No C 155/4 Official Journal of the European Communities 21.6.86 
II 
(Preparatory Acts) 
COMMISSION 
Proposal for a Council Directive amending Directive 85/611 /EEC on the coordination of laws, 
regulations and administrative provisions relating to undertakings for collective investment in 
transferable securities (UCITS) as far as concerns the investment policy of certain UCITS 
COM(86) 315 final 
(Submitted by the Commission to the Council on 11 June 1986 
(86/C 155/04) 
THE COUNCIL OF THE EUROPEAN COMMUNITIES, 
Having regard to the Treaty establishing the European 
Economic Community, and in particular Article 57 (2) 
thereof, 
Having regard to the proposal from the Commission, 
Having regard to the opinion of the European Par­
liament, 
Having regard to the opinion of the Economic and 
Social Committee, 
Whereas Article 22 (1) and (2) of Council Directive 
85/611/EEC (') as amended by , limits the 
investment of UCITS assets in transferable securities 
issued by the same body to 5 %, a limit which may, if 
required, be increased to 10 %; 
Whereas that limit poses special problems for UCITS 
established in Denmark in cases where they wish to 
invest an appreciable proportion of their assets on the 
domestic bond market, since that market is dominated by 
mortgage credit bonds and the number of institutions 
issuing such bonds is very small; 
Whereas those mortgage credit bonds are subject in 
Denmark to special rules and supervision designed to 
protect holders and are treated under Danish legislation 
as equivalent to bonds issued or guaranteed by the State; 
Whereas Article 22 (3) of Directive 85/611/EEC 
derogates from paragraphs 1 and 2 of that Article in the 
case of bonds issued or guaranteed by a State and auth­
orizes UCITS to invest up to 35 % of their assets in such 
bonds; 
0) OJ No L 375, 31. 12. 1985, p. 3. Whereas, for the reasons given, a similar derogation is 
justified in the case of Danish mortgage credit bonds; 
whereas, however, there are in other Member States 
bonds which offer the investor equivalent guarantees by 
virtue of the special rules and regulations which are 
applicable to them; whereas it is therefore necessary to 
extend the derogation to all those bonds, while at the 
same time leaving it to Member States to draw up 
themselves the list of bonds which they may wish to treat 
as equivalent to State bonds and providing for a 
procedure for informing the other Member States similar 
to that provided for in Article 20 of Directive 85/611/ 
EEC; 
Whereas certain unit trust management companies have 
recently set up in the United Kingdom parallel unit trusts 
(managed funds) which invest their assets exclusively in 
units issued by other UCITS which they manage; 
Whereas those parallel unit trusts may prove useful to 
investors who, while wishing to diversify their 
investments, are not themselves in a position to choose 
between a whole range of specialist and general funds 
managed by the same management company; 
Whereas arrangements should be made for those parallel 
funds to benefit from the advantages provided for in 
Directive 85/611/EEC, and particularly from the 
freedom to market their units within the Community; 
whereas, to that end, it is necessary to exempt those 
funds from application of the investment rules laid down 
in Section V of Directive 85/611/EEC, which are inap­
propriate in their case, while at the same time making 
them subject to special investment rules and to the other 
obligations laid down in that Directive; 
Whereas it is necessary to extend those arrangements to 
parallel funds which may be set up in other Member 
States and to render them also applicable to investment 
companies investing their assets in the units of other 
UCITS to which they are linked, 
21.6. 86 Official Journal of the European Communities No C 155/5 
HAS ADOPTED THIS DIRECTIVE: 
Article 1 
Directive 85/611/EEC is hereby amended as follows: 
1. The following paragraphs are added to Article 22: 
'4. Member States may raise the limit laid down in 
paragraph 1 to a maximum of 35 % where the 
transferable securities of an issuer are bonds which in 
view of the guarantees they offer investors by virtue 
of the special rules and regulations governing them in 
the Member State of issue, are equivalent to the 
securities referred to in paragraph 3. 
Member States shall send to the Commission lists of 
the categories of bonds which they plan to treat as 
equivalent to the securities referred to in paragraph 3 
and any amendments which they contemplate making 
to those lists in accordance with the procedure and 
arrangements laid down in Article 20 (1). The 
Commission shall forward that information to the 
other Member States in accordance with the 
procedure laid down in Article 20 (2). 
5. Investments in transferable securities issued by 
the same body carried out in accordance with 
paragraphs 1, 2, 3 and 4 shall under no circumstances 
exceed in total 35 % of the assets of a UCITS. 
The transferable securities referred to in paragraphs 3 
and 4 shall not be taken into account for the purpose 
of applying paragraph 2.' 
2. The following Article 26a is inserted. 
'Article 26a 
Member States may authorize a UCITS (hereinafter 
referred to as a "parallel UCITS") to invest its assets, 
notwithstanding Articles 19 to 26, in units issued by 
other UCITS provided that the following conditions 
are met: (a) The parallel UCITS must invest its assets — 
subject to the necessary conditions concerning 
liquidity — exclusively in units issued by UCITS 
subject to the provisions of this Directive, 
including Articles 19 to 26 thereof; 
(b) The parallel UCITS and the UCITS in the units 
of which it invests must: 
— be managed by the same management 
company, or 
— be managed or controlled by companies which 
are separate but linked by common 
management or control or by a substantial 
direct or indirect holding. 
(c) The parallel UCITS must have the opportunity of 
investing its assets in the units of at least 10 
UCITS which meet the criteria set out at (a) and 
(b) and which can be distinguished from each 
other by their investment policies and/or 
objectives. 
(d) The parallel UCITS must describe in its instru­
ments of incorporation or fund rules and in its 
prospectus or any promotional literature the 
characteristics of the UCITS in the units of which 
it is authorized to invest. Those documents must 
clearly show in figures the charges, taxes, 
commissions and other costs directly or indirectly 
borne by the parallel UCITS' unit-holders, so that 
the latter are able to assess the cost of investment 
in the parallel UCITS in relation to the cost of 
direct investment in the units of the underlying 
UCITS.' 
Article 2 
The Member States shall bring into force the measures 
necessary to comply with this Directive by the same 
dates as those provided for in Directive 85/611/EEC. 
They shall forthwith inform the Commission thereof. 
Article 3 
This Directive is addressed to the Member States.