CELEX: 51976PC0152
Language: en
Date: 1976-04-14
Title: Proposal for a COUNCIL DIRECTIVE for the coordination of laws, regulations and administrative provisions regarding collective investment undertakings for transferable securities (submitted to the Council by the Commission)

ARCHIVES HISTORIQUES
DE LA COMMISSION
COLLECTION RELIEE DES
DOCUMENTS "COM"
COM (76) 152
Vol. 1976/0044
 ---pagebreak--- Disclaimer
Conformément au règlement (CEE, Euratom) n° 354/83 du Conseil du 1er février 1983 concernant
l'ouverture au public des archives historiques de la Communauté économique européenne et de
la Communauté européenne de l'énergie atomique (JO L 43 du 15.2.1983, p. 1) modifié en dernier
lieu par le règlement (UE) 2015/496 du Conseil du 17 mars 2015 (JO L79 du 25. 3.2015, p. 1), ce
dossier est ouvert au public. Le cas échéant, les documents classifiés présents dans ce dossier
ont été déclassifiés conformément à l'article 5 dudit règlement ou sont considérés déclassifiés
conformément aux articles 26(3) et 59(2) de la décision (UE, Euratom) 2015/444 de la
Commission du 13 mars 2015 concernant les règles de sécurité aux fins de la protection des
informations classifiées de l'Union européenne.
In accordance with Council Regulation (EEC, Euratom) No 354/83 of 1 February 1983 concerning
the opening to the public of the historical archives of the European Economic Community and the
European Atomic Energy Community (OJ L 43, 15.2.1983, p. 1), as last amended by Council
Regulation (EU) 2015/496 of 17 March 2015 (OJ L 79, 27.3.2015, p. 1), this file is open to the
public. Where necessary, classified documents in this file have been declassified in conformity
with Article 5 of the aforementioned regulation or are considered declassified in conformity with
Articles (26.3) and 59(2) of the Commission Decision (EU, Euratom) 2015/444 of 13 March 2015
on the security rules for protecting EU classified information.
In Übereinstimmung mit der Verordnung (EWG, Euratom) Nr. 354/83 des Rates vom 1. Februar
1983 über die Freigabe der historischen Archive der Europäischen Wirtschaftsgemeinschaft und
der Europäischen Atomgemeinschaft (ABI. L 43 vom 15.2.1983, S. 1), zuletzt geändert durch die
Verordnung (EU) Nr. 2015/496 vom 17. März 2015 (ABI. L 79 vom 25.3.2015, S. 1), ist dieser Akt
der Öffentlichkeit zugänglich. Soweit erforderlich, wurden die Verschlusssachen in diesem Akt in
Übereinstimmung mit Artikel 5 der genannten Verordnung freigegeben; beziehungsweise werden
sie auf Grundlage von Artikel 26(3) und 59(2) der Entscheidung der Kommission (EU, Euratom)
2015/444 vom      13.   März 2015     über die   Sicherheitsvorschriften für den Schutz von  EU-
Verschlusssachen als herabgestuft angesehen.
 ---pagebreak--- COMMISSION OF THE EÜROEBAN COMMÜMTÎΤΠΪΝ
                                               COM(76 ) 152 final .
                                               Brussels , 11 Avril
                                  Proposal for a
                                 COUNCIL DIRECTIVE
                         for "the coordination of laws ,
                    regulations and administrative provisions
                 regarding collective investment undertakings
                           for transferable securities
                 ( submitted to the Council by the Commission )
   CQM(76 ) 152 final
 ---pagebreak---                                     - 1 -
                              TABLE OP CONTENTS
EXPLANATORY MEMORANDUM
1.    Introduction                                            1
2.    Scope of the proposai                                   2
3.   Th3 case for coordination                                6
4 . General principles underlying CIUTS coordination          8
5 » Reasons fcr and explanation of certain provisions
      in the proposed Directive                              12
PROPOSAI FOR A ,_CQHTC1L DIRECTIVE
Introduction                                                 32
Sections :
    I.   General provisions and field of application         34
         (Articles 1 - 4 )
   II .  Authorisation of the CUITS                          36
         ( article 5 )
  III .  Obligations regarding the structure of              37
         unit trusts (.Articles 6 - 16 )
   IV .  Obligati ons regarding the structure of             40
         investment companies and their depositary company
         ( articles 17 - 24 )
    V.   Obligations concerning the investment policy        43
         of CIUTS ( articles 25 - 30 )
   VI .  Obligations concerning information to be supplied   46
         to unitholders (articles 31 - 40 )
 VII .   General obligations of the CIUTS                    45
         (articles 4I - 53 )
vni .    Special provisions applicable to CIUTS which        54
         market their units in Member States other than
         those in which they are situated ( Articles 54-57 )
 ---pagebreak---                                   - 2 -
 IX . Provisions concerning; the competent             55
      authorities (Articles 58 - 62 )
  X.  Specific provisions relating to investment       53
      companies which market their units exclusively
      through one or more stock exchanges
      (/articles 63 - 65 )                           -
 XI . Contact Committee                                59
      (Article 66 )
XII . Transitional provisions , derogations and        6C
      final provisions (/articles 67 - 73 )
SCHEDULE A
      Information to be included, in the CIUTS         62
      prospectus
SCHEDULE B
      Information to be included in the                69
      periodical reports
 ---pagebreak---                                     - 1 -
                      Proposal for a Council Directive
               for the coordination of laws , regulations and
              administrative provisions regarding       collective
            investment undertakings for transferable securities
                           Ebnol anal orv Me aor andura
1. Introduction
Collective investment undertakings are institutions whose aim is to gather
together the funds cf as many savers as possible "by issuing units ( l ) and •
invest these funds , using the principle of risk spreading, in securities
or other assets , without seeking to exert through the holding, an influence
extending beyond the objective of financial investment .
These institutions offer savers a number of advantages 2 they provide a
wide spread of investments , however small the number of units held ; they
select the securities placed in the portfolio after carrying out careful
comparisons which are often difficult for the individual saver , in parti¬
cular as regards foreign markets , because of the inadequacy of information
available to him concerning these markets .
Furthermore , the nature of these institutions and the technique they use
to market their units - sales by means of offers to the public , often
directed at small inexperienced servers - signifies that special attention
is paid to safeguarding the latter 5 s savings . Consequently , many countries
have adopted special rules relating to the activities pursued by, and the
controls to be laid down , in respect of collective investment undertakings .
(-0 In the English text of this Memorandum and of the proposed Directive
    tne words '’unit” and "unitholder" are used conventionally to cover
    shares and shareholders respectively .
 ---pagebreak---                                        - 2 -
There is a need for coordination of Member States' legislation in this
field with a view to affording savers in the 'Community more uniform safe¬
guards and also to bring closer together the competitive conditions in
which collective investment undertakings in the Community operate and to
promote at Community level a more thorough interpenetration of markets in
transferable'securities (for further ' details see paragraph '3).
2 . Scope of the proposai
a ) Collective investment undertakings can be divided into two groups ? the
     closed-end type and those other than the closed-end type . The essential
    •difference between the two is that with closed-end institutions the
     capital is fixed and the units representing this capital are never re¬
     purchased or redeemed against the assets of the institutions . The group
     of closed-end institutions includes " socieies d' invest issement " in
     Prance , " investment trusts " in the United Kingdom and " sociata invest "
     in Italy . Institutions other than of the closed-end type , however , issue
     their units continuously or in blocks at short intervals and/or direct¬
     ly or indirectly repurchase or redeem them at the request of the holder .
     The proposed Directive is concerned only with collective investment
     undertakings other than of the closed-end type , for these are the most
     important at Community level and it is also in this field that savers ’
     protection is most likely to fail unless strict rules and controls are
     applied ? unlike the closed-end type , these institutions often lie out¬
     side the scope of company law and their units are not quoted on the
     stock exchange , so that company–law and stock-exchange safeguards are not
     applicable .
b ) Two basic types of collective investment undertakings of other than the
     closed-end type exist in the Member States ? those vjith a corporate
     structure and those other than with a corporate structure ( i.e. con¬
     tractual or "trust ").
 ---pagebreak--- The collective investment undertakings with a corporate structure (re¬
ferred to in the proposal as " investment companies") aro similar in form
to public limited companies . The unitholders are the shareholders in
the company and can therefore influence directly – at least in theory –
the decisions taken by the company by exercising their voting rights at
meetings . As companies , these institutions have the further characteristic
of being the legal owners of the assets contributed by the unitholders .
Investment companies exist at present in Denmark ( investment associations ),
Prance , Luxembourg and the Netherlands . Of these countries , only Prance
lays down specific rules for investment companies , while in the other
countries they are , as a rule , governed by the laws on public limited
companies . Finally , it should be noted that in Germany and Belgium special
rules for investment companies have been deliberately avoided and only
contractual institutions are authorised .
Collective investment undertakings other than with a corporate structure
(referred to in the proposal as "unit trusts") are institutions without
legal personality and consist generally of a management company which
fulfils all functions connected with the management of the trust , a de¬
positary company responsible for the custody of the assets of the trust
and a special fund which collects the funds put up by the unit holders .
These funds are either the property of the management company , the joint
property of the unitholders , or simultaneously the property of the de¬
positary company and of the unitholders according to the applicable le¬
gislation in the Member States where the unit trusts are established .
Unlike investment companies , unit trusts now exist in all the Member
States except Italy and Denmark . They are subjected to specific regula¬
tions which take account of their particular legal status in Germany,
Belgium , Prance and the United Kingdom. Such regulations are being planned
 ---pagebreak---                                             - 4 -
   ' in Denmark , Italy , Ireland , Luxembourg and the Netherlands . In the
     Netherlands , however , the regulations will also apply to investment
     companies .
     The proposed Directive covers these two forms of collective investment
     undertaking, but does not apply to those which do not invest their
     capital essentially in securities . The last mentioned undertaking's ,
     and in particular those which invest their capital in property , raise
     special problems which will have to be examined at a later stage .
c ) In conclusion , the proposed Directive is concerned with collective
     investment undertakings for transferable securities other than of the
     closed-end type ( ,,CIIJFS,, )» i * e * investment companies (collective in¬
     vestment undertakings with a corporate structure) and unit trusts
     ( collective investment -undertakings with a non-corporate structure )!
     - whose object is collective investment in transferable securities or
        retention as liquid assets of at least GO^ of the capital they collect 5
     - which accumulate this capital by means of offers to the public ;
     - which operate on the principle of risk spreading;
     - and whose units are or have been issued continuously or in blocks at
        short intervals and/or are directly or indirectly repurchased or re¬
        deemed at the request of the holder using the assets of these under¬
        takings .
     It can be seen from this definition that the proposal also covers
     Luxembourg investment companies which indirectly repurchase their
     units through repurchase companies which they have set up and also
     certain Dutch investment companies which issue units continuously within
     the limit of their authorized capital but which are not obliged to re ¬
     purchase their units although they in fact do so on the stock exchange .
 ---pagebreak---                                     mm i M
The following, however , are some of the institutions xdiich do not fall
within the scope of the proposed Directives
a ) collective investment undertakings more than 20fo of whose funds arc
    invested in assets other than transferable securities or kept liquid
    ( i.e. most of the mixed unit trusts , property funds , holiday funds ,
    property development funds and commodity trusts ) 5
h ) institutions such ass
    - portfolio companies -whose object is to obtain the participation
        of a number of investors in financing firms -whose access to the
        financial market is barred by legal or economic obstacles 5
    - holding companies , whose object is to acquire through trading
        investments a controlling and supervisory holding in firms ?
    - securities management departments through which banks or insti~
        tut ions specialized in portfolio management administer , on behalf
        of their customers and without issuing representative certificates ,
        a fund made up of the deposits of a number of customers ;
    - investment clubs , made up of a small number of investors who are
       known to one another and grouped together for the purpose of
        jointly investing funds , without advertising ;
c ) certain special collective investment undertakings such as " fonds
    d * interessement” ( in Prance ) and ''exempted" unit trusts ( in the
    United Kingdom ), for these institutions do not raise their capital
    by offers to the public but by offers to specific categories of
    investors .
 ---pagebreak---                                        6 -
    Finally , Cl UTS whose assets are mainly invested , through subsidiary
    companies , in assets other than transferable securities or which are
    kept liquid are explicitly excluded from the scope of the proposed
    Directive . This exclusion , which takes special account of certain
    Luxembourg institutions , was deemed desirable in view of the fs,ct
    that , from an economic viewpoint , these institutions fall within the
    category of funds referred to under a ) above .
3 . The case for coordination
    The purpose of the proposed Directive is to coordinate the regulations
    governing the CIUTS defined above . To this end , it requires Member
    States to apply a number of minimum rules when such institutions are
    situated on their territory .
    There are several objectives which this coordination Directive is
    designed to meet . The basic situation is that thera are differences
    between regulations applying to CIUTS in the various Member States .
    In fact , the systems of legislation in the Member States , when they
    exist , vary considerably between each other , particularly as regards
    the obligations and controls imposed upon these institutions . More¬
    over , the differences between the legislative systems relating to CIUTS
    in the Community are widened still further by the fact that certain
    Member States do not have specific legislation relating to these in¬
    stitutions .
    This situation – determined by historical factors , such as whether
    these institutions have existed for a long time in a Member State or
    whether they are a recent innovation and the differences between the
    structures of the financial markets in these States - leads , at
    Community level , to appreciable differences in the protection offered
    to persons investing their funds in these institutions . By coordinating
    the national legislation or regulations applying to CIUTS , it should
    therefore be possible to render this protection more effective at
    Community level and to provide more uniform safeguards for all savers .
 ---pagebreak---                                      7
Coordinating the legislation in question should also enable the conditions
of competition in which the collective investment undertakings for trans¬
ferable securities operate to he improved , which is not the case at the
present time , the obligations imposed on these institutions varying with
the national legislation or regulations governing them .
Finally , this coordination aims at making easier the realisation of ano¬
ther fundamental objectives removing restrictions on the free movement
within the Community of units of collective investment undertakings for
transferable securities . The first and second Directives adopted by the
Council with a view to the removal of restrictions on capital movements
contained no provision covering the free movement of units of collective
investment undertakings^ ^ . One of the reasons for this was that the Mem¬
ber States’ laws governing these undertakings are so different that they
do not provide equivalent safeguards for savers and equivalent conditions
of healthy competition between such undertakings . The Member States have ,
therefore , generally been reluctant to allow units of collective invest¬
ment undertakings from the other Member States to be traded freely within
their borders . The coordination of legislation , as envisaged by the
present proposal is aimed at remedying this position and should therefore
remove this obstacle to the opening up of frontiers as regards the units
of CIUTS . Coordination is thus a prior condition for establishing the
free movement of capital in this sector . In order that the envisaged co¬
ordination can bo really effective it appears essential that the necessary
measures must be taken in respect of movements in parellel with the
implementation of the present Directive to ensure freedom of movement
for units of CIUTS . This is the reason for which the Commission , having
consulted the Monetary Committee in accordance with Article 69 of the
SEC Treaty , will submit to the Council a proposed Directive aimed at
bringing about this objective .
l ) O.J.s of 12 July i960 and 22 January 1963-
 ---pagebreak---                                       O
                                   «• Ο··
The planned coordination should therefore lead to the attainment of a
number of objectives : provide better safeguards for savers , make for
healthier conditions of competition in which CIUTS operate , and permit
the removal of restrictions on dealings in their units within the
Community . When this third objective has been attained , building on the
foundation provided by the attainment of the other two objectives , it
will then be possible for CIUTS to step up their activities throughout
the Community in view of the increase in the number of savers they will
be able to call on . Moreover , if these institutions are permitted to
extend their operations to the entire Community, savers in the Community
will find it easier to use this form of saving, which should be encouraged,
and , at the same time , the outlook for the market in transferable securi¬
ties will improve ? this will help to achieve one of the fundamental aims
of the Common Market - namely that of ensuring fuller interpenetration
of capital markets in the Community .
4 . General principles underlying CIUTS coordination
    A. Single set of legal provisions
The proposed Directive is designed to make CIUTS located in any Member
State subject to a single set of legal provisions , regardless of whether
they operate in only one country or throughout the Community . There will
likewise be a single set of rules for the authorisation of CIUTS and the
supervision of their activities . The arrangements can be summarized as
follows :
Each Member State must apply the Directive to CIUTS situated in its
territory^ but will be free to apply stricter and/or additional require¬
ments , provided that such requirements are of general application . and do
not conflict with the Directive . But a Member State nay not apply pro¬
visions of any kind to CIUTS situated in another Member State even if
they market their units in its own territory , with the exception of the
provisions governing capital movements and the marketing of units ( see
B. below ).
l ) For the purposes of the proposed Directive a CIUTS is deemed to be
    situated ri the Member State where its management is effectively
    cam 'c  o-  • :~
 ---pagebreak---                                     - 9 -
In brief , it nay bo said that CIUTS of Member States will , subject to this
last reservation , be governed exclusively , regardless of the Member States
in which they operate , by the legislation of the Member State in which
they are situated , and that this legislation must comply with the minimum
rules laid down in the proposed Directive ( Article l ).
The proposed Directive further provides that a CIUTS may not trade unless
it has been authorised (Article 5(l ))» and that the only authorities having
power to grant valid authorisation are those of the Member State in which
the CIUTS is situated (Article 4(h )). Such authorisation once granted is
valid for all the Member States 3 once a CIUTS is authorised , it may , there¬
fore , operate not only in the authorising Member State but also in the
other Member States , without having to obtain authorisation in these other
Member States .
Likewise , only the competent authorities , of the Member State in which the
CIUTS is situated, ares
a) authorised and required to supervise the activities of the undertaking,
    even if they are carried on in another Member State , and in particular
    ensure that it complies with the rules laid down in the proposed Direc¬
    tive (Article 53(l))j
b ) authorised to take all appropriate measures concerning the undertaking,
    including withdrawal of arrthorisation, as provided for •‘by -nati&asl- legisla¬
    tion , should the CIUTS infringe laws , regulations or administrative
    provisions or the fund rules of the unit trust or the memorandum and
    articles of association of the investment company (Article 6l(l )).
To enable the competent authorities to fulfil their supervisory function
properly , the proposed Directive provides that they should be granted all
the powers necessary (Article 53(4 )) and- must be able to rely on the close
collaboration of the authorities of the Member States where the units of
CIUTS a.re marketed when such units are subject to their supervision
 (Article 59 ).
 ---pagebreak---                                     - 10 -
It has been felt reasonable to stipulate that Community CIUTS should nor¬
mally be subject only to the regulations of the Member State in which they
are situated . This is because the minimum rules laid down in the proposed
Directive would appear to form an adequate basis for safeguarding savers
and ensuring sound conditions of competition between the various CIUTS .
The single system of authorisation and supervision mentioned above is also
based on the mutual confidence which the competent authorities of the Member
States should extend to each other as regards the diligence with which each
of them will ensure that the Directive is properly applied and , generally
speaking, that all savers will be adequately protected .
B. Marketing régulations
There is , however , as stated above , one important exception to the principle
of a single set of legal provisions governing the CIUTS and of the exclusive
competence of the authorities of the Member State in which the undertaking
is situated for supervision purposes , even if the CIUTS operates in other
Member States . This exception concerns the rules for marketing CIUTS units
and the supervision of the application of these rules . In thi3 connection ,
the proposed Directive provides that a Member State 'may apply its own
marketing regulations to CIUTS situated in other Member States but marketing
or intending to market their units on its territory (Article 55 ) and that
the supervision of the proper application of these marketing regulations is
the responsibility of the competent authorities of the Member State in which
the units are marketed , these authorities being in the best position to
exercise this supervision since they will in fact be checking that their
own rules are being correctly applied (Article 58(3 ))*
 ---pagebreak---                                    - 11 -
The main argument against coordinating the marketing regulations as well
is that any attempt to do so combined with the coordination measures pro¬
vided for in the proposed Directive , would , in view of the market
differences between the Member States in this field , have significantly
delayed the latter . Furthermore , the problem of the coordination of the
marketing regulations concerns transferable securities as a whole and not
only the units of CIUTS ; it was thus felt that this problem should be
resolved in a more comprehensive manner , and should therefore be dealt
with separately.            ...
A Member State cannot , in any case , vise the right to apply its own market¬
ing regulations to CIUTS situated in the other Member States to circumvent
the objectives of the Directive . This stipulates that the marketing
regulations in question must be applied in a non-d is criminatory manner
and may not have the effect of imposing on CIUTS situated in the other
Member States stricter conditions than those envisaged by the present
proposal (Article 55(3))° Thus , if a Member State provides in the frame¬
work of its legislation that canvassing of units of CIUTS cannot take place
unless these institutions publish four reports per financial year it would
not be able to apply this regulation to CIUTS situated in other Member
States because the proposed Directive provides that CIUTS must publish a
maximum of three reports per financial year (Article 3l ).
C. Stricter or additional requirements
Finally it would appear useful to give two examples to demonstrate what
is meant by the terms "stricter requirements " and "additional requirements "
which Member States may apply to CIUTS situated within their territory
(Article l(3))s
a ) Stricter requirements Article 26 of the proposed (Directive provides
    that a CIUTS may not invest more than 5% of its assets in securities
    issued by the same issuer . A Member State could apply this provision
    more strictly by laying down that CIUTS situated within its territory
    may not invest more than 4 of their assets in such securities .
 ---pagebreak---                                    - 12 -
b ) Additional requirement ; Article 10 of the proposal lists the functions
    which a unit trust’s depositary company must fulfil . A Member State
    would he free to impose an additional requirement that the depositary
    companies of unit trusts situated within its territory must fulfil
    other functions such as , for instance , exercising vis-a-vis the
    management company or a previous depositary company the rigths of unit
    holders deriving from the units they hold in the unit trust .
5° Re asons for and explanation of certain provisions in the proposed
    Directive
In addition to the general principles described above , the proposed
Directive contains a number of rules relating to ;
- the structure of unit trusts and investment companies 5
- the restrictions imposed on the investment policy that CIUTS pursue ;
- the information they must disclose ;
- a number of general obligations they must fulfil ;
- CIUTS which market their units in a Member State other than that in
   which they are situated ;
- the competent authorities responsible for aUthorisingvand supc:bvising
   CIUTS ;
- the setting up of a Contact Committee .
Some of these rules which require further clarification are dealt with
below .
 ---pagebreak---                                    - 13 -
A. Remarks concerning the management company set up by unit trusts
    (Articles 3 , 9 and 67 )
1 . The proposed Directive provides that the activities of the unit trust
management company must he confined to the management of unit trusts
( Article 3 ). This rule is designed to protect ■unitholders as it aims to
ensure on optimum level of specialization "by management companies and
also to avoid any likelihood of a clash of interest with any other
actitivities .
The rule is , however , subject to two exceptions . The first mainly concerns
Belgian management companies which may also issue bearer certificates
representing registered securities of foreign companies . They may continue
with this additiona.l activitjr subject to authorisation by Belgium
(Article 67(1 )).
The second exception mainly concerns management companies in Ireland ,
the United Kingdom and the Netherlands , which nay at present carry out
other activities such as banking or insurance . To take account' of this
situation , the proposal provides that Member States may authorise manage¬
ment companies which , at the time of notification of the Directive , also
carry out other activities to continue these other activities provided
that they do not prejudice the interests of unit holders (Article
It did not appear advisable to prohibit these companies , which have
acquired remarkable experience in the management of trusts , from con¬
tinuing to carry out this management activity not only in respect of the
trusts they manage at the time of notification of the Directive but also
in respect of new trusts set up after such notification .- Such a ban
would have had the following drawbacks ?
 ---pagebreak--- - in the case of trusts existing at the tine of notification of ; the .
   Directives the obligation to change management companies in the
   event of their management companies not having decided to discontinue
   these other activities , such change being no easy matterfor a unit
   trust ;
– in the case of trusts set up after notification of the Directives the
   impossibility for them to benefit from the experience acquired by the
   companies in question in the management of trusts .
2 . The proposed Directive provides that the management company must in¬
form the competent authorities of the names of all its members and of
the' amounts of their respective participation in the company
(Article 9\l ))« This rule is necessary in order to enable these authori¬
ties to satisfy themselves as to the good standing of all the members
and to ensure that there is no possible clash of interest between the
members and unithJolB.5rnq
The proposed Directive , however , lays down less strict rules in cases
where , as mentioned in 1 . above , a unit trust is managed by a credit
institution or an insurance • underta.king, the latter being required to
report the names of their major shareholders only (Article 67(3 ))- As
these bodies are already subject . to very strict controls laid down by.
national banking and insurance legislation , it was felt that less : strict
requirements could be imposed on them as regards the management of
trusts . It must , in any case , be pointed out that those bodies are often
not in a position to establish the identities of all the sharehelders
when the securities issued are bearer' securities . ,
B. Remarks concerning the depositary company of unit trusts and invest ¬
    ment companies (Articles 10 , 11 , 19 , 20 and 63 )
1 . The depositary company plays a very important part in protecting
the interests of unitholderst In addition to keeping custody of the
 ---pagebreak---                                    - 15 r
assets of CIUTS , to carrying out a number of technical transactions
relating to the day-to-day administration of these assets (among other
things , the collection of dividends and interest , and redeeming
securities which have matured) and to paying out distributions , the
depositary company will be required to supervise a number of the
activities of the management company or investment company to ensure
that they are in conformity with the law and the "fund rules " of the
unit trusts or the memorandum and articles of association of the invest¬
ment company (Articles 10 and 19 ) «
2 . The proposed (Directive provided (Article ll(l ) and Article 20(l))that
the depositary company must either ;
a ) have its registered offices in the same Member State as that where
    the CIUTS is situated , i.e. the Member State where its management is
    effectively carried on , or
b ) be established in or at least have a centre of activity in that Member
    State , if it has its registered office in another Member State .
This rule tabes into account the fact that the arrangements for authori¬
sation and supervision provided for in the proposal are to form a single
system . The competent authorities in the Member State in which the CIUTS
is situated ( i.e. the Member State in v/hich its management is carried
on ) are responsible for approving the choice of depositary company and
for supervising its operations and also for authorising ! the management
company or the investment company . The rule also takes account of the
fact that , owing to the tasks entrusted to it , the depositary company
must remain in constant touch with the centre where the management of the
CIUTS is carried on , because it must supervise this management to satisfy
itself that it complies with contractual and statutory requirements .
For all these arrangements to be fully effective and practicable , the
depositary company must be located in the same Member State as that in
which the CIUTS is situated , which is also the Member State where its
effective management is carried on . It will be deemed to be located
there if it has in that Member State either its registered office or
at least a centre of activity, if the registered office is situated in
another Member State .
 ---pagebreak---                                    - 16 -
3 * The provision discussed in 2 . above will not , however , apply for a
temporary period to depositary companies which , at the time of notifica¬
tion of the Directive , are not located in the Member State where the
CIUTS is situated ( Article 63 ). This exception is designed mainly to
take account of the situation in Luxembourg , where a substantial number
of CIUTS have chosen credit establishments located outside Luxembourg as
depositary companies . The proposal provides that this situation must be
regularised no later than 5 years after entry into force of the Directive .
4 . The directive stipulates that the depositary company must be respons¬
ible for the custody of the transferable securities and liquid assets
which constitute the assets of a CIUTS . This does not , however , mean that
these transferable securities and liquid assets cannot be held by a
credit institution other than the depositary company provided that this
institution acts as the agent of the depositary company , which alone
remains responsible for carrying out the duties entrusted to it under
the proposed Directive .
It is also to be noted that transferable securities forming part of the
assets of a CIUTS need not necessarily be physically held by the deposit¬
ary company , which may entrust them , for instance , to a depositary body
such as the Sicovam in Prance .
5 . The proposed Directive does not specify the legal form cf the deposit¬
ary company ; this question will remain within the competence of the
Member State , sub ject to the right for undertakings of Member States to
establish themselves in another Member State without having to incorporate
a company there in accordance with local law . At present , in the Member
States where such legislation exists , only the following can act as
depositary companies :
a ) In Germany :
    die inländischen Kreditinstitute ;
 ---pagebreak--- b ) In Pelgiun ;
    the companies governed by Belgian law which appear on the list of
    banks drawn up in accordance with Article 2 of Royal Decree No . I85
    of 9 July 1935 on the control of banks and the arrangements governing
    the issuing of securities ;
c ) In France ;
    the banlcs and financial institutions referred to in the Acts of 13
    and 14 June 1941 ? agents de change , compagnies d' assurances ,
    établissements du secteur public ou semi-public habilités à exercer
    les fonctions de dépositaire ;
d ) In Ireland ;
    a trustee as described in Section 3(l)(c ) of the Unit Trust Act 1972 ;
e ) In Luxembourg;
    banicing and savings Institutions vjithin the meaning of Article 1 of
    the Grand-Ducal Decree of 19 June 1 9^5 5
f ) In the United Kingdom s
    a trustee as described in Section 17 of the Prevention of Fraud
    (investments ) Act , 1958 .
6 . The proposed Directive also provides that the depositary company of
an investment company will have less extensive responsibilities than
those borne by the depositary company of a unit trust ; Article 19 does
not repeat the duties referred to in Article 10(2)(c ) and ( d ). Less
extensive responsibilities have been allocated to the depositary company
of investment companies since ;
a ) unitholders in investment companies are covered by company–law ,
    safeguards and , in. particular , are able to exert direct influence
    and control over the management of such a company by taking part in
    meetings ; this is not so in the case of unitholders    in unit trusts
    since they do not have any control over the management of the fund
    as carried out by the management company ;
 ---pagebreak---                                     - 18 -
b ) in the case of an investment company, there is no danger of a clash
    of interests , as is possible in the case of a unit trust , between
    the management company and the unitholders , since the unithblldrs
    and the shareholders of the investment company are the same people .
C. Composition of the assets of CIUTS (Article 25 )
1 . Since it must be possible to assess easily the investments of a
CIUTS and to realize them without difficulty in the event , for instance ,
of a massive demand for the redemption of units , the proposed Directive
provides (Article 25(l )) that the assets of a CIUTS must exclusively
consist of ;
a ) transferable securities admitted to official stock exchange quotation
    in a Member State and , subject to certain conditions , transferable
    securities for v;hich quotation has been sought ;
b ) transferable securities traded on another regulated market of a Member
    State which operates regularly and which is recognized and open to the
    public . This covers inter alia the " geregelter Freiverkehr" in Germany ,
    the " marche hors cote " in Prance and the market in Belgium on which
    additional public sales of securities take place ;
c ) transferable securities admitted to official stock exchange quotation
    in a non-Member State or traded on another regulated market of a non-
    Member State which operates regularly and which is recognized and
    open to the public , provided that the choice of this stock exchange
    or market has been approved by the competent authorities ;
d ) liquid assets , including letters of credit which , due to their
    imminent maturity and their status , rank as liquid assets . This cate¬
    gory of securities includes ^ cash and also medium-term certificates
    issued by credit institutions and Treasury bills due to mature in the
    very near future .
 ---pagebreak---                                     - 19 -
2 . Provision is , however , made for two important exceptions to the
principle referred to in 1 . above ; in order to allow some degree of
flexibility in the management of a CIUTS , the Directive provides that
( Article 25 ( 2 ) ) g
a ) a CIUTS may invest a maximum of 10$ of its assets in transferable
    securities other than those referred to in 1 . above | this category
    of securities includes inter alia medium-term certificates which are
    not due to mature in the very near future ,
b ) Member States may authorise CIUTS to invest a maximum of 5$ of their
    funds in assets other than those referred to in 1 . and 2(a ) above .
    This last provision , which will make it possible for CIUTS to invest
    in such items as gold and property , provided that it receives
    authorisation from the Member State in question , should not entail
    any siseable risks for unitholders , given the very tight restriction
    provided for in respect of such forms of investment (a maximum of 5
    of its funds ). Finally it should be noted that letters of credit
    representing loans made under Article 47(2 ) are included in this
    category of assets .
D. Links between Article 2 and Article 25 of the proposed Directive
Article 2(l ), which defines the CIUTS referred to in the proposed -Direct¬
ive , stipulates inter alia that this definition covers unit trusts and
investment companies which invest at least 80$ of their funds in trans¬
ferable securities and liquid assets .
On the other hand , under Article 25 of the proposed Directive , CIUTS
must invest at least 95^ of their funds in transferable securities and
liquid assets . There is an apparent inconsistency between the two
Articles , but it should be remembered that they pursue two quite distinct
objectives .
 ---pagebreak---                                       20- -
Article 2(l ) defines the scope of application of the proposed Directive
and , within this framework , stipulates that it applies not only to
collective investnent undertakings which invest all their funds in trans ¬
ferable securities and liquid assets , but also to those which invest a
substantial proportion of their funds (under the proposed Directive , at
least O0/to) in transferable securities . The proposed Directive is based
on the assumption that all such bodies pursue , from an economic view¬
point , the same objectives , that the investor thus considers them to be
similar and that they must , therefore , be subject to the same rules .
Article 25 is one of the orovisions relating to CIUTS investment policy ,
and here the interests of unitholders require that CIUTS should not be
allowed to invest more than jfo of their funds in assets other than trans¬
ferable, securities and liquid assets .
It should also be pointed out that any' problems resulting from these two
percentages will , in essence , arise only for CIUTS in existence at the
moment of entry into force of the proposed Directive^, since CIUTS set
up at a later date will have to comply with Article 25 from the outset .
If , therefore , at the tine of entry into force of the proposed Directive ,
a collective investment undertaking satisfies the criteria laid down in
Article 2(l ) of the . proposed Directive and holds , for example , 12$ of
its * funds in assets other than transferable securities and liquid assets :
- it will fall within the scope of the proposed Directive in pursuance
   of Article 2(l ),
- but , in order to comply with Article 25 of the proposed Directive , will
   have to reduce its investment in assets other than transferable securi¬
   ties and liquid assets to not more than 5 % of funds (provided , of
   course , that the Member State in v/hich the undertalcing in question is
   located , authorises this form of investment ).
l ) These problems must not be overestimated because examples of CIUTS
     investing more than 5$ of their funds in assets other than transferable
    securities and liquid assets appear very exceptional .
 ---pagebreak---                                   - 21 -
As regards the sizeable difference between the 20fo limit provided for in
Article 2(l ) and the 5$ limit provided for in .Article 25(2)(b ) in respect
of investment in assets other than transferable securities and liquid
assets , this is necessary to prevent collective investment undertakings ,
which are able to invest their funds in assets other than transferable
securities and liquid assets , deliberately avoiding the application of
the proposed Directive by modifying slightly the composition of their
portfolios where this is not prohibited by national legislation .
Thus , if both limits were identical , or if the gap between then was
narrowed - for example , by fixing them at      and 5 % respectively - a
CIUTS investing 5% of its funds in assets other than transferable securi¬
ties and liquid assets could easily move outside the scope of the pro¬
posed Directive , merely by investing a further      of its funds in these
other assets . Given the limits laid down in Article 2 of the proposed
Directive , the CIUTS in question would , however , have to place a further
1 % of its funds in assets other than transferable securities and liquid
assets to move outside the scope of the Directives such an operation is
unlikely as it would have far-reaching repercussions on the fundamental
nature of the investment undertalcing in question .
Finally it must be noted that the difference between the limits mentioned
above can be justified by the fact that Article 30 of the proposal pro¬
vides that in certain cases the limit of 5% provided by Article 25(2 ) ( b )
can be exceeded .
E. Investment policy of CIUTS (Articles 2b , 27 , 20 , 29 , 30 and ^9 )
The proposed Directive lays down a number of rules concerning CIUTS
investment policy with particular regard to securing the protection of
unitholders ,
 ---pagebreak---                                     - 22 -
1 . For instance , a CIUTS nay not invest more than 5*7° of its assets in
transferable securities of the sane issuer ( Article 2 r ( l )). There are ,
however , the following exceptions to this rule , the aim of which is to
ensure that the principle of risk spreading is observed in respect of
investments by CIUTS :
- The limit of 5% may by raised by Member States to a maximum of 10%
   provided that the total value of the transferable securities held by
   the CIUTS in issuers in which it invests more than 5% of its assets
   does not exceed ^0% of the value of those assets ( Article 2"(2 )).
   This exception could apply in particular to CIUTS in Denmark and Ire ¬
   land , where the market in securities is small and where there are
   relatively few quoted issuing bodies in which CIUTS can invest their
   assets .
- The limit of 5% need not be applied in respect of securities issued
   or guaranteed by a Member State or its local authorities or in respect
   of securities issued by public international organisations of which
   one or more Member States are members (Article 2 f ( 3 )). Generally
   speaking, investment in these securities should be free of risks ,
2 . It was also deemed desirable , with a view to protecting unitholill'p’re*
to limit the scope available to a CIUTS for investing in units of other
CIUTS . Consequently, a CIUTS may not invest in all more than 10% of its
assets in units issued by other CIUTS , irresepctive of whether these
units are quoted or not (Article 27(l )) and , within this limit , a
collective investment undertaking may not invest more than 5% of its
assets in the units of other unit trusts managed by the same management
company as its own (Article 27(2 )). In addition to this limit , the
proposed (Directive provides that :
 ---pagebreak---                                    - 23 -
- a unit trust may not charge further costs where it invests its assets
   in units of other trusts managed hy the same management company as its
   own (Article 27(2 ))|
- CIUTS may not invest their assets in securities of a collective in¬
   vestment undertaking not ranking as a CIUTS for the purpose of the
   proposed Directive . This prohibition concerns mainly securities
   issued by collective investment undertakings which are of the open-end¬
   ed type but which do not invest their funds essentially in trans¬
   ferable securities and liquid assets ( such as undertakings for
   collective investment in property or commodities , or mixed or open-ended
   undertakings ). This rule does not amply to securities issued by closed
   investment companies since these rank as transferable securities as
   referred to in Article 25 (Article 23 ).
3 . Finally , the proposed Directive provides that a CIUTS may not hold
more than jfo of the securities of the same category of an issuer and may
not have , for each voting object , more than 5$ of the total votes
attaching to the securities of this issuer . The aim of this rule is to
ensure that a CIUTS does not pursue a policy of talcing over control of
companies in which it invests , as this is not one of the tasks entrusted
to it . The limit , which may be raised to a maximum of 10$ by the Member
States in exceptional cases decided by the competent authorities , does
not , however , apply to securities issued or guaranteed by a Member State
or its local authorities or by public international organisations of
which one or more Member States are members or to holdings in certain
investment companies in third countries when this is the only possible
way to invest in securities of issuers of the countries concerned
(Article 29 ).
    The limits laid down for the composition of the assets of CIUTS
(Article 25(2 )) and those relating to the level of investment of these
assets in the transferable securities of the same issuer (Article 2< )
or in units of other CIUTS (Article 27 ) may , however , be exceeded in
the srent of price variations in the assets of the CIUTS , the exercise
 ---pagebreak---                                      24 -
by it of subscription rights , or a contraction in the size of the CIUTS
following the redempt on or repurchase of units , provided that the total
value of the excess is not more than 10$ of the value of the assets of
the CIUTS (Article 30)s there would be little justification for requiring
a CIUTS to liquidate investments in order to comply with limits which it
had not deliberately overstepped , when they may be sound investments which
it would be in the best interests of the CIUTS to retain in its portfolio .
This exception does not concern the 5^ ceiling on the holding of securities
issued by the same issuer , for in the cases where CIUTS are authorised to
exceed the limits mentioned , the percentage of securities held by the
CIUTS will not vary .
5 . For the same reason as that justifying the retention of the excess
margins referred to in 4 » i it was deemed desirable to provide that Member
States may authorise CIUTS which , at the time notification of the Direct¬
ive , exceed the limits referred to in 4 * above , including the maximum
limit of 5$ imposed on the holding of securities issued by the same issuer ,
to continue exceeding these limits provided that the total amount of the
excess margin does not exceed 10$ of the value of the assets of the CIUTS
(Article 59 ). Such leeway is not , however , permitted in respect of the
limits laid down on the composition of assets (Article 25(2 )) in view of
the liquidity problems relating to the assets of the CIUTS which could
arise if the limits were exceeded . Of course , if the excess margins autho¬
rised in this manner are subsequently reduced , they cannot once again
come into existence . Thus , a CIUTS which at the moment of notification of
the Directive holds 3$ of the securities of the same issuer and subsequent¬
ly reduces this percentage to 6$, cannot exceed this latter percentage in
the future , unless the conditions of Article 30 apply ( see point 2 above ).
F. Authorisation to withhold particulars referred to in Schedule A annexed
    to the Directive (Articles 34 and 57 )
The proposed Directive specifies the information to be published by CIUTS ,
i.e. a prospectus setting out the basic particulars of the CIUTS ( its
structure , objectives , procedures for issuing and repurchasing shares and
units , etc .), an annual report and two half-yearly reports ( or , if
appropriate one half-yearly report ) containing , in the main , finane ial
 ---pagebreak---                                     - 25 -
information relating tt> its activity . The information that must appear
in these documents is listed in the Annexe as in the case of the proposed
Directive 's other provisions , this provision also contains minimum rules ,
in the sense that each Member State is free to stipulate that CIUTS
located in that State , and those only , must publish additional informa¬
tion .
The competent authorities may, however , where the legislation of that
State included detailed regulation of CIUTS situated in that State ,
authorise such undertakings to limit the information to be contained in
the prospectus to information which is not regulated by such legislation
(Article 34(b )), This rule , which is designed to avoid requiring publica¬
tion of any information of which the public is already deemed to be in¬
formed , is directed , for example , at the present situation in France and
in the United Kingdom , where several points in the " statute " of " SICAVs "
and in the fund rules of unit trusts respectively are governed by law .
It should , however , be noted that if these undertakings should market
their units in a Member State other than that in which . they are situated ,
the prospectus to be published in respect of such marketing in the other
Member State should be comprehensive , i.e. should contain at least all
the information listed in Schedule A annexed to the proposed Directive
(Article 57(2 )).
G . Checking the information given by CIUTS (Article 37 )
The proposed Directive provides that the prospectus to be published by a
CIUTS and any changes to it must be submitted for prior checking by the
competent authorities . Checking of the annual and half-yearly reports
may , however , be carried out at a later date by these authorities . In
both cases , the competent authorities have a period of one month within
which to make any comments (Article 37(l ))»
 ---pagebreak---                                        - 26 -
The reason why the proposed Directive lays down different checking arrange¬
ments for the prospectus , on the one hand , and for the periodical reports ,
on the other , is as follows s
The proposed Directive provides (Article 31(2 )) that the periodical reports
must be published
             ished   withiti
                     withÿi very strict time-limits ( annual reports four
               shed with
months , half-yaarly reports s two months ). If these reports had had to be
submitted for   pri{fr**<me eking by the competent authorities , this would have
             r Dridr**<mec
meant that the time-limit for publication would have had to be longer than
those mentioned above . The prospectus is , however , a ‘'one-off” document
which need not necessarily be published within extremely strict time-limits
such as those laid down for the periodical reports . A prior check by the
competent authorities of the information contained in the prospectus is ,
therefore , possible ; consequently , it should be made compulsory , particularly
as the information contained in the prospectus is of great importance for
the potential investor with regard to his investment decision .
H. Borrowings by Cl UTS (Articles 41 and 70 )
The proposed Directive stipulates that CIUTS may not borrow, (with the ex¬
ception , subject to certain limits and conditions , of borrowings for the
repurchase or redemption of units^tfor the exercise of subscription rights
or , as regards investment companies , the acquisition of buildings necessary
for the carrying on of their activities (Article 41 )• It should be pointed
out that the following are not to be considered as borrowings within the
meaning of this provisions
a ) the opening of a current account with a credit institution on behalf
    of a CIUTS , with overdraft facilities ;
b ) the acquiring by a CIUTS of the foreign currency necessary to purchase
    foreign securities , where the CIUTS lodges as security for such a
    transaction an amount , in national currency , matching or exceeding the
    foreign currency acquired (back-to-back loans ).
 ---pagebreak---                                      - 27 -
The han on 'borrowing- will not , however , apply' 'to - Cl UTS- whose - fund, rules .
or memorandum and articles of association included on 1 January 197 ) provi¬
sions enabling loans to be contracted for investment , and which , during
the two years preceding this date , actually made use of these provisions
(Article 70)° Application of this ban on borrowings by such CIUTS would
unduly disrupt their character , and also unitholders: may have taken this
possibility of borrowing into consideration when making their investment .
Similarly , the rule whereby all units of a CIUTS must carry equal rights
(Article 4-) will not apply to such CIUTS since the unitholders lending
funds are subject , by virtue of their lending, to laws different from
that applicable to ordinary unitholders *
I. Suspension of the repurchase or redemption of units (Article 42 ) ■
The proposed Directive provides that a CIUTS may , in .cases provided for
by law , the fund rules or the memorandum and articles of association of
the investment company , suspend the repurchase or redemption of its units .
(Article 42(2)(a )). ?or instance , this might arise if the CIUTS was to
suspend calculation of the list value of its -units on one of the following
grounds s
a ) the closure of one or more stock exchanges on which a large number of
    the securities held in the portfolio of the CIUTS ;
b ) inability of the CIUTS to enjoy normal disposal of its assets on
    account of the political , economic, . military , monetary or social
    situation , or any other case of force majeure ;
c ) a breakdown of the means of communication used to determine the value
    of the assets of the CIUTS ;
d ) exchange restrictions or the application of abnormal exchange rates .
 ---pagebreak---                                         20 -
J. Income roceivod by a Cl UTS (Article 44 )
The proposed Directive provides that the income received hy a Cl UTS must
either be distributed to unitholders or reinvested (Article 41-)* " Income "
refers , in particular , to dividends , interest and other financial accruals .
K. Particularly speculative transactions which CIUTS cannot -undertake
   (Article 4-0 )
The proposed Directive prohibits CIUTS from carrying out particularly
speculative transactions , such as uncovered dealings in transferable
securities ( Article 4°' )<> The definition of transactions deemed to he par¬
ticularly speculative is the responsibility of the national authorities ,
although uncovered dealings in transferable securitiesarc in any case
amongst the transactions prohibited ? taking into account the differences
between the Member States concerning the financial market structure end
the nature of permitted transactions in securities , no common definition
of "particularly speculative transactions " has been possible .
L. Régulations concerning nomes (Article 53 )
Paragraphs 1 and 2 of Article 53 of the proposed Directive have different
objectives .
Paragraph 1 is aimed at preventing a CIUTS falling within the scope of
this proposed Directive from trading under a name which night mislead the
public . Such would be the case if , for instance , a unit trust investing
its assets in a very small number of countries described itself as a
"world-wide unit trust ".
 ---pagebreak---                                     - 25
                                                                undertakings noi:
Paragraph 2, on the other hand, provides that Member States ,must ps9hib.it /
meeting the definition provided for in Article 2{l ) of the proposed I)irec ! '.-
 ive and remaining therefore outside it from using names similar to those
used by undertakings covered by the scope of the proposed Directive . The
aim of this ban is to prevent investors from being misled into believing
that undertakings not ranking as CIUTS covered by this Directive do in
fact enjoy this status .
M. Financial service (Article 54 )
In order that unitholders may easily exercise their financial rights , the
proposed Directive provides that if a CIUTS markets its units in another
Member State to that in which it is situated , it must provide a financial
service in that other Member State (Article 54(2 )). This requirement will
normally be complied with ipso facto when marketing of the units in that
other Member State is carried out by a credit institution .
II. Savings plans (Article 55 )
The proposed Directive mentions , amongst the marketing regulations , the
rules governing various forms of savings plan (Article 55(2 )). It should
be pointed out , by way of example , that the expression s, the various forms
of savings plan" covers , amongst others ;
a ) the typical savings plan, i.e. a contract between the saver and the
    formulator of the savings plan , for securing, by a single payment or
    by regular or irregular payments units in one or more CIUTS with a     :
    view to achieving a specific savings objective !
b ) the withdrawal plan , i.e. a plan providing for the periodical payment
    to the subscriber of a fixed amount deducted from the income from units
    and, if such income is not sufficient , from the invested capital by
    repurchasing units .
 ---pagebreak---                                     - 30 -
0 , Special scheme for Certain investment companies (Articles 63 to ^5 )
By virtue of Section X of the proposed Directive , investment companies
which market their units exclus ively through one or more official stock
exchanges are exempt from certain obligations., In particular , these
companies are subject neither to the provisions of the proposed Directive
concerning the depositary company (Articles 19 to 2A inclusive ) nor to
the legal obligation to repurchase their units at the request of the unit ¬
holder (which obligation is provided for in Article . 42(1 )).
The reason that it appeared useful to exempt the companies in question
from the obligation of having a depositary company like other investment
companies sterns from the fact tha„t certain responsibilities applicable
to depositary companies of investment companies ( see Article 19 ) are not
applicable to investment companies which market their shares exclusively
through the medium of the stock exchange . However , the fundamental
function of the dopesitary company which is to safeguard the assets of
the investment company , he,s been retained ! in this connection it is pro¬
vided that the assets of these investment companies must be kept in a
special account with one or more credit institutions (Article ^5 ( 3 ) ) »
In addition , the obligation to repurchase is meaningless in view of the
use of this form of exclusive marketing ! but , in order to protect the
saver , the proposed Directive provides that the investment companies
concerned must intervene on the market to prevent the quotation of their
units from deviating more than 5$ from their net asset value , nevertheless ,
the competent authorities may exempt these investment companies from inter¬
vening on the market in exceptional circumstances , which ought normally to
be the same a3 those justifying the suspension of the repurchase or re¬
demption of units by a CIUTS (Article 54 )* In other words , this moans that
these companies will , if need be , have to intervene on the stock exchange ;
 ---pagebreak---                                    - 31 -
to repurchase their units so that , at any given time , an investor may ,
if he wishes to sell his units , obtain a stock exchange price equal to
at least 95/£ of their asset value 5
to sell their units ( or to issue other units ) so that , at any given time ,
an investor may, if . he tiishes to buy .units , obtain a stock exchange price
equal to not more than 105^ of their asset value .
 ---pagebreak---                                     - 32 -
                       Proposal for a Council Directive
               for the coordinati >n of lav/s , regulations and
              administrative provisions regarding collective
            investment undertakings for transferable securities
THE COUNCIL OP THE EUROPEAN COMMUNITIES ,
Having regard to the Treaty establishing the European Economic Community
and in particular Article 57(2 ),
Having regard to the Proposal from the Commission ,
Having regard to the Opinion of the European Parliament ,
Having regard to the Opinion of the Economic and Social Committee ,
Whereas under the Treaty any discriminatory treatment based on nationality
concerning establishment and provision of services is prohibited since the
 end of the transitional period ; whereas       Council Directive of 27 June
 1973 on the abolition of restriction    on freedom of establishment and free ¬
dom to provide services in respect of self-employed activities of banks and
 other financial institutions^ considered that the obligv tion
 for a company intending to carry on the activity of manager or trustee of
 a unit trust in another Member State to be incorporated in that State comes
within the scope of this prohibition ;
Whereas the laws of the Member States relating to collective investment
■undertakings differ appreciably from one State to another , particularly as
regards the extent of the obligations and controls which ;.u-c i : loosed
 these undertakings ; whereas these differences disturb       competitive
 conditions between      undertakings and do not ensure equivalent protection
 for unitholders}
 Whereas national lave governing collective- investment mdertnkings should
be coordinated with a view to appro:d.lifting the conditions of competition
between these undertakings at Community level , at the same timo ensuring
the effective and more uniform protection of unitholders } whoreno it
seems that such coordination would also facilitate access by CIUTS
situated   in  one   Member State   to activities    in
  ) '„J ib . L 11' Of 1.:,7 l 7 ;\ p. 1/10
 ---pagebreak---                                      - 33 -
the other Member States 5
Whereas the attainment of these objectives is essential ofr the removal of
restrictions on the free circulation of units of collective investment
undertakings in the Community , and consequently this coordination falls
within the idea of the creation of a European capital market 5
Whereas to achieve these objectives , provision should be made for common
basic rules concerning the authorization , supervision , structure , activities
and information for collective investment undertakings situated in the
Member States which they must publish ?
Whereas the application of these common rules is a sufficient guarantee to
collective investment undertakings situated in a Member State , to permit
them , subject to provisions relating to movements of capital , to market
their units in other Member States without these Member States being able
to make the undertakings or their units subject of any provision whatsoever
other than regulation for marketing ? xvhereas nevertheless if a CIUTS in one
markets its units in a different Member State it should provide a financial
service in that other Member State to allow unitholders therein to easily
exercise their financial rights ?
Whereas , firstly , the coordination of the laws of Member States should be
confined to collective investment undertakings other than these which are
"closed*' which invest exclusively in securities ? whereas , on account of the
various problems raised by collective investment undertakings which do not
invest exclusively in securities and these which are closed , these should
be coordinated at a later date ?
HAS ADOPTED THIS DECISION :
 ---pagebreak---                                       - 34 -
                       Proposal for a Council Directive
                            for the coordination of
               laws , régulations and administrative provisions
                regarding collective investment undertakings
                         for transférable securities
Section I - General provisions and field of application
Article 1
1.           Member States shall apply the provisions of this Directive to
collective investment undertakings for transferable securities ("CIUTS")
situated within their territories .
2.           Subject to the provisions relating to the movement of capital and
to Articles 55(1 ) and 61(2 ) of this Directive , a Member State shall not apply
any provisions whatsoever to CIUTS situated in another Member State or to
the units iocucd.by such'-CIUTS *
3.           Member States shall apply stricter requirements to CIUTS situated
within their territories than those provided in Article 5 ct seq of this
Directive and any additional requirements , provided these are of
general application and do not conflict with the provisions of this Directive .
Article 2
1.           For the purposes of this Directive , CIUTS are hereby defined as in­
vestment companies and unit trusts :
- whose object is the collective investment , mainly in transferable
   securities and liquid assets , of capital acquired by means of offer
   to the public and whose operations are based on the principle of spreading
   the investment risk . " Investment mainly in transferable securities
   and liquid assets" is hereby defined as the investment in such transferable
 ---pagebreak---                                       - 35 -
    securities and liquid assets of at least 80 $ of the capital collect ec ,
-       whose units are or have "been issued continuous 1;' or u' blorkr :.i
    short intervals and/ or have "been directly or indirectly repiirchased or
    redeemed at the request of the holder , at the expense of the assets
    of such undertakings .
2.          For the purposes of this Directive the following shall not
be deemed to be CIUTS :
^a) closed investment companies ;
(b ) CIUTS whose assets are mainly invested other         than in transferable
      securities and liquid assets through the medium of subsidiary companies .
Article 3
            For the purposes of this Directive , a CIUTS shall be deemed
to be situated in the Member State in which its business is effectively
carried on .
            For the purposes of this Directive , the following definitions
shall apply :
(a) investment company :
      CIUTS with a corporate structure , i.e. established as a company;
(b ) unit trusts :
      CIUTS with a non-corporate structure ;
( c ) management company :
      the company entrusted with managing a unit trust ;
(d) depositary company :
      the company entrusted with custody of the assets of a unit trust or
      investment company;
( e ) fund rules :
      all the contractual rules or "trust rules" governing the existing
 ---pagebreak---                                         - зб -
      iC /.’. 1 relationships , within the framework of a unit trust , between
      tne management company , the depositary company and the unitholders ;
 ( f) unit :
      any material representation of unitholders’ rights in CIUTS assets ,
      whether such rights take the form of shares issued by the CIUTS or by
      the registration of the unitholders in a register kept by the CIUTS}
 (g) directors ;
      persons viho by virtue of the law or the articles or memorandum of
      association represent the management , investment or depositary company,
      or who have assured managerial responsibilities at a senior level ;
00 competent authorities ;
      those in the Member States in which the CIUTS is situated .
Section II - Authorisation of the CIUTS
Article 5
1.                A CIUTS shall not conduct operations unless it has been authorized
by the competent authorities . Such authorisation shall be valid for all the
Member States .
2.                A unit trust shall only be authorised if the competent
authorities have approved the management company , the
fund rules and the choice of depositary company . An investment
company shall only be authorised if the competent authorities have approved
both the articles and memorandum of association and the choice of depositary
company .
3.                The competent authorities shall not authorize a CIUTS if the
directors of the management company ,        the investment company or the
depositary company are not of good repute or are not competent to carry out
their duties . The names of the directors of the management company ,
the investment company , and their successors in office
 ---pagebreak---                                       37 -
should therefore he reported   immediately to    the   competent
authorities . The same shall apply to directors of the depositary company ,
unless such notification has already been g$wai to other authorities of the
Member State in which the CIUTS is situated .
4»             The management company or depositary company shall only
be replaced and the fund rules or memorandum or articles of association
of the investment company shall only be amended with the approval of the
competent authorities .
5.             Any amendment of the memorandum or articles of association
of the management company should be reported immediately to the competent
authorities .
Section III –                                        of unit trusts
               For the purposes of this Directive a unit trust shall be
deemed to include a management company and a depositary company in addition
to the capital accumulated .
Article 7
1.             The management company shall have its registered office in
the Member State where the unit trust is situated, or shall be established there
if its registered office is in another Member State .
2.              The management company shall have sufficient paid up capital
to enable it to carry out its activities effectively and neet its
 liabilities .
Article 8
                The activities of the management company shall be limited
to the management of unit trusts .
 ---pagebreak--- 1.             The management company shall inform the competent authorities
of the names of all its partners and the amounts of their respective
holdings in the company *
2.             Shares in the management company may orifer be sold or other¬
wise disposed of with       the approval of the competent organs of the
management company .
Article 10
1.             The safekeeping of transferable securities and liquid assets which
fixrm part of the assets of the unit trust shall be the responsibility of the
depositary company which shall hold them in a separate account . This rule
shall also apply to all other assets of the unit trust whose safekeeping
eon be assured to a great extent by the depositary company*
2.             The depositary company shall moreover have the following
duties :
 (a) talcing all necessary measures to ensure the day-to-day administration
       of the unit trust’s assets of which it is the trustee }
(b ) taking all necessary measures to ensure that the sale , issue , repurchase ,
       redemption and the cancellation of units by the unit trust is carried
       out in accordance with statutory provisions and fond rules ;
( c ) taking all necessary measures to ensure that the value of the units
       is calculated in accordance with statutory previsions and fund rules $
 (d ) carrying out the instructions of the management company relating to
       the assets of the unit trust , unless these are not in accordance with
       the law or the fund rules ;
 ( e ) taking all necessary measures to ensure that :
       - securities sold on behalf of the unit trust are handed over only in return
         payment of their equivalent value and that such equivalent value is
         entrusted to its custody;
 ---pagebreak---                                      - 39 -
     -      payment for the securities purchased on behalf of the ur.it trust
        is made only on the handing over of the securities , and that their
       custody be entrusted to the depositary company to the extent
       that their safekeeping can be substantially assured by it |
( f) talcing all necessary measures to ensure that distributions are made in
     accordance with the procedures laid down in the fund rules .
  Article 11
  1,           The depositary company shell either have its registered office
  in the same Member State as the unit trust , or be established in ,
  or at least have a place of business in that Member State
  if it has its registered office in another Member State ,
  2.           The depositary company shall have sufficient paid up capital to
  enable it to perform its duties effectively and meet its liabilities .
 Article 12
               The depositary company shall be liable to the management company
  and the unitholders for all less suffered by them as a result of its failure
  to oarry out or properly execute its duties . Liability
  towards unitholders shall be direct or indirect through the management
  company depending on the legal nature of the relationship between the
  depositary compary and the unitholders . Clauses in the fund rules or any
  other agreement trhich may exclude or restrict this liability shall have no
  effect .
  Article 13
  1#           The same company shall not act as management company and depositary
  company .
  2.           The management company and the depositary company shall act , in
  carrying out their respective roles       in the unit trust j in the sole interest
  of the unitholders .
 ---pagebreak---                                            - 40 -
Article 14
1,         The terms and conditions of replacement of the management company
and the depositary company shall bo laid down by statute or by fund rules .
The statutory previsions shall provide , that the competent authorities shall
demand the replacement of the management company or the depositary company
when these bodies are no longer capable of carrying out their duties ,
2.         The statutory previsions or fund rules sahll provide regulations
to ensure the protection of the unitholders where the management company,
or the depositary company is replaced .
Article 15
           The assets of a unit trust shall not be made the subject of any
claim from persons other than the management company and the unitholders .
           In all cases claims by the management company or the unitholders
shall only be met by assets of the unit trust where there axe charges
expressly attaching to these assets by statute or according to the fund rules .
Article 16
           Member States shall take measures to ensure that the assets of
a unit trust are protected if the management company or the depositary
company goes into liquidation .
Section IV - Obligati on s_ regarding the_ structure of investments _cojnp
              and thei -- rkn - i ; nr ■' cr.enan’ es
Article 17
           The investment company shall have sufficient initial paid up
capital to enable it to car:y cn its business effectively .
 ---pagebreak---                                      - 41 -
Article JL8
            The investment company shall not engage in activities other than
those referred to in Article 2 , It shall be responsible for the management
of its assets .
1.          The safekeeping of transferable securities and liquid assets
forming part of the assets of an investment company shall be the responsibility
of a depositary company which must hold them in separate accounts . This
rule shall also apply to all other assets of the investment company the
safekeeping of which can be guaranteed by a grea.t extend by the depositary
compary .
2.          The depositary company shall moreover be responsible for the
following:
( a) taking all necessary measures to ensure the day~to--d.ay administration
      of the investment company’s assets of which it is the trustee 5
(b ) taking all necessary measures to ensure that the sale , issue , repurchase ,
      redemption and cancellation of tinits by the investment company is carried
      out in accordance with statutory previsions and with the memorandum and.
      articles of e.ssociation of the investment company ^
( c ) taking all necessary measures to ensure that :
      - securities sold on behalf of the investment company are handed over
        only in return for payment of the equivalent value which shall then
        be entrusted to its safekeeping !
      - payment for securities purchased on behalf of the investment company
        shall be made only when these securities are handed over the custody
        of the laatter being entrusted, to the depositary company to the extent
        that their safekeeping can be substantially assured by it 5
(d ) taking all necessary measures to ensure tlia.t dividends are issued in
      accordance with the procedures laid down in the memorandum and articles
      of association of the investment company .
 ---pagebreak---                                      - 42 -
Article 20
1.          The depositary company shall either have its registered office in
the same Member State as that of the investment company , or be established
in or at leant have a place of business in that Member State if it has its
registered office in another Member State .
2.          The depositary company shall ha.ve sufficient paid up capital to
enable it to carry on its business effectively and to meet its liabilities .
Article 21
1.          The depositary company shall act , in the sole interest of the
unitholders , in to role as a depositary company .
2.          The depositary company shall be liable to the investment company
for all less suffered by the latter as a result of its failure to carry out
or properly execute its duties . Any agreement which may exclude or restrict
this liability shall have no effect .
Article 22
          The same company shall not act as investment company and depositary
company .
Article 23
1.          The terms and conditions of replacement of the depositary company
shall be laid down by the relevant statute or the memorandum and articles
of association of the investment company . The statute shall provide , that
the competent authorities shall demand the replacement of the depositary
company when this body is no longer capable of oarrying out its duties .
2.          The statute or the memorandum and articles of association of the
investment company shall provide regulations to ensure the protection of
unitholders where the depositary company is replaced .
 ---pagebreak---                                      - 43 -
 Article 24
               Member States shall take all measures necessary to ensure that
 the assets of an investment company arc protected if the depositary company
 goes with liquidation .
 Section V -
 Section
■Section       Obligations concerning the investment policy of CIUTS
 1.            The assets of CIUTS shall consist solely of 8
 (a ) transferable securities admitted to official stock exchange
      quotation in a Member State     end also those
      recently issued transferable securities in the same category as those
      already admitted to official quotation, provided that the admission of
      the new transferable securities to official quotation is applied for;
 (b ) transferable securities traded on another regulated market of a Member
      State which operates regularly and is recognized and open to the
      public |
 (c ) transferable securities admitted to official stock exchange quotation
      in a non-Hember State or traded on another regulated market of a non–
      Member State which operates regularly and is recognized and open
      to the public , provided that the choice of this stock exchange or market
      has been approved by the competent authorities ;
 ( a) liquid assets , including letters of credit ’which , due to their rapid
      maturity and their guaranteed realisation , rank as liquid assets
 2.             lîoweverî
 ( a) a CIUTS may invest a maximum of up to 10 fa of its assets in transferable
      securities other than those referred to in paragraph 1 ;
 (b ) Member States shall provide in their legislation that CIUTS may invest
      a maximum of up to 5 f° of their funds in assets other than transferable
      securities and liquid sssets .
 ---pagebreak---                                    - 44 -
Article 26
1.         A CIUTS shall not invest more than 5    of its assets in transferable
securities issued by the same body .
2.         Member States shall raise the limit laid down in paragraph 1
hereof to a maximum of 10 % only if the total value of the transferable
securities held by the CIUTS in the issuing body in which it invests more
than 5 i° of its assets does not exceed 40 $ of the value of these assets .
3.         Member States shall waive application of paragraphs 1 and 2 hereby
in the case of securities issued or guaranteed by a Member State or its local
authorities or securities issued by public international organizations of
which one or more Member States are members .
Article 27
1.         A CIUTS shall not invest more than 10 $ of its assets in units
issued by other CIUTS .
2.         Without prejudice to paragraph 1 hereof a unit trust shall not
invest more than 5 % of its assets in the units of other unit trusts managed
by the same management company as its own , but should this arise , the
charging of further costs shall be prohibited .
3.         Subject to paragraph 2 hereof , if a CIUTS does invest part of its
assets in the units of another CIUTS , any charging of further costs shall
be shown in the periodical reports referred to in Article 31 hereof .
Article 28
         A CIUTS shall not invest its assets in securities of a collective
investment undertaking which is not defined as a CIUTS for the purposes of
this Directive . This rule however shall not apply to securities issued by a
 ---pagebreak---                                       - 45 -
closed investment company .
Article 29
1.          A CIUTS shall not hold more than 5 $ of the securities of the
same category in an issuing "body , and shall not dispose of more than 5 i°
of the total votes attaching to the securities of this of this issuing body
by way of vote .
2.          Member States shall authorize the competent authorities to raise
the limits provided for in paragraph 1 hereof to a maximum of 10 fo in
exceptional cases .
3.          Member States shall waive application of paragraphs 1 and 2 hereof
in the following cases :
(a) transferable securities issued or guaranteed by a Member State or its
      local authorities or transferable securities issued by public inter¬
      national organizations of which one or more Member States are members ?
  (b ) the holdings of a CIUTS in a company incorporated in a non-Member State
      which invests its assets mainly - in securities of issuing bodies having
      their registered office in that country , under whose legislation , such
      a holding establishes the only way the CIUTS can invest in the securities
      of the issuing bodies in that country . This waiver shall , however , only
      apply where the company in the non-Member State adheres to the limits
      laid down in Articles 26(l ), 27 and 29 (l ) hereof in its investment policy .
      Where the limits set in Articles 26(l ) and 27 are exceeded , Article 30
      shall apply mutatis mutandis ?
( c ) the holdings of a CIUTS in subsidiary companies carrying on the business'
      of management , investment or marketing on its own behalf .
 ---pagebreak---                                       - 46 -
Article 30
          The limits laid dovm in Articles 25(2 ), 26(l ) and ( 2 ) and 27(l ) and
( 2 ) may he exceeded on condition that any such excess stems from price
variations in the assets of the CIUTS,or the exercise hy the CIUTS of
subscription rights attaching to the securities which form its assets , or
from any restraint on the part of the CIUTS , and on condition that the total
value of this excess is not more than 10 fo of the value of the assets of
the CIUTS .
Section VI - Obligations concerning information to be supplied to unitholders
A. Publication of a prospectus and periodical reports
Article 31
1.          The CIUTS shall publish :
- a prospectus end two half-yearly reports , each financial year ,
- an annual report
2.          The annuar and half-yearly reports shall be published from the
end of the period to which they refer within the following time limits :
- 4 months for the annuar report
- 2 months for the half-yearly report ,
3.          By way of derogation from paragraph 1 hereof , the CIUTS shall not
be . obliged to publish the half-yearly report relating to the second six-
month period of the financial year if the annual report for that financial
year is published during the two month period .
Artide 32
1.          The prospectus shall contain the information provided for in
Schedule A annexed to this Directive .
 ---pagebreak---                                      - 47 -
2.         The annual report shall contain the information provided for in
Schedule B annexed to this Directive .
3.         The half-yearly report shall contain the information provided for
in Chapters I and II of Schedule B annexed to this Directive .
           If the CIUTS distributes dividends during the first half of a
financial year , the half-yearly report relating to the period during which
this distribution is made shall also include the information provided for
in Chapter III of Schedule B annexed to this Directive , concerning the
revenue account for the reference period .
Article 33
1.         The fund rules or the memorandum and articles of association of
the investment company which are an integral part of the prospectus shall
be annexed thereto .
2.         The documents mentioned in paragraph 1 need not , however , be ■
annexed to the prospectus provided that in each Member State whore the
units are placed on the market , they are readily available to the public ,
free of charge , at the places mentioned in the prospectus .
Article 34
         By way of derogation from Article 32
( a) the competent authorities shall permit a CIUTS to dispense with the
     publication of certain particulars provided for in Schedules A and B.
     annexed to this Directive where such particulars are unlikely to affect
     an assessment of the assets , financial position , performance and
     prospects of that undertaking $
 ---pagebreak---                                  – /U » mm
b ) where the legislation of a Member State provides for the detailed
    regulation of CIUTS situated in that State , the competent authori¬
    ties shall permit ouch u-bn't aJiingo to limit the inforrx-tion conic-iiLd
    in the prospectus to data which is not regulated by law .
Article 35
The essential elements of the prospectus must be kept up to date .
Article 3 ">
1 . Member states shall specify the independent persons or the bodies
whose duty it is to verify the financial data contained in the annual
reports .                                                                 ' "
2 . Each annual report shall indicate precisely the person or body
whose duty it is to verify the financial data .
Article 37
li The' CIUTS shall submit its prospectus and        tcn-iment e thereto , as
well as the annual and half-yearly reports , for choc’lng by the competent
authorities , who shall have a period of one month. which to nako any
comments . The CIUTS shall take these comments into account . As far as
the prospectus is concerned , this chock must be carried out prior to
publication ,
2 . The competent authorities shall ensure that the prospectus and the .,
reports do not contain any information or orsaissionrs t/hich night
mislead the public .
Article 38
1 . The prospectus , the most recent annual report and the subsequent
interim report shall be sent free of charge to the potential subscriber
either when ho is canvassed or at his own request .
 ---pagebreak---                                       49 -
 2 . Moreover , the annual and halfi^early-roportc-ehall ' 'be. -mis r*vailablo
to tlic public .
B . Publication of other information
Article 39
The CIUT3 shall make public the issue , sale , repurchase or redemption
price of its units each time it issues , sells , repurchases or redeems
them , and at least twice a month . The competent authorities shall ,
hotvever , permit a Cl UTS to reduce the frequency to once a month on
condition that this derogation does not prejudice tho interests of the
unitholders.
Article A0
 1 . All publicity involving an invitation to purchase units of a CIUTS
shell indicate that a prospectors exists end the places where it may be
obtained by the public .
 2 . A CIUTS , and such marketing organisations and financial inter¬
mediaries as may be convened in the issue or sale of the units or their
distribution by the stock exchange ,shall not furnish any information
likely to influence the assessment of the units where such information
 is not contained in the prospectus or tho periodical reports or is not
common knowledge .
Section VII - General obi i ,oat ions of the CIUTS
.Article A 1
1 . A Ci UTS shall not borrow .
 2 . Paragraph 1 notwithstanding, Member States shall stipulate that the
competent authorities may permits
 ---pagebreak---                                     - 50
a ) Cl UTS to "borrow furlc up to 10 °/> of the value of their assets for the
    repurchase or redemption of their units or for the exercise of
    subscript ion rights , on condition that the funds "borrowed ore
    repaid, within a short period and are not secured by a charge on
    the assets of the CIUTS ;                   ....
h ) investment companies to "borrow funds to acquire buildings' which
    are necessary in- order to carry on their operations .
Article <12
1 . A CIUTS shall , at the request of the unitholder*     repurchase or
redeem its units .
2 . Paragraph 1 notwithstandings
a ) a CIUTS slv.il. in cases provided, for by statute , the fund rules or the
    memorandum and articles of association of the investment company ,
    suspend the repurchase or redemption of its units . The terms and
    conditions of this suspension shall be laid down in the fund rules or
    in the memorandum and articles of association of the investment
    company ;
b ) the competent authorities shall demand in the interact of the unitholders
    or in tho public interest         the suspension of the repurchase or
    redemption of its units by a CIUTS .
3 . In the cases mentioned in paragraph 2(a ), the CIUTS shall inform tho
competent authorities without delay of its. decision .
Article 43
The methods of asset valuation and the methods of calculation of the
sale or issue price and the repurchase or redemption prico of the units
of a CIUTS shall be indicated in the fund rules or in the memorandum and
articles of association of the investment company .
 ---pagebreak---                                    - 51 -
Article /4
1 . The inc >mo received by a Cl UTS shall either he dioiribut J& to unit -
holders or re5.nvested in accordance with provisions which shell be laid
down in the fund rules or in the memorandum and articles of association
of the investment company .
Distribution of income should take place at loao't
once a year . In the case of reinvestment of income , ruiitholders - ■
shall be informed at least once a year of the amount reinvested .
2 . The net gains realized from the sale of the assets of the CIUTS shall
be distributed . where such distribution is laid down by statute
and is provided for by the fund rules or the memorandum and articles of
association of the investment company .
3 . Unrealized gains shall not bo distributed .
Article 45
The units of a CIUTS shall not be issued unless . the cash equivalent to .
the not issue price is simultaneously paid into the funds of the CIUTS .
This provision shall not preclude the distribution of bonus units .
Article 4 ?
All the units of a CIUTS shall carry equal rights .
Article 47
1 . Without prejudice to Article 25(l)(d ), a CIUTS shall neither grant
loans nor act as a guarantor .
2 . Dy way of derogation from paragraph 1 . Member States shall provide that
the competent authorities ma,y authorise a CIUTS to make loans to under¬
takings of up to 5/° of the value of its assets , provided that these are
short term loans only . This authorisation shak be given in each case ,
and prior to the making of the loan .
 ---pagebreak---                                    - 52 ~
Article 43
A CIUTS shell not carry out transactions of a speculative nature , such as
open dealings in transferable securities .
Article 49
1 . A CITJTS shall only carry out transactions in the transferable securities
referred to in Article 25(l ) which are or shall be part of its assets on
the official market of a stock exchange or on another regulated market
which operates regularly and is recognized and open to the public .
2 . Paragraph 1 notwithstanding , a CIUTS shall carry out transactions out ¬
side the markets referred to in that paragraph if they are carried out
at a price which is more profitable to the unitholders than that which
might have been obtained on these markets had the transaction been carried
out thereon .
3 . Where a CIUTS carries out transactions in the securities referred to
in Article 25(2 ), the price on the basis of which these transactions are
carried out shall be certified by an expert approved by the competent
authorities .
Article 50
The following persons shall not act as party to transactions effected for
the account of a CIUTS i
- the mane„gement company and the depositary company 5
- the directors and staff of these companies or of the investment
   company |
- subsidiaries of the management company or depositary company ;
- the investment advisers of the management company , the investment
   company , or the depositary company ;
 ---pagebreak---                                      - 53 -
- any persons holding more than 10 % of the voting rights in the management
company , investment company or depositary company .
They shall not so act unless such transactions concern transfer;.,lie
securities and have been carried out
a) at a price which is equal to or more advantageous for the unitholders
    than the price of the official quotation on the stock exchange , if the
    said transferable securities have been admitted to quotation ?
b ) at a price which is equal to or more advantageous for the unitholders
    than that observed on any other regulated market which operates regu¬
    larly and is recognized and open to the public , if the transferable
    securities involved have been traded on this market ?
c ) at the price calculated in accordance with the rules laid doxm by the
    fund rules or the memorandum and articles of association of the investment
    company in the case of transferable securities other than those referred
    to in subparagraphs a ) and b )?
d ) at the issue price to the public for new issues in respect . of which the
    depositary company acts as an intermediary .
Article 51
A CIUTS shall place at the disposal of each unitholder a document confirming
his rights over its assets .
The fund rules or the memorandum and articles of association of tho investment
company shall indicate categories of costs chargeable to the unitholders .
1 . The competent authorities shall ensure that the name of a CIUTS cannot
mislead the public .
 ---pagebreak---                                        - 54 -
2 . Member States shall take        necessary measures to prevent           '• ‘
X--  ri ; a.   v/ hio' * uoc  t rogar d -d ao CIUT3,ac de?::i 'd in J'his r^c    r3
from using nar.es which night lead the public to believe that those under¬
takings cone xvithin the scope of this Directive .
Section VIII - Special -provisions applicable to GIUTS which market the^r
                   units in .Member States other than those in which they are
                   situated
Article 54
1 . If a CIUTS intends to market its units in a Member State other than
that in which it is situated , it shall inform the competent authorities
as vrell as the authorities of      the other Member State of its intention .
2 . In the case referred to in paragraph 1 , the CIUTS shall provide in
this other Member State a financial service through which unit ¬
holders may exercise their rights .
Article 55
1 . By viay of derogation from Article 1 ( 2 ) , a Member State shall apply its
own marketing regulations to CIUTS situated in other Member States and
marketing or intending to market their units within its territory .
2 . For the purposes of paragraph 1 , the term "marketing regulations "
shall cover the following :
a ) the rules relating to entries in trade registers ;
b ) the rules relating to sales promotion ;
c ) the rules relating to unfair competition ;
 ---pagebreak---                                  " * 55
d ) the rules relating to canvassing or other marketing techniques 5 .
e ) the rules governing the various forms of savings plan .
 3 . The marketing regulations referred to in paragraph 1 shall he applied
 in a non-Aiscricinatory manner and shall not have : impose
on Cl UTS situated in      other Member States stricter conditions than
those    set out  in this Directive .
Article 5 5   •
A Cl UTS shall be able to carry out the marketing of its units in a Member
State other than that in which it is situated through a sales office
situated in that Member State . The setting up of this office shall not be
dependent    on   the approval of the authorities of that Member State .
Article 57
1 . If a CIUTS markets its units in a Member State other than that in
which it is situated , it shall distribute in this other Member State , in
at least one official language of • tho said ' Member State , the documents
and information which shell be published in the Member State in which it
is situated , in accordance with the same terms and conditions as those
provided for in the Member State of distribution .
2 . By way of derogation from paragraph 1 , a CIUTS yhioh is granted permission
in accordance uiih Article 34(b ) slir.ll } if it markets its traits in a Member
State other than that in which it is situated , publish in this other
Member State,a prospectus in accordance with Article 32(l).'               ■
Section IX – Provisions concerning the comuotent authorities
Art ici G 57
Member States shall designate the competent authorities who shall
assume     the responsibilities conferred upon them by this Directive .
They shall inform the Commission thereof and shall specify any sharing
respons ibility .
 ---pagebreak---                                       -*5' -
The conpctent authorities shall supervise the activities of CIUT3
situated in their national territory , throughout the
Community , and shall , in particular , ensure that the rules laid down in
this Directive are respected , subject to the provisions of paragraph 3°
2 . The competent authorities referred to in Articles 5 , 9(l ), 14(l ),
42(3 ), 53(1 ), fO(l ) and ( 3 ), l (^), '2 and 53(3 ) shall be state
authorities .
 3 . If recourse is had to the power provided on Article 55(l ), than the
authorities responsible for supervising the observance of the marketing
regulations referred to therein shall be those of the Member
State in which the units are marketed .
4 . The competent authorities shall be granted all          powers , including
those of supervision , necessary to carry out their task . In Particular , they
shall have the power to carry ourfc on the spot investigations and to require the
CIUTS concerned to provide any information or documents they may need
in order to carry out their task .
Article 59
The competent authorities of Member States shall collaborate closely
 in order to carry out their task and shall for this purpose communicate
to each other all         information requested .
Article 60
1 . The competent authorities shall state the reasons behind all decisions
rejecting applications for authorisation &,nfl shall oomwani cater the*:® reasons
to the applicant .
 ---pagebreak---                                        57 - .
 2 . Member States . shall provide for a rigb+- of appeal at lax-; against
 ail réfactions .
 3 . Where an application for atrtharica'tren.vhleh'^ascpi^p&ra^e^r^GhlM'ihas not
been acted upon by the competent authorities within three months from the
date of receipt thereof , provision shall also be made for a right of
appeal at lax;.           •
Article <1
 lo Member States shall specify such measures , including the possibility
 of withdrawal of authorisation' xdiich the\esmpet3hf authorities - -referred to
 in Article 5o(l ) nay take with regard to a CIUTS v;hich has violated
statutory provisions', regulations or ivlninistrr.tivt actions , or the
fund rules or the memorandum and articles of association of the investment
company .
 2 . Member States shall specify such measures which the authorities
referred to in Article 58 {?) shall take irith regard to o CUR'S which has
violated the rules laid clown in Articles 54(1 ) and 55(1 )-
 3 . All decisions takon by the authorities pursuant t'o the preceding
paragraphs sha.ll state the reasons on which they are based and shall be
 communicated to the CIUTS .
Member States shall provide for a right of appeal .at lax; against
 such a decision .
 4 . All decisions to withdraw their approval shall be communicated without
 delay by the competent authorities , of the Menber State in which the
 CIUTS in question is situated to the authorities of the other Menber
 States in which the units of this CIUTS are marketed .
 Article ^2
 1 . The 'winding up of a CIUTS shall be carried out under the supervision
 of the competent authorities in accordance with the regulations laid
 down by national legislation .
 ---pagebreak---                                     - -53 -
2 . The competent authorities shell have ell the necessary powers in order
to ensure that the interests of unitholders are protected , i'ithout
prejudice to the powers conferred upon courts in such a natter , Member
States shall authorise the competent authorities to appoint liquidators or
to have them appointed by tho courts .
3 . The winding up shall not " c carried out in a discriminatory manner with
regard to unitholders from other Member States .
Sect i on X - Specific provisions relating to investment companies which
              market their unit s exclusively through one or more stock
              exchanges
Article ”3
Investment companies which market their units exclusively through one or
more official stock exchanges to whose official quotation the units are
admitted , shall not- bo required to have a. depositary company within tho meaning
of this Directive .
The provisions of this Directing -which relate to tho depositary company
and its managers shall not therefore apply to those companies .
Article ^4
The provisiors of Article 42 shall not apply to tho investment companies
referred to in Article 5 3 . However , these companies shall , if necessary ,
intervene on the market to prevent the quotation of their units from
deviating more than 5$ from their net asset value . The competent
authorities shall in exceptional cases exempt these -companies’ from this
latter requirement .
Article 6 5
1 . The provisions of Articles 39 and 43 shall not apply to the investment
companies referred to in Article S3 .
 ---pagebreak---                                     ~ 59 ~
2 . The methods of asset variation and calculation of the net asset value
of the units of the companies referred to in Article 63 shall he set out
in the memorandum or articles of association of these companies . The n< t
asset value shall he established and published at least twice a week , and
its calculation must he certified as correct by an independent auditor .
3 . The transferable securities and liquid assets which are pant o'f the
assets of the companies referred to in Article 63 shall he kept in a
special account at one or more credit institutes . This rule shall also
apply to all assets the safekeeping of which can he substantially assured
by a credit institute .
Section XT - Liaison Committee
Article 66
1 . A Liaison Committee shall be set up at the Commission . The task of this
Committee shall be :
a ) to facilitate , without prejudice to Articles 169 and 170 of the Treaty ,
    the harmonized implementation of this Directive through regular
    consultation relating in particular to practical problems of implementation !
b ) to facilitate consultation between Member States as regards the stricter
    or supplementary requirements and the marketing rules which they are free
    to apply in accordance with Articles l(3 ) and 55(l ) of this Directive !
c ) to advise the Commission , if necessary , on additions or amendments to
    this Directive .
2 . The Liaison Committee shall be composed of representatives of the Member
States and representatives of the Commission . It shall be presided over by
a representative of the Commission . The secretariat shall be provided by
the Commission .
 ---pagebreak---                                     - 60 -
3 . The Committee shall he convened hy the Chairman either on his own
initiative or at the recmeet of one of its members .
Section XII - Transitional provisions , dérogations and final provisions
1 . By way of derogation from Article 8 , Member States shall authorise
management companies to issue hearer certificates representing registered
securities of other companies .
2 . Member States shall authorise management companies which , at the time
of notification of this Directive are , also involved in activities other
than those provided for in Article G , to continue these activities provided
they do not harm the interests of unitholders .
3 . If , in the case referred to in paragraph 2 , the management company is
a credit institute or an insurance company , it need only , notwithstanding •
Article 9(l )> inform the competent authorities of the name of any share¬
holder holding a number of securities to which are attached voting rights
in excess of 5 of the total votes attaching to its own securities .
4 . Article 9(2) shall not apply to the management companies referred to
in paragraph 3 .
Article 63
Member States shall allow CIUTS whose depositary companies do not comply
with the conditions in Articles 11 (l ) and 20(l ) at the time of the
notification of this Directive , a period of five years from the date of
entry into force of this Directive to comply with these conditions .
Article 69
1 . Member States shall authorise CIUTS which , at the time of the notifica¬
tion of this Directive , exceed the limits laid down in Articles 26 , 27
and 29 , to continue exceoding these limits , provided that the total value
of the resulting excess margins is not greater than 10 ^ of the value of
the assets of the CIUTS
 ---pagebreak---                                      -  1 -
 2 . The excess margins referred to in paragraph 1 relating to the
 limits laid down in Articles 2':' and 27 ray ho increased under the
 conditions net out in Article 30 .
Article 70
 1 . Articles 41 and 43 shall not apply to CIUTS whose fund rules or
.". on '.madam and articles of association included on 1 January 1 97 e
provisions enabling loans to be       granted  for investment and -which ,
during the two years preceding January 197 6 » actually mndc use of these
provisions .
2 . The fact that loans may he granted shall      he clearly indicated in
the prospectus .
3 . However , the amount of the loans contracted under paragraph 1 shall
not exceed l^fo of the amount of the assets of the CIUTS *
Article 71
Member States shall bring the laws , regulations and administrative
provisions necessary to comply with this Directive into force within
a period of 12 months from* the date of its notification and shall inform
the Commission imr.ideately thereof .
Article 72
Member States shall ensure that the Commission is notified of the text
of essential provisions subsequently adopted under national law in the
fields covered by this Directive .
Article 73
This Directive is addressed to the Member States .
 ---pagebreak---            - 62
        SCHEDULE      A
ITFCÏÏMATIOÏT TO BE ÏNCLUDED
         T–     MIT f PW« ■■Mi I » |–I m tW
 IN THE CIUTS PROSPECTUS
 ---pagebreak---                                                                           - 63 -
                            A ) Degarding unit trust ?                                       B ) F:egarding -invcstment corrpanles .-   (i
       Unit trusts in ganeral                             • - Management company                                                      î
1 » General data                              ϊ' **   Gens.''
                                              Α   - ?            de La                    1 . General data
                                              k                                                                                       *
                                                                                                                                       4
                                                                                                                                        4
11 « Genert ! characteristics                                     characteristics
                                              *
                                                                                          11 . Gener 'i eb ?           os             *
                                             4-
11.1 Uame                                        11.1 Fame - or style , registered office                                             i
                                                                                          11.1 Dame or stylo , registered office      fi
                                                         and the principal headquarters          and the principal headquarters
                                                         if this differs from the                if this differs from the             i|
                                                         Registered office .                     registered office .                  **
                                                                                                                                      fi
11.2 Dates of creation and of the first          11.2 Duration , if limited .             11.2 Dates of the company 's incor¬         J;
                                                                                                                                      l;
       sale of units to the public .                                                             poration and of the first sale
       Indicate the duration , if                                                                                                      *
                                                                                                 of units to the public . Indicate     t .
       limited .                                                                                                                         I
                                                                                                 the duration , if limited .
                                                                                                                                      4
                                                 11.3 If the company manages other unit                                                4
                                                         trusts or has other business ,                                               !(
                                                         indication of the other trusts
             -----––
                                                         and activities .                                                             !*
11.4 Indication of the place where the                                                    11.4 Indication of the place where the
       fund rules and periodical                                                                 memorandum and articles of            »
       reports may be consulted .                                                                association and periodical report ? ?
                                                                                                 of the company may be consulted.
11.5 Brief indications relevant to                                                        11.5 Brief indications relevant to
       unitholders of the taxation of                                                            unitholders of the taxation of the
   * ~ the fund . Details of whether
                                                                                                 company . Details of whether          i;
       deductions are made at source                                                             deductions are made at     source      i
       from the income and capital                                                               from the income and capital
       gains paid by the fund to unit-                                                           gains paid by the . company to .
       holders .                                                                                 unitholders .
                                                                                                                                      I
 ---pagebreak---                                                                                             - 64 -
                            A ) Regard in^ unit trusts                                                            B ) Regarding investment comnanies
                          **иякя ч«г в >-. ,-в«га«г ) • длвг’
                                                                H
         'Unit -trusts in general                               £            îlmagcruenc ocmpaiiy
«
                                                              4"
  11*6 Accounting and distribution                                                                              11.6 Accounting and distribution
      , dates .                                                                                                         dates .
                                                              JL,                                                                                            1 •
                                                                  12 . Mena -rem sut and -ri                    12 . Kr.r   er or t . ?rd «•."’.ditir.s*
                                                                  12.1 Nano snd position of the under¬          12.1 Name and position of the under¬
                                                                        mentioned persons vn Yhir the                  mentioned persons viithin the
                                                                        company , with dc-thii& of their                company , with details of their
                                                                        main action. ties outside the                  mam activities our, side the •
                                                                        company ( via , retenant                        company ('viz . relevant
                                                                        directorships and main duties                   directorships and main duties
                                                                        in other companies )}                           in other companies ):
                                                                        - Members of the Board of                    ‘ - Members of the Board of              I V
                                                                                                                                                             i V
                                                                             Direavors , the Supervisory                  Directors , the Supervisory        it
                                                                           - Board and the Managing Board, •              Board, and the Managing Board,     î .
                                                                             partners and managers and                    partners and managers and
                                                                        ' other persons responsible                       other persons responsible'
                                                                             for management at a senior                   for management at a senior
                                                                             level ..                                     level .                        .
                                                                        – Founders , if they still have                – Founders , if they still have
                                                                             responsibilities vis-a-vis                   responsibilities vis-a-vis
                                                                             the management company . '         •    - . the investment company .,         h
                                                               JL
                                                                   13.1 Paid- up capital plus statutory
                                                                         ■ and volurrrary roserves ( as per                                                  5
                                                                           latent :balario3 shoot )
                                                                                                             ~jh“
                                                                                                                13.2 In the event of an authorised           j
                                                                                                                        capital , indication of the amount . *
 ---pagebreak---                                                                          - 65 ~
                      A ) legarding unit trusts
                                                                                                   gardin^ investment comnani sa
      13.3     Details of the types and main characteristics of the               j  13.3
               units, in particular :                                            j         Detaiis of the different types and main characteristics -
              - the nature of the right (e.g. real, personal or other !                    of the units and in particular:           '•    ■     c |
                   title ) represented by the units                              I         “           sec^Ti±ies or certificates providing evidence
              –* origi-ttuvl socuriiiiGs or CGrijificcftss providing ©vid.Gn.cG
                                                                                 J           of titles entry m a register or in an' accounts' '
                  of titles entry in s> register or in an accounts                         - characteristics of the units : registered or bearer. " "!
              - characteristics of the units : registered or bearer.
                                                                                             Indication of denomination in the latter cases             j
                  Indication of denomination in the latter cases                           “ indication of unitholders * voting rights,                 1
              - indication of unitholders ’ voting rights if these                         - circumstances in which winding-up can be decided by
                  exists                                                                     the investment company and winding-up procedure, in
                                                                                             particular as regards the rights of unitholders .         I
              - circumstances in which windingt-ub can be decided ■
                 by the unit trust and' winding-c.p: ps^r-edure, in’ parti¬
                cular as regards’ the rights of unitholders .
     - 3.4    Indication of stock exchanges or markets where the               |I 13.4 Indication of stock exchanges or markets where the
             uni-us are quoted .                                                          uni us are cruoted .
 iI 14 * ,&?£®<iures        _and conditions  of issue of--r:iVil
                                                          '-units
                                                                              1 4.
                .. *–  w- . •»    ^
                                                                                                                                  units
 j 14.1 Continuous or block issues .                                                14.1  Contiruous or block issues .
                                                                                                                                                     î
| 14.2 Issue or sale by the unit trust , by a marketing                            lg . 2
                                                                                          issue or sale by the investment company, by a marketing j
j»         , organisation, through an intermediary, through                               organisation,  through an intermediary, through the stocl
i            the stock exchange or another ■ market .                                     exchange or another market .
• 44.3 Humber of units or duration of issue .
                                                                                          Humber of units or duration of issue .
    '-4*. 4 Cireumstances       in which issue or sale may he                 i
             suspended .                                                           I4.4 Circumstances in which issue or sale mav be
                                                                                          suspended .         - -     .            u
 ---pagebreak---                                                                                                           - 66 -
                           A ) Regarding unit trusts                                                                                 B ) Regarding investment companies
    1 S ■ Conditions and procedures for . repurchase . or jredengt Ion                                            1
                                                                                                                  ! 5 . JI 1.         CM                                  f 7*.. r édemption
            of -units and ci "' v                            "•   which repurchase o k­                                 01     >
          • redemption may be JS.iL'                                                                                    J1 & ^ • •     :;i  '      r-t suspended *
    lo . Out line of distribution rules                                                                           lo . Or -Air, 2 of 6 1 1 tri1'!! ’: i on rul os
    16.1 Distribution or reinvestment of profits .                                                               116 . 1 D'.f - tr- ib'iiion or reinvestment of profits .
                                                                                                             ~î 16.2 Precise description of methods used for determining                     1
    15.2 Precise description of methods used for determining
             net profit and sums available for distribution                                                                net profit and sums available for distribution
              (whether capital gains or losses taken into account ,                                                        (whether capital gains or losses taken into account ,
             whether a revenue equalisation account is employed,                                                           whether a revenue equalisation account is employed ,
             method of charging fees and costs ).                                                                          method of charging fees and coots ).
| ie . 3 Details of whether the profit is distributed in full                                                     16.3 Details of vrhether the profit is distributed in full                 -p
i            or only in pli/j? i/ and in the latter case names of the                                                      or only in pant and in the latter case names of the                j
!
   1 ■_ ia»w–
             bodies having authority to take the relevant decisions .
                         wri imrrf ■ – >        m m m 111 ■ a-ni mr TTI–1 ■ niflifint ~II "■ -r–1–1- - - -- --- –
                                                                                                                           bodies having authority to take the relevant decisions . J
i 16.4 Form of the distribution of profits (in cash or units). 1 16.4 Form of the distribution of profits (in cash or units), j
a            x' WXIII ux vxxv  ux w v * J. wv» v           v*        w ** WM  y -** '•vv –     w–  --      /
e
    2 .,     Business policy                                                                                       2.      BvgjLr r s g_.2°.v.'!.f'.Y
    20 . Description of business policy ’aims and techniques                                                       20 .    Desc-ynt j pn of Jjusiness policy aims and techniques
    20.1 Object of the fund e.g. aims for income , capital                                                         20.1 Object of the company e.g. aims for income , capital
                                                                                                                           growth , etc .
|            growth, etc.
J 20.2 Orientation of the fund’s investment policy                                                                 20.2 Orientation of the company’s investment policy
1             (particularly specialisation or spread in geo¬                                                               ( particularly specialisation or spread in geo¬
!            graphical terms or as to industry ).                                                                          graphical terms or as to industry ).
    20,3 Limitations and obligations on investment policy .                                                        20.3 Limitations and obligations on investment policy .
 I
 ---pagebreak---                                                           - 67 -
                                                                                                           companies
20.4 Indication of specific techniques , such as              S 20.4 Indication of specific techniques , such as
       contracting of debts or option dealings                I         contracting of debts or option dealings
       which are permissible in the management of             |        which are permissible in the management of
       the assets.'                                           J         the assets .
21 .   Main rules for valuation of assets
                                                              LA        Main rules for valuation of a ssets
                                                               rTo      Determination of the sale or J,ssue J3ric_e_andjthe
22 . Determination of the sale or issue price .andgthe
       repurchase or redemption price of units , in                     repurchase or redemption price. . o_f . units , m
       particular :                                                     particular ( ij:
       – Frequency of calculation of the sale or issue                  - Frequency of calculation of the sale or issue
          price and the repurchase or redemption pricef                    price and the repurchase or redemption price ;
       - Details of charges and commissions of all                      - Details of expenses and commissions of all
          kinds , including taxes relating to sales                        kinds , including taxes relating to sales
          or issues and redemption or repurchase ;                         or issues and redemption or repurchase ;
       - Method, place and frequency of publication                     - Method, place and frequency of publication
          of, these prices .                                               of these prices .
                                                                                                                                 I
  23 . Remunerations payable to the management company ,                Remunerations payable to the directors , tho
       the '.depositary company or third parties by the                 depositary companjr or to third parties by the company
        fimd and refunds of costs to the management                      and refunds of costs to the directors , tne depositary-
                                                                                     >  Ui  (JUoUO  bU 011VS  U.J.A UWJ.    -v    4
        company , the depositary company or third parties                company or to to third
                                                                                           third parties
                                                                                                   parties ..                     f
|       by the fund .                                                                                                            J
                                                                 ( l ) For the investment companies referred to in Article 63
                                                                       of the Directive , this heading is hereby replaces by the
                                                                       following j
                                                                       22 . Method and frequency of calculation of the net
                                                                            asset value of the shares . Method, place and
                                                                             frequency of publication of this value .
 ---pagebreak---                                     - 68 -
3,  Information concerning the dqpositcry company of unit trusts and
    investment TConpar.ie s ■
3.1 Name or style , registered office and the principal headquarters
    if this differs from the registered office .
3.2 Elements of -the contract with the management company or the investment
    company not arising from statutory provisions , fund rules or tionorandiui
    and articles of association of the investment company , and relevant
    to the unitholders .
3.3 Main activity .
4•  Information concerning investment advisers of unit trusts and
    investment companies
4.1 Name or style .
4.2 Elements of the contract nith the management company or the investment
    company uhich may be relevant to- the unitholders .
4*3 Other significant activities .
 ---pagebreak---           - 69 -
         SCHEDULE    3
INFORMATION TO 3E INCLUDED Iff
   THE PERI GDI CEL REPORTS
 ---pagebreak---                                          70 -
I. Statement of assets and liabilities
   The following items shall be shown separately ;
   a ) transférable securities .
       Particulars of transferable securities shall be given in the form of
       a table with a separate line for each different type of security .
       Transferable securities must also be analysed according to one or
       more of the following criteria ;
       - nature of the security ( shares , bonds or debentures , convertible
         bonds , etc .)?
       – relevant situr.tiai ( country of issuer , country of quotation , etc .);
       - économie sector ?
       - currency .
       For each security mentioned above the following must be stated ;
       - number or total nominal value ;
       - total value determined in accordance with the valuation rules laid
         down by statutory provisions , fund rules or the- memorandum and articles of
         association of the investment company . The total value shall bo
         expressed in the currency of the CIUTS ?
       - proportion in relation to the total assets of the CIUTS .
   b ) Deposits with banking institutes .
   c ) Dividends and interest receivable , where not already included in the
       valuation of assets under a ), b ) and e ).
   d ) Other amounts receivable .
   e ) Other assets .
       The following particulars shall be given for each assets
 ---pagebreak---                                        - 71 -
          - description and values
          - proportion in relation to the total assets of the CIUTS .
     f ) Loans obtained , indicating the purpose , the currency of the loan ,
         the rate of interest and the terra .
     g ) Other amounts payable .
     h ) Value of net assets .
     i ) The nuraber of units in circulation .
II . Hotes on the statement of assets and liabilities
     a ) Transferable securities not admitted to an official stock exchange
         quotation shall bo identified as such .
     b ) Where the price used for transferable securities is not an official
         quotation , the market referred to or the criteria, used for valuation
         shall bo specified.
     c ) Where the free negotiability of securities is restricted by statutory
         or contractual requirements , this        be stated , and the
         criteria used for valuation shall be indicated .
     d ) Contingent tax liabilities , particularly those relating to capital
         gains , shall be mentioned , indicating how far these taxes have been
         taken into account in determining the position of the CIUTS .
     e ) Transactions in progress (cuch as conditional operations ) on the
         date when the statement of onsets' and liabilities of the CIUTS is
         drawn up which arc relevant fron the point of view of assets' shall
         be shorn *
                                                                                ■>
 ---pagebreak---                                        - 72 -
      f ) Amounts to to received or to be paid by the CIUT3 under the heading
           of forward exchange transactions in progress on the date when the
           statement of assets and liabilities of the CIUTS is - established
           shall be listed in foreign currency ! these amounts shall be expressed
           in the relevant foreign currency with an indication of their equivalent
           value in the currency of the bomber State where the CIUTS is situated .
           Foreign currency shall include currencies other than those in which
           the CIUl'3 accounts ere kept .
III . Revenue acc ount for the refer ence period
      The following items shell be shown separately ?
      a ) Dividends on shares ?
           - in cash ?
           - in securities , where such dividends are considered as income .
      b ) Interest on bonds ( including lottery draws and premiums ).
      c ) Other income ( including subscription rights , bonus issues and
           warrants ).
      d ) Appreciation in value where brought to the revenue account .
      e ) Balance of the revenue equalization account , if such an accounting
           system is used .
      f ) Management costs where charged to the revenue account .
      g ) Custody charges where charged to the revenue account .
      h ) Financial charges , and , in particular , interest paid on loans .
      i ) Depreciation in value where charged to the revenue account .
       j ) Taxes .
      k ) Net anount of revenue .
 ---pagebreak---                                         - 73 -
     Items falling under headings f) and g) shall he apportioned , if these costs are
     invoiced separately , according to nature or according to persons making
     the charge . An apportionment shall not he required when' the CIUTS pays
     only lump sums to those persons .
IV . Changes, in capital account during the reference period
     The following items shall he shown separately :
     a ) Value of net assets at the beginning of the period .
     h ) Total amount of capital from sale or issue of units and purchase
         or redemption of units .
     c ) Management costs where charged to the capital account .
     d ) Custody charges where charged to the capital account .
     e ) Appreciation or depreciation in. capital value since the beginning
         of the period .
     f) Value of the net assets at the end of the period .
     Items falling under headings e ) and d ) shall he apportioned , if those costs
     are invoiced separately , according to nature or according to persons making
     the charge . An apportionment shall not he required when the CIUTS pays
     only lump sums to those persons ,
 V. Transactions carried out during the reference period^
     The following transactions shall he shown:
     a) Sales and purchases of transferable securities during the reference
         period shall be shown in terms of number or total nominal value .
         Where transactions are not the result of a decision of the CIUTS ( for
         example scrip issues ) these shall he shown separately .
     l ) This information does not have to he included in the annus.1 report if
         it has been published in the half-yearly report .
 ---pagebreak---                                      - 74 -
b ) For each security referred to in paragraph l(e ) the gross sale or
    purchase price ,
c ) Transactions referred to in paragraph II ( e ) which have been settled
    during the period , unless they he„ve given rise to a sale or purchase
    included in the statement referred to in a) above .
 ---pagebreak---                                   - c -
                         Financial record shect
Some costs might be incurred in organizing the meeting's of the Contact
Committee established by xirticle 6 ^ of the proposed Directive , However ,
since neither the frequency of the meetings nor the number of members
on the Committee has yet been fixed , it is not possible at present to
give an accurate estimate of these costs , which should not be high .