITS itself intends to undertake any rebalancing of the portfolio before the merger takes effect.

2. (2)

   The information to be provided under COLL 7.7.10 R (3)(c) must also include:

   1. (a)

      details of how any accrued income in each scheme is to be treated; and

   2. (b)

      an indication of how the report of the independent auditor or the depositary may be obtained.

3. (3)

   The information to be provided in accordance with COLL 7.7.10 R (3)(d) must include:

   1. (a)

      where required by COLL 7.6.2 R (Schemes of arrangement: requirements), the procedure by which unitholders will be asked to approve the merger proposal, and what arrangements will be made to inform them of the outcome;

   2. (b)

      the details of any intended suspension of dealing in units to enable the merger to be carried out efficiently; and

   3. (c)

      when the merger will take effect in accordance with regulation 13 of the UCITS Regulations 2011.

4. (4)

   The information to be provided to the unitholders of the merging UCITS must include:

   1. (a)

      the period during which those unitholders will be able to continue making subscriptions and requesting redemptions of units in the scheme;

   2. (b)

      the time when those unitholders not making use of their rights granted under regulation 12 of the UCITS Regulations 2011, within the relevant time limit, will be able to exercise their rights as unitholders of the receiving UCITS; and

   3. (c)

      an explanation that once the merger proposal is approved by the resolution of a general meeting of the unitholders of the merging UCITS, those unitholders who vote against the proposal or who do not vote at all, and who do not make use of their rights granted under regulation 12 of the UCITS Regulations 2011 within the relevant time limit, will become unitholders of the receiving UCITS.

5. (5)

   If a summary of the key points of the merger proposal is provided at the beginning of the document providing information on the merger proposal, it must cross-refer to the parts of the document where further information is provided.

1. (1)

   The6 information that the 6 authorised fund manager of a receiving UCITS6 must provide to its unitholders under COLL 7.7.10 R (3)(b) must also include an explanation of whether the authorised fund manager expects the merger to have any material effect on the portfolio of the receiving UCITS, and whether it intends to undertake any rebalancing of the portfolio either before or after the merger takes effect.

2. (2)

   In addition to (1), the authorised fund manager of the receiving UCITS must provide to its unitholders the information referred to in COLL 7.7.13 R (2), (3), and (5).

The authorised fund manager of a merging UCITS must provide an up-to-date version of the key investor information of the receiving UCITS to its existing unitholders.

Between the date when the information required under COLL 7.7.10 R is provided to unitholders and the date when the merger takes effect, the information document and the up-to-date key investor information of the receiving UCITS must be provided to each person who purchases or subscribes for units in either the merging UCITS or the receiving UCITS or who asks to receive copies of the instrument constituting the fund,5prospectus or key investor information of either scheme.

The authorised fund manager of the merging UCITS and the receiving UCITS must provide the information required by COLL 7.7.10 R to COLL 7.7.14 R to unitholders in a durable medium.

The authorised fund manager of a UCITS scheme that is either a merging UCITS or a receiving UCITS must ensure that any legal, advisory, administrative or any other costs associated with the preparation and completion of the UCITS merger are not charged to either scheme or to any of its unitholders.

The authorised fund manager of 6the receiving UCITS in a domestic UCITS merger6 must confirm in writing to the depositary of the UCITS scheme and the FCA that the merger transfer is complete.