CELEX: 51976PC0152R(01)
Language: en
Date: 1976-09-14
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)

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APPLIES TO THE ENGLISH                                COM(76) 152 final/2 .
    VERSION ORLY
                                                      Brussels , 14 September 1976 »
      I
                                          Proposai 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 )
          C 011(76 ) 152 final/2 .
 ---pagebreak---                                      - 1 -
                              Tf BLU OF CGUTMT3
EXPLPATOR.Y UFMOPiU.Ptïï !
1.   Introduction                                                1
2.   Scope of the proposai                              '        2
3.   The case for coordination                            '6
4 * General principles underlying CIUTS coordination             8
5«   Reasons for and explanation of certain provisions
      in the proposed Directive                                 12
PROPOS AL FOR. 4 CCUHCIL DIRECTIVE
Introduction                                                    32
Sections :
    I.   General provisions and field of application          ' 34
         (Articles 1-4 )
   II .  Autiicrisation of the CIUTS                            36
         ( frticle 5 )
  III .  Obligations regarding the structure of                 37
         unit trusts ( articles 6-16 )
   IV .  Obligations regarding the structure of                 40
         investment companies and their depositary comrany
         (.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                       49
         (Articles 41 - 53 )
VIII .   Special provisions applicable to CIUTS vrhich          54
         market their units in Member States other than
         those in vhich they are situated (Articles 54 - 57 )
 ---pagebreak---  IX . Provisions concerning the competent            55
      authorities (Articles 58 - 62 )
  X.  Specific provisions relating to investment     58
      companies which market their units exclusively
      through one or more stock exchanges
      (articles 63 - 65 )
 XI . Contact Coinmittee                             59
      (Art ici G 66 )
XII . Transitional provisions , dérogations and      60
      final provisions (Articles 6 7 - 73 )
SCHKDULE A
      Information to he included ir 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 lai.s . regulations and
                administrative provisions regarding collective
             investment undertakings for transferable securities
                              Erolanc.t ory Mémorandum
1 . Intr oduct i or.
Gotteclive' investment undertakings are institutions •          cfoj ect is . to
Sesethie the funds of as many savers as possible by issuing units ( 1 ) and to
invest these funds , using the principle of risk spreading, in securities
or other assets , x.ithout seeking to exert through the holding, an influence
extending beyond the objective of financial investment .
These institutions offer savers a number of advantages s they provide a
wide spread of investments , however small the number cf 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 , be cause 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 savers - signifies that special attention
is paid to safeguarding the latter '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 .
 (l ) In the English text of this Memorandum and of the proposed Directive
      the words " unit" and "unitholder’1 are used conventionally to cover
      snares and shareholders respectively .
 ---pagebreak--- 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 end to
promote at Community level a more thorough interpenetration of markets in
transferable securities (for further details see paragraph 3 ).
2 . Scope of the oroposal
a ) Collective investment undertakings can be divided into tv:o groups : the
    closed-end type and those other than the closed-^nd 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 " societes d' invest is sement” in
    France , " investment trusts " in the Halted 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 elosed-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 with a corporate
    structure and those other than with a corporate structure ( i.e. con¬
    tractual or "trust").
 ---pagebreak---                                      - 3 -
  The collective investment taidertakings with , a corporate structure .(re¬
  ferred to in the proposal as ." investment companies") are 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 unit holders .
  Investment companies exist at present in Denmark ( investment associations ),
  FTance , Luxembourg and the Netherlands . Of these countries , only France
  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 unitholders .
 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 \inithol&kS'S 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
  Sta,tes except Italy and Denmark . They are subjected to specific regula¬
  tions which take accoxmt of their particular legal status in Germany,
 Belgium , France and the United Kingdom. Such regulations are being planned
 ---pagebreak---   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 undertakings ,
  and in particular those which invest their capital in property , raise
  special problems which will have to be examined at a later stage .
) In conclusion, the proposed Directive is concerned with collective
  investment undertakings for transferable securities other than of the
  closed-end type ("CIUTS” ), 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 80jo of the capital they collect 5
  - which •- r'sise- ’ "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 aro 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---                                      - 5
The following', however , are some of the institutions which do not fall
within the scope of the proposed directives
a ) collective investment undertakings more than 2Qfo of whose funds are
     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
To ) 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 harred hy legal or economic obstacles ?
     - 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¬
         tutions 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 1 interessement" ( in France ) 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---     Finally , CIUTS whoso 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 fact
    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 there 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 be 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 oan be really effective it appears essential that the necessary
measures must be taken in respect of movements in parallel 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 Commit tee_ in accordance with Article 69 of the
EEC Treaty , will submit to the Council a proposed Directive aimed at
bringing about this objective .
l ) O.J. s of 12 July 1970 and 22 January 1973-
 ---pagebreak---                                      n
                                     Ο ·*·
The planned coordination should therefore lead to the attainment of a
number of object ivess 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 CT.UTS 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 may not apply pro¬
visions of any kind to CIUTS situated in another Member State even if
they market their units in its o\m territory , with the exception of the
previsions governing capital movements and the marketing of units ( see
B. belovi ).
l ) For the purposes of the proposed Directive a CIUTS is deemed to be
    situated in the Member State where its management is effectively
     carried on (Art . 3 ).
 ---pagebreak---                                      - 9“
In. brief , it nay be said that CI UTS of Member States Kill , 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 buen authorised (Article 5(l ))» and that the only authorities having
power to grant valid author isat ion 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 ; 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 , arcs
a ) authorised . and required to supervise the activities of the undertaking,
    oven 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(i))$
b ) authorised to take ail appropriate measures concerning the undertaking,
    including withdrawal of authorisation^ - as provided: for hy''national: legisla¬
    tion , should the CIUTS infringe laws , regulations or administrative
    provisions or the fund rulos 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 bo granted all
the powers necessary (Article 00(4 )) and must be able to rely on the close
collaboration of the authorities of the Member States where the units of
CIUTS are marketed when such unit3 are subject to their supervision
(Article 55 ),
 ---pagebreak---                                        10 -
It has "been felt reasonable to stipulate that Community CITJTS 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 Cl UTS .
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 he 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 undertalcing
 is situated for supervision purposes , even if the CIUTS operates in other
Member States . This exception concerns the rules for marketing Cl IK'S units
 and the supervision of the application of these rules . In this 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 5°(3 ))*
 ---pagebreak---                                    - 1-1-
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 , use 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 he applied in a, non-d is criminatory manner
and nay not have the effect of imposing on CIUTS situated in the other
Member States stricter, conditions than those envisaged by the present
proposal ( Article 5h(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 requirement ; Article 26 of the proposed (Directive provides
    that a CIUTS may not invest more than jfn 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/t of their assets in such securities .
 ---pagebreak---                                    - 12 -
b ) Additional requirements Article 10 of the proposal lists the functions
    which a unit trust’s depositary company must fulfil . A Member State
    would be 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 : Mghts of unit
    holders deriving from the unit 3 they hold in the unit trust .
5 . Reasons 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 tos
- the structure of unit trusts and investment companies ;
- the restrictions imposed on the investment policy that CI TJT3 pursue ;
- the information they must d.isclose ;
- 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 authorising' and 'supervising
   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 0 ). This rule is designed to protect unitholder'C - as it aims to
ensure an 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 additional activity subject to authorisation by Belgium
(Article 37(1 )).
The second exception mainly concerns management companies in Ireland ,
the United Kingdom and the Netherlands , which may 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 57(2 )).
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 menage 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 ? 1
 ---pagebreak---                                      - 1 /’.
- 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 the ir- 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 unithfellLbrsv
The proposed Directive , however , lays down less strict rules in cases
vrhere , as mentioned in 1 . above , a unit trust is managed by a credit
institution or an insurance undertaking, the latter being required to
report the names of their major shareholders only (Article 67(3 ) )• As
these bodies arc 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 these bodies are often
not in a position to establish the identities of all the shareholders
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 68 )
1 . The depositary company oplays a ver,y important part in protecting
the interests of unitholders*, In addition to keeping custody of the
 ---pagebreak---                                     - lp -
assets of CUTS , to carrying out a number of technical transactions
relating- to the day-to-day acL.iinis-ora.tion of these assets ( among other
things , the collection of dividends and interest , and redeeming
securities which have matured)'1 and to paying out distributions , the
depositary company will he 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 ns that where
    the Cl UTS is situated , i.e. the Member State where its management is
    effectively carried on , or
b ) bo established in or at least have a . place of business in that Member
    State , if it has its registered office in another Member State .
This rule trices into account the fact that the arrangements for authori¬
sation end 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 which 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 , oviing 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 contra.ctual and statutory requirements .
For all those 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 he located
there if it has in that Member State either its registered office or
at least a hi ace of bu^artess    if the registered office is situated in
another Member State .
 ---pagebreak--- 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 £-n>). 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 depository 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 ibrance .
5 . The proposed Directive dees not specify the legal form of 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 s
    die inländischen Kreditinstitute ;
 ---pagebreak---                                     _ 17 -
o ) In Ie lp run s
    the companies governed by Belgian lav; whist. appear on the list of
    banks drawn up in accordance with Article 2 of Royal Docrce Ho . 105
    of 9 July 1935 on the control of banks and the arrangements governing
    the issuing of securities ;
c ) In Frarces
    the hanks and financial institutions referred to in the Acts of 13
    and 14 June 1941 * agents de change , compngnies d * assurances ,
    etablissements du scctcur public ou semi-public habilites a exarcor
    les fonctions de depositaire ;
d ) In Irelancls
    a trustee as described in Section 3 ( 1 ) (o ) of the Unit Trust Act 1972s
e ) In Luxembourg ;
    bonking and savings institutions within tho meaning of Article 1 of
    the Grand-Ducal Decree of 19 Juno 19' '1 ;
f ) In the United Kingdom s
    a trustee as described in Section 17 of the Prevention of Fraud
    ( investments ) Act , 193"' .
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 trusts Article 19 does
not repeat the duties referred to in Article 10(2)(c ) and ( d ). Loss
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 dole to exert direct influence
    and control over the management of such a company by talcing part i:i
    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--- 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 unitholders
     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(1 ) 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 which quotation has been sought ;
                        1                                            -  /
b ) transferable securities traded on another regulated market of a Member
     State which operates regularly and is recognized and open to the public .
     This covers inter_ali a the "goregelter Freivorkehr" in Germany, the
     " march£ hors cote" in Franco and the market in Belgium on which additional
     public sates 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 is recognized and open to
     the public , provided that the choice of this stock exchanoe or market
     has been approved by the competent authorities ;
d ) liquid assets , including debt securities which , having regard to their
     short term nature and the guarantees attaching to them, rank as liquid
     assets . fhi § category 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 , hov;ever , made for two important exceptions to the
principle referred to in 1 , a1 -eves in erdor to allow sore coerce of
flexibility in the management of a CIUTS , the Directive provides That
(Article 25(2 ))»
a ) a ClDIG may invest a maximum of 10$ of its assets in transferable
    securities other than those referred to in 1 . above 5 this category
    of securities includes inter alio, medium-term certificates which are
    not due to nature 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 sizeable risks for unitholders. , given tho very tight restriction
    provided for in respect of such forms of investment (a maximum of 5$
    of its fur ds ) . Finally it should bo noted that                  --r
    representing loans made under Article 47 ( 2 ) are included in this
    category of assets .
I. L'v'-s ■••ctwoon Article 2 and Article 25 of the proposée?. 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 P-0$ 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 9       of their funds in transferable securities and
liquid assets . There is an apparent inconsistency between the two
Articles , but it should be remembered that thev 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 investment 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 80$) 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 provisions relating to CIUTS investment policy ,
and here the interests of unitholders- require that CIUTS should not be
allowed to invest more than 5CA> 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 time 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 , 12ffo of
itssfunds 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 2p of the proposed Directive , will
   have to reduce its investment in assets other than transferable securi¬
   ties and liquid assets to not more than 5f° of funds (provided, of .
   course , that the IlemLer State in which 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 appean very exceptional .
 ---pagebreak---                                     - 21
As regards the sizeable difference between the ZOfo linJt provided for i:.i
Article' 2(l ) and the jfc 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 them, was
narrowed - for example , by fixing them at 10/o and 5/° respectively – a
CIUTS investing 5 c/° of its funds in assets other than transferable securi¬
ties and liquid assets could easily move outside the scope of the pro¬
posed Dir active , merely by investing a further 'fj of its funds in these
othhr 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'fo of its funds in assets other 'than transferable securities and liquid
assets to move outside the scone of the Directive ; suoh an operation is
unlikely as it would have far-reaching repercussions on - the fundamental
nature of the investment undertaking in question .
Finally it must be noted that the difference between the limits mentioned
above con be justified by the fact that Article 30 of the proposal pro¬
vides 'that in certain cases the limit of p% provided by Article 2p(2)(b )
can be exceeded .
E. Investment policy of CITJT3 (Articles 2 ", 27 , 20 , 29 , 30 and o?)
The proposed Directive lays down a number of rules concerning CIUTS
investment policy with particular regard to securing the protection of
unitho-lders ,
 ---pagebreak---                                     - 22 -
1 . For instance , a CIUTS may not invest more than 5f° of its assets in
transferable securities of the same issuer (Article 2;(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 t
    does not exceed 40$ of the value of those assets (Article 2 -r( 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 isstuad
■ or guaranteed by a Member State or . its local authorities or in reppect
    of securities issued by public international organisations of which
  ' one or more Member States are members (Article 2 r ( 3 ))» Generally
    speaking, investment in these securities should be free of risks .J ,
2 . It t;as also deemed desirable , with a view to protecting unithto^pferts:*
to limit the scope available to a CIUTS for investing in units of pther
CIUTS . Consequently, a CIUTS may not invest in all more than 10$ off its
assets in units issued by other CIUTS , irresepetive of whether thesse
units are quoted or not (Article 27(l ) ) and, v;ithin this limit , a |
collective investment undertaking may not invest more than 5$ of ijfcs
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 1
proposed Directive provides that ;                          ‘     , .. . g :
 ---pagebreak---                                      - 23 -
- a unit trust may not charqs further costs whore it invests its assets
    in units of other trusts managed by 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-ended type but which do
   not invest their funds essentially in transferable securities and liquid
    assets ( such as undertakings for collective investment in Droocrty or
    commodities , or mixed or open-ended undertakings ) . This rule does not
    apply to securities issued by closed-end investment companies since those
    rank as transferable securities as referred to in Article 25 ( Article 28 ).
3 . Finally , the proposed Directive provides that a CIUTS may not hold more
than 5% of the securities of the same type of sn issuer and nay not hove ,
in resoect of each matter on which a vote nay be taken , 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 taking 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 non-Member States when this is the only possible way
to invest in securities of issuers of the countries concerned ( Article 29 ).
4 . The - limits laid down for the composition of the assets of CIUTS ( Article 25
( 2 )) and those relatino to the level of . investment of these assets in the
transferable securities of the samp issuer ( Article 26 ). or in units of
other CIUTS ( Article 27) may , however , be exceeded in the event of price
variations in the assets of the CIUTS , the exercise by it of • subscription
 ---pagebreak---                                        - 24           I
 rights , op 3 contraction in the size of the CIUTS follow.inq the rsderoot . .
 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 ):
 there would he little justification for roquirinq 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 net vary *
 5 . For the same reason as that justifying the retention of the excess
 margins referred to in 4 ., it was deemed desirable to provide that Member
 States may authorise CIUTS which , at the tine notification of the Directive ,
 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 , te ‘continue
 exceeding these limits provided that the total amount by which - those limits
 are exceeded does not exceed 10% of the value of the assets of the' CIUTS
 ( Article 6?)... 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
oroblems relating to the assets of the CIUTS which could arise if the limits
were exceeded . Of course , if the excess amounts authorised in this manner are
subsequently reduced , they cannot once again cone into existence . Thus , a
CIUTS which at the moment of notification of the Directive holds 8% of the
securities of the same issuer and subsequently reduces this percentage to 6% ,
cannot exceed this latter percentage in the future , unless the conditions
of Article - 30 apply ( see point 2 above ).         . '                  : '
                                                                        t *. . • '
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 prosoectus setting out the basic particulars of the CIUTS ( its
 structure , objectives , procedures for issuing and reourchasing shares and
 units , etc .), an annual report and two half-yearly reports ( or , if
 aporopriate one half-yearly report ) containing , in the mein , financial
 ---pagebreak---                                      - 25 -
 information relating it> its activity . The information that must appear
 in these documents is listed in the Annex ; as in the case of the proposed
•Directive 's other provisions , this provision also contains minimum rules ,
 in the sense that each Member Stats is free to stipulate that Cl UTS •
 located in that State , and those only , must publish additional informa¬
tion .
The competent authorities ray , however , where the legislation of that
State included detailed retaliation of Cl UTS 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 3d(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 " SICA'Ts "
 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
Mender 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 Cl UTS (.Article 37 )
 The proposed Directive provides that the prospectus to be published by a
 Cl UTS 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 propose! 'Directive provides (Article 31(2) ) that the periodical reports
must he published within very strict time-limits ( annual reports four
months,  half-yearly reportss two months). If these reports had had to he
submitted for pridr*onecking by the competent authorities , this would have
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 tine-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 , possibles 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^»for the exercise of . subscription rights
or , as regards investment companies , the acquisition of buildings necessary
for the carrying on of their activities (Article 4l )» 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 ban on borrowing will net , however , apply to CIUTS whose fund rules
 or memorandum and articles of association included on 1 January 1976 provi ¬
 sions permitting borrowing for investment purposes , 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 A6 ) will not aooly to such CIUTS since the unitholders lending
funds are subject , by virtue of their lendino , to laws different from that
 applicable to ordinary unitholders .
 I. Susgej3sion_of_the_repurchase_nr_rsdem2t2on_of_- un2ts ( 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(?)(a )). For instance , this flight arise if the CIUTS was to
 suspend calculation of the list value of its units on one of the following
 grounds :
 a ) the closure of one cr mere stock exchanges on which a Large number of
     the securities held in the portfolio of the CIUTS ;
 b ) inability of the CUTS 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 r?tes .
 ---pagebreak---                                     - 28 -
J. Income received by a CIUTS (.Article 44 )
The proposed Directive provides that the income received by a CIUTS must
either he distributed to unithCl&&rE3 or reinvested (Article 44 ) • "Income”
refers , in particular , to dividends , interest and other financial accruals .
Ko Particularly speculative transactions which CIUTS canno t undertake
    (Article 43 )
The proposed Directive prohibits CIUTS from carrying out particularly
speculative transactions , such as uncovered dealings in transferable
securities (Article 48 ). The definition of transactions deemed to be par¬
ticularly speculative is the responsibility of the national authorities ,
although uncovered dealings in transferable securitiesaro 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. Régalât ions concern ing 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
"\forld–wide unit trust ".
 ---pagebreak---                                        29 -
Paragraph 2, on the other band, provides that Member States must prohibit
undertakings not meeting the definition provided for in Article 2(1 ) of the
proposed Directive 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 net ranking as CIUTS covered by this
Directive do in fact enjoy this status .
M. Financial facilities ( Article 54 )
In order that unitholders nay exercise their financial rights without
difficulty , the proposed Directive provides that if a CIUTS markets its units
in another Member State to that in which it is situated , it must possess
financial facilities in that other Member State ( Article 54(2 )). This require¬
ment will normally be complied with ipso facto when marketing of the units
in that other Member State is carried out by a credit institution .
M. Savings plans ( Article 55 )
The proposed Directive mentions , amongst the marketing regulations , the
rules governing various forms of savings plan . ( Article 55f ?)). It should
be pointed out , by way of example , that the expression " the various forms
of savings plan" covers , amongst others :
a ) the typical savings plan , i.c . 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 elan , 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 unvested capital by
    repurchasing units .
 ---pagebreak---                                      - 50 -
 0 . Special scheme for certain investment companies (Articles 63 to r>5 )
 By virtue of Section X of the proposed Directive , investment companies
.which market their units exclusively through one or more official stock
 exchanges are exempt from certain ohligcations , In particular , these
 companies are subject neither to the provisions of the proposed (Directive
 concerning the depositary company (Articles 19 to 24 inclusive ) nor to
 the legal obligation to repurchase their units at the request of the unit ¬
 holder (which obligation is provided for in Article ; 4-2(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 stems from the fact that 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 depositary company which is to safeguard the assets of
 the investment company , has 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
 CnODcdeyiat Jnq_by . 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 as those justifying the suspension of the repurchase or re¬
 demption of units by a CIUTS (Article ?4 )« In other words , this means that
 these companies will , if need be , have to intervene on the stock exchanges
 ---pagebreak---                                    - 31 -
to rep\irchase their .-units so that , at any given tine , an investor may,
if he wishes to sell his units , obtain a stock exchange price equal to
at least 95% of their asset value j
to sell their units ( or to issue other units ) so that , at any given time ,
an investor may , if he wishes to buy units , obtain a stock exchange price
equal to not more than 105% of their asset value *.
 ---pagebreak---                          Proposal for a Council Directive
                  for the coordination of ■ laws , regulations and
                  administrative provisions regarding collective
               investment undertakings for transferable securities
 THE COUNCIL OF 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 has been prohibited
 since the end of the transitional period; whereas the Council Directive
 of 28 June 1973 concerning the abolition of restrictions on freedom of
 establishment and freedom to provide services in respect of self-employed
 activities of banks and other financial institutions regards as coming
 within the scope of this prohibition the obligation 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 ;
 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 are imposed on
 these undertakings ; whereas these differences disturb competitive conditions
 between undertakings and do not ensure equivalent protection for unitholders
 Whereas national laws governing investment undertakings should therefore be
 coordinated with a view to approximating the conditions of competition
 between these undertakings at Community level , and at the same time ensuring
 the effective and more uniform protection of unitholders ; whereas such
 coordination would also facilitate access by CIUTS situated in one Member
 State to activities in the other Member States ;
 1 ) O.J. No . L 194 of 16.7.1973, p. 1 / 10
 ---pagebreak---                                       33 -
Whereas the attainment of these objectives is essential for the removal
of restrictions on the free circulation of units cf collective investment
 undertakings in the Community and consequently this coordination comes
within the terms of the creation of 3 European capital market ;
I’hereas to ensure these objectives , orovision should be made for common
rinimum rules for collective investment undertakings situated in the Member
States concerning their authorisation , supervision , structure , activities
and the information they must publish ;
Whereas the application of these common rules is a sufficient guarantee
to collective investment undertakings situated in a Member State to oermit
them , subject to the provisions relating to the movement of capital , to market
their units in other Member States without these Member States being able
to make the undertakings or their units subject to any provision whatsoever
other than marketing regulations ; whereas , nevertheless , if a CIUTS markets
its units in a different Member State than the one in which it is situated
it must possess in that other Member State the necessary financial facilities
to enable unitholders in that other Member State to exercise their financial
rights without difficulty ;
Whereas , os a first step , the coordination of the laws of .Member States should
be confined to collective investment undertakings other than of the " closed-end"
tyne - which invest mainly in transferable securities ; ehereas , on account of the various
problems raised by collective investment undertakings which do not invest
mainly in transferable securities and by those which are of the closed-end type ,
those should be coordinated at a later date ;
HAS A00PT3D THIS DIRECTIVE :
 ---pagebreak---                          Proposal for a Council Directive
                             for the coordination of
                 laws , regulations and administrative provisions
                  regarding collective investment undertakings
                           for transferable 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 sencurttres (" CIUTS")
situated within their territories .
2.        Subject to provisions relating to the movement of capital and
to Articles 55(1 ) and 61(2 ) of this Directive , a Member State shall not
apnly any provisions whatsoever to CIUTS situated in another Member State
or to the units issued by such CIUTS .
                                          '     /
3.        Member States may apply to CIUTS situated within their territories
requirements which are stricter than or additional to those provided in
Article 5 et'seq of this Directive , provided that they are of general .
aoplication and do not conflict with the provisions of . this Directive .
Article 2 '
 1.        For the purposes of this Directive , CIUTS are hereby defined as
 investment comoanies and unit trusts :
- whose object is the collective investment , mainly in transferable
    securities and liquid assets , of caoital raised by means of offers
    to the public and whose operations are based on the principles of
    spreading the investment risk . " Investment mainly in transferable
    securities and liquid assets" is hereby defined as the investment in
 ---pagebreak---                                          35 -
    such transferable securities and liquid assets of at least 80% of the
    capital raised ,
- and whose units are or have been issued continuously or in blocks at
    short intervals , and/ or nil l be directly or indirectly repurchased or
    redeemed at the request of the holder out of their assets .
2.        For the purposes of this Directive the following shall not be deemed
to be Cl UTS :
( a ) closed-end investment companies ;
( b ) CIUTS whose assets are mainly invested through the medium of subsidiary
      companies otherwise than in transferable securities anc! liquid assets .
Article 3
          For the purposes of this Directive , a CIUTS shall be deemed to be
situated in the Member State where its management is effectively carried on .
Article 4
          For the parooses of this Directive , the following definitions shall
apply :
( a ) ii™£§£!E2Q£_,£2£22Di: :
      CIUTS with a corporate structure , i.e. established as a company ;
( b ) uni t_t rust s :
      CIUTS with a non-corporate structure;’
( c ) management comoany :
      the company entrusted with managing a unit trust ;
( d > deno_sjtary_çompany :
      the company entrusted with custody of the assets of a unit trust or
      investment company ;
( o ) fynd_rules :
      all the contractual rules or " trust rules" governing the legal
 ---pagebreak---                                       36
      relationshio , within the framework of 8 unit trust , between the
      management company , the depositary company and the unitholders ;
< f ) unit ;
      any physical representation of unitholders' rights in CIUTS assets ,
      whether such representation take the form of securities issued by the
      CIUTS or by the registration of the unitholders in a register kept by
      the CIUTS ;
( g ) directors ;
      persons who by virtue of the law or the memorandum and articles of
      association represent the management , investment or depositary company ,
      or who carry on their management at a senior level ;
Ch ) comget ent__aut ho r i t i es :
      those of the Member States in which the CIUTS is situated ..
Section II - Authorisation of the CIt'TS
               s
Article 5
1.        A CIUTS shall not carry on activities unless it has been authorised
by the comoetent authorities . Such authorisation shall be valid for all
Member States .                                  v. •     .
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 tho
competent authorities have aporoved both the memorandum and articles of
association and the choice of depositary company .
3.        The competent authorities shall not authorise 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 . To this end , the names of the directors of the management
comoany and of the investment company and of every person succeeding them
 ---pagebreak---                                        37 -
 in office shall he notified immediately to the competent authorities . The
 some shall apply to the directors of the depositary company , unless such
notification has already been given to other authorities of the Member State
 in which the CIUTS is situated ,
 4.     The management company or the depositary company may not be replaced ,
 or the fund rules or memorandum and articles of association of the investment
 comnany amended , without the approval of the competent authorities .
 5.     Any amendnend of the memorandum and articles of association of        ,
 the management company shall be repof’ted immediately to the competent
 authorities .
 Section III - Oblioations regarding the structure of unit trusts
 Article 4
        For the purposes of this Pi recti vs e unit trust shall be deemed
 to include , in addition to the capital raised by it , a management company
 and a depositary company .
 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 .
 7.     Tne management company sha l l have sufficient paid uo canital to
 enable it to carry on its business effectively and to meet its liabilities .
 Article 8
        The activities of the management company shall be limited to
 the management of unit trusts .
 ---pagebreak---                                        - 38 -
Article 9
1.      . , The management comoany shall inform the competent authorities
of the names of all its members and of the amounts of their respective
holdings in the company .
2.          Shares in the management company shall not be sold or other¬
wise disposed of without the approval of the competent organs of the
management company .
                             i
Article 10
1.          The custody of transferable securities and liquid assets which
form part of the assets of the unit trust shall be the rosoonsibi lity of
the depositary1 company which shall hold them in a separate account . This
shall apply, a l $.o to all other . assets of the unit trust whoso safekeeping
can be physically assured by the depositary comoany .
2.          The depositary company shall , moreover , be responsible for the
following duties :
( a ) taking all necessary measures to ensure the day- to-day administration
      of the unit trust 's assets for whose custody it is responsible ;
( b ) taking all necessary measures to ensure that the sale , issue , repurchase ,
      redemotion and cancellation of units by the unit trust is carried
      out in compliance with the law and the fund rules ;
( c ) takinq all necessary measures to ensure that the value of the units
      is calculated in compliance with the law and the fund rules ;
( d ) carrying out the instructions of the management company relating to ...
      the assets of the unit trust , unless these are not in compliance with
      the law or the fund rules ;
< e ) taking all necessary measures to ensure that :
      - the transfer of securities sold on behalf of the unit trust takes place
         only on payment of their equivalent value and that such equivalent
         value is deposited with it ;
 ---pagebreak---                                        3o _
      - payment for the sedurities purchased on behalf of the unit trust
         is made only on the physical transfer of such securities end that
         the latter bo deposited with it to 'the extent that their safekeeping
         can he physically assured by it ;
( f ) tak-’n^ all necessary measures to ensure that distributions are node in
      compliance with the procedures laid down in the fund rules .
Article 11
1.         T'’o depositary company shall either have its registered office
in the sane Member State as that wheoe the unit trust is situate *-1 , or bo
established in or at least have a place of business in that Member State
if it has its registered office in another Member State .
?.         The denositary corpany shall have sufficient paid up capital to
enable it to carry on its business effectively and t ^ moot its liabilities .
Article 12
           The depositary company shell be' liable to the management company
and tho unitholders for ell loss suffered by then as a result of f ai lure
to carry out or properly execute its duties . Liability towards unitholders
shall bo direct , or indirect through the management conoany , dependinq on
the legal nature of the relationship between the depositary company and
the unitholders . Clauses in the fund rules or any other agreement aimed
at excluding or restricting such liability shall have no effect .
Article 13
1.         The same company shall not act as management company .end depositary
company .
2.         The management company and the depositary company shall act , in
carrying out their respective roles in the unit trust , in the sole interest
of the unitholders .
 ---pagebreak---                                     - 40 -   •
Article 14                                                          1
1.      The procedures for the 'replacement of the management company end
the depositary company shall be laid down by the law or by the fund rules .
The law shall provide , in any event , that the competent authorities will
reouire the .replacement of the management - company or the depositary company
when these companies are.no longer capable of carrying out their duties.'
2.      The law or the fund rules shall provide regulations to ensure ■
the protection of the unitholders where the management company cr the
depositary company is replaced .
Article 15
        The assets of a unit trust may not be the subject of any claim
whatsoever by persons other than the management Company end the unitholders .
        In all cases claims by the management comnany or the unitholders
may only be satisfied from the assets of the unit trust where there are •
charges oxpreSsly attaching to these assets under the law or the fund rules .
Article 16
   ]  . Member States shall . take measures to ensure that the assets of a
unit trust are protected if the management comoany or the depositary company
are wound up .                                                            ’
Section IV - Obligations regarding the structure of investment companies     ■
               and their depositary companies
Artide 17
        The investment company shall have sufficient initial paid up capital
to enable it to carry on its business effectively .
 ---pagebreak---                                        - 41 -
Article 18
          The investment company nay net ennape in activities other than
that referred to in Article 2 . It shell be responsible for the? management
of its assets .
Article 1°
1.        The custody of transferable securities and liquid assets which
form part of the assets of an investment company shall be the responsibility
of a depositary company which shall hold thorn, in a separate account . This
shall apply als^ to all other assets of the investment company whose safe¬
keeping con be physically assured by the depositary company .
?..       The depositary company shall ,, moreover , be responsible for the
following duties :
( a ) taking all necessary measures to ensure the 'hay-to- day administration
      of the investment company 's assets for whoso custody it is responsible ;
( h ) taking all necessary measures to ensure that the sale , issue , repurchase ,
      redemption and cancellation of units by the investment company is
      carried out in compliance with the low and with the memorandum and
      article ? of association of the investment company ;
( c ) taking all necessary measures to ensure that :
      - the transfer of securities sold on behalf of tho investment company
        takes place only on payment of their equivalent value and that such
        equivalent value is deposited with it ;
      - payment for the securities purchased on behalf of tho investment
        company is made only on the physical transfer of such securities and
        that the latter be deposited with it to the extent that their safe¬
        keeping can be physically assured by it ;
( d ) takino £>(.1 necessary measures to ensure that distributions are made in
      compliance with the procedures laid down in the memorandum and articles
      of association of the investment company .
 ---pagebreak--- Article 20
1.        The depositary company shell either have its registered office
in the sane Member - State as that where the investment comoany is situated ,
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 denositary company shall have sufficient paid uo capital to
enable it to carry on its business effectively and to meet its liabilities .
Article 21
1.        The depositary company shall act , in carrying out its role as
depositary company, in the sole interest of the unitholders .
2.        The denositary company shall be liable to the investment company
for all loss suffered by the latter as a result of failure to carry out
or properly execute its duties . Any aoreoment aimed at excluding or
restricting such liability shall have no effect .
Article 22
          The same company shall not act as investment company and depositary
company .
Article 23
1.        The oroccdures for the replacement of the depositary comoany shall
be laid down by the law or the memorandum and articles of association of
the investment company . The law shall provide , in any event , that the
competent authorities will require the replacement of the depositary company
when this company is no longer capable of carrying out its duties .
2.        The law or the memorandum and articles of association of the
investment comoany shall provide regulations to ensure the protection
of unitholders where the depositary company is replaced .
 ---pagebreak---                                          43 -
Article 24
          Member States shall take measures to ensure that the assets
of an investment company are protected if the depositary company is wound
uo .
Section V - Obligations concerning the investment policy of CHITS
Article 2 e-
1.        The assets of CIUTS shall exclusively consist of :
( a ) transferable securities admitted to official stock exchange quotation
      in a Member State or for which quotation has been souoht and also
      recently issued transferable securities of the same type 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 reoularly and is rocoqnizod . and open to the public ;
( c ) transferable securities admitted to official stock exchange quotation
      in a non-denber State or traded on another r emulated market of a non-
      Humber St^te which operates reoularly and is re cognized and open to the
      public , provided that the choice of this stock exchange or market has
      been approve :! by the competent authorities ;
( d ) liquid assets , including debt securities which , having reaard to their
      short term nature and to the guarantees attaching to them , rank as liquid
      assets .
2.        However :                                                          .
( a ) a CIUTS n my invest a maximum of 1C % of its assets in transferable
      securities other than those referred to in paragraph 1 ;
( b ) Member States may provide in their legislation that CIUTS may invest
      a maximum of 5 % of their funds in assets other than transferable
      securities and liquid assets .
 ---pagebreak---                                          - 44 -
Art i c 1 e 26
 1.            A CIUTS shall not invest more than 5 /-■ of its assets in transfe¬
rable securities of the same issuer .
 2.            Member States may raise the limit stipulated in paragraph 1 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 40 % of the value of its assets .
3.             Member States may waive application of paragraphs 1 and 2 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 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 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 , and in such cases charging of further
costs shall be prohibited .
3.             Subject to paragraph 2 , whenever a CIUTS invests 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 .
Article 28
               A CIUTS shall not invest its assets in securities of a collective
investment undertaking not defined as a CIUTS for the purposes of this
Directive . This rule , however , shall not apply to securities issued by a
closed-end investment company .
 ---pagebreak---                                       - 45 -
Article 29
1.            A CIUTS shall not hold more than 5% of the securities of the
same type of an issuer and shall not have , in respect of each matter upon
which a vote may he taken , more than      of the total votes attaching to the
securities of this issuer .
2.            In exceptional cases , Member States may authorize the competent
authorities to raise the limits provided for in paragraph 1 to a maximum'
of 10
3.            Member States may waive application of paragraphs 1 and 2
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- Men her State
      investing its assets mainly in securities of issuers who are nationals
      of that country , where , urder the legislation of that country , such a
      holding constitutes for the CIUTS the only way in which it can invest
      in the securities of issuers of that country . This waiver shall ,
      however , only apply where the company in the non-Member State respects ,
      in its investment policy , the limits set in Articles 26(1 } 27>aiid
      29(l ). hhere 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 exclusively carrying
      on the business of management    investment or marketing on behalf of the
      the CIUTS .
 ---pagebreak---                                           - 46 -
Article 30
             The limits provided for in Articles 25(2 ), 26(l ) and ( 2 ) and
27(l ) and ( 2 ) may be exceeded on condition that any such excess stems from
price variations in the assets of the CIUTS , the exercise by the CIUTS of
subscription rights relating to securities making up its assets , or from a
contraction in size by the CIUTS , and on condition that the teal value of
the excess is not more than 10 % of the value of the assets of the CIUTS .
Section VI - Obli gations concerning information to be supplied to unitholders
A. Publication of a prospectus and periodical reports
Article 31
1.           The CIUTS shall publish t
   •- a prospectus and , each financi El 1 year ,
   - an annual report
   - and two half-yearly reports .
2.           The annual and half-yearly reports shall be published within
the following limits from the end of the period to which they refer :
   - 4 months for the annual report
   - 2 months for the half-yearly reports .
3.           By wav of derogation from paragraph 1 , 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 must 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 E annexed to this Directive ,,
3.         The half-yearly report shall contain the information provided, for
in Chapters I and II of Schedule E annexed to this Directive .
            If the CIUT3 distributes dividends during the first half of a
financial year , the half-yearly report relating to the p< ribd 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 period following the period for which a revenue
account was last published .
Article 33
1.         The fund rules or the memorandum and articles of association
of the i vestment company shall constitute an integral part of the prospectus
and shall be annexed thereto .
2.         The documents mentioned in paragraph 1 need not , however , be
annexed to the prospectus , if in each k ember State where the units are
offered they are readily available to the public , free of charge , at the
places mentioned in the prospectus .
Article 34
           Article 32 notuithstanding s
(a ) the competent authorities may permit a CIUTS to withhold 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---                                      - 48 -
l ) where the legislation of a Member State provides for the detailed regula¬
     tion of CIUTS situated in that State , the competent authorities may permit
     such undertakings to limit the information contained in the prospectus to
     data which is not regulated by law .
Article 35
The essential elements of the prospectus shall bo kept up to date .
Article 36
  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
 1 . The CIUTS shall submit its prospectus and any amendments thereto , as
 well as the annual and half-yearly reports , for checking by the competent
 authorities , who have a period of one month within which to make any comments .
 The CIUTS shall take these comments into account . As far as the prospectus
 is concerned , this check shall be carried out prior to publication .
 2 . The competent authorities shall ensure that the prospectus and the reports
 do not contain any information or make any omissions which could mislead the
 public .
 Article 38
 1 . The prospectus , the most recent annual report and the subsequent
 half-yearly report shall be sent free of charge to the potential subscriber
 when he is can\rassed or at his own request .
 2 . Moreover , the annual and half-yearly reports shall be made available to
 the public .
 ---pagebreak---                                      - 49 -
B . Publication of other information
Article 39
The CIUTS shall make public the issue , sale , repurchase ., or redemption
price of its units each time it issues , sells , repurchases or redeems them,
ard. in any even.1 at least twice a month . The competent authorities may,
however , permit a CIUTS to reduce the frequency to once a month on condition
that this does not prejudice the interests of the unitholders .
Article 40
1 . All publicity involving an invitation to purchase units of a CIUTS shall
indicate that a prospectus exists and the places where it may be obtained
by the public .
2 . A CIUTS , and such marketing organisations and financial intermediaries
as majr be concerned in the issue or sale of the units or their distribution
by a stock exchange , shall not furnish ar.” information likely to influence
the assessment of the units where such information is not contained in the
prospectus or the periodical reports or is not common knowledge .
Section VII    - General obligations of the CIUTS
Artide 41
1 . A CIUTS shall not borrow .
2 . Paragraph 1 notwithstanding, Member States may provide that the competent
authorities may permit :
 ---pagebreak---                                    - 50 -
a ) CIUTS to borrow funds up to 10 % of the value of their assets for the
    repurchase or redemption of their units or for J he exercise of subscrip¬
    tion rights , on condition that the funds borrowed are repaid within a
     short period and are not secured by a charge on the assets of the CIUT'E ;
b ) investment companies to borrow funds to acquire buildings which are
    necessary in order to carry on their business .
Article 42
1 , A CIUTS shall , at the request of the unitholder , repurchase or redeem
its units .
2 , Paragrah 1 notwithstanding :
a ) a CIUTS may , in cases provided for by the law , the fund rules or the
    memorandum and articles of association of the investment company , suspend
    the repurchase or redemption of its units . The procedure for this suspen¬
    sion shall be laid down in the fund rules or in the memorandum and
    articles of association of the investment company ;
b ) the competent authorities may demand in the interest of the nnitrholders or
    in the public interest the suspension by a CIUTS of the repurchase or
    redemption of its . units .
3 , In the cases mentioned in paragraph 2(a ), the CIUTS shall inform the
competent authorities without delay of its decision .
Article 43
The procedures for valuation of assets and the methods of calculation of the
sale or issue price and the repurchase or redemption price of the units
of a CIUTS shall be indicated in the fend, rules or in the memorandum and
articles of association of the investment company .
 ---pagebreak---                                       - 51 -
Article 44
1 . The income received by a CIUTS shall either he distributed to unitholders
or reinvested in accordance with regulations which shall he laid down in the
furd rules or in the memorandum and articles of association of the investment
company .
    Distribution of income shall take place at least once a year . In the case
of reinvestment of income , unitholders shall be informed at least once a year
of the amount reinvested .
2 . The net gains realised from the sale of the assets of the CIUTS may he
distributed where such a distribution is in accordance with the law and is
provided for by the fund rules or the memorandum and articles of "association
of the investment company .
3 . Unrealised gains shall not be distributed .
Article 45
Units of a CIUTS shall not be issued unless the cash equivalent to the
net issue price is simultaneously paid in to the funds of the CIUTS .
This provision shall not preclude the distribution of bonus units .
Article 46
All the units of a CIUTS shall carry equal rights .
                                                                               Ï
Article 47
1 . bit bout prejudice to Article 25(l)(d), a CIUTS shall neither grant loans
nor act as a guarantor .
2 . By way of derogation from paragraph 1 . Member States may provide that the
competent authorities cay authorise a CIUTS to make loans to undertakings
of up to 5 % of the value of its assets , provided, that these are short term
loans only. This authorisation shall be given in each case , and prior to the
making of the loan .
 ---pagebreak---                                       52 ~
Article 48
A CIUTS shall not carry out particular?”- speculative transactions , such as
uncovered dealings in transf oracle securities .
Article 49
1 . A CIUTS 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 recognised and open to the public .
2 . Paragraph 1 notwithstanding, a CIUTS may carry out transactions outside
the markets referred to in that paragraph if they arc carried out at a price
which is more advantageous for the unitholders than that which could have
been obtained on these markets if these transactions had been carried out
on them .
3 . ’.Hiere 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 bjr an expert approved by the competent
authorities .
Article 50
The following persons :
- the management company and the; depositary company ;
- 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
   companv , or the depositary company ;
 ---pagebreak---                                          53 ”
- any persons holding more than 10 % of the voting rights in the management
    company, inve stmcrt company or depositary company ,
shall not act as a part3r to transactions effected on behalf of a CIUTS unless
such transactions concern transferable securities and are carried out :
a ) at a price which is ecrua.1 to or more advantageous for the unitholders than
     the price of the official quotation of a stock exchange , if the transfe¬
     rable securities involved have been admitted to its quotation ;
b ) at a price which is equal to or more advantageous for the unitholders than
     that observed on ary other regulated market which opera-tee regularly and is
     recognised and open to the public , if the transferable securities involved
     have been traded on this market ;
c ) at the price calculated, in accordance with regulations laid down by the
     fund, rules or the memorandum and articles of association of the investment
     company in the case of trar sferrbl c securities other than those referred to
     in subparagraphs ( a ) and (t ) 5
d ) at the; issue price to the public in. the case of new issues in respect of
     which the depositary company acts as an intermediary .
Artycle_^bl
A CIUTS shall place at the disposal of each unitholder a document confirming
his rights ovir its assets .
Article 52
The fur. d rulc-s  r the memorandum and articles of e-ssociation of the investment
company shall indicate all the categories of costs chargeable to the
unitholders .
Article 53
1 . The competent authorities shall ensure that the name of a CIUT'S cannot
mislead, the public .
 ---pagebreak---                                       - 54 -
 2. Member States shall take the necessary measures in order to prevent
undertakings which are not regarded as CIUTS as defined in this Directive ,
from using names which might lead the public to believe that those under¬
takings come within the scope of this Directive .
Section VIII - Special provisions applicable to CIUTS which market their
                 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 notify such intention to the competent
authorities as well as the authorities of the other Member State .
2t, In the' case referred to in paragraph 1 , the CIUTS must possess financial
facilities in the other Member State through which the unitholders may
exercise their rights .
Article 55
1 . By way of derogation from Article l(2 ), a Member Slate may apply its own
marketing regulations to CIUTS situated in otacr Member States and ^.rKctiag
or intending to market their units in its territory .
2 . For the purposes of paragraph 1 , the term " marketing regulations "
shall cover mainly :
a ) the rules relating to entries in trade registers ;
b ) the rules relating to sales promotion ;
c ) the rules relating to unfair competition ;
d ) the rules relating to canvassing or other marketing techniques ;
e ) the rules governing the various forms of savings plan .
 ---pagebreak---                                        55
3 . The marketing regulations referred to in paragraph 1 shall be applied
in a ncr-discriminatory manner and. must not have the effect cf imposing '
on CIUTS situated in the other Member States stricter conditions than those
envisaged in this Directive ,
Article 5 6
A CIUTS must bo abl ^. 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 authorisation by 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 the other Member State , in at least
one official language- of the other Member State , the documents and information
which have to bo published in the Member State in which it is situated , in
accordance with the sanm procedures as those provided for in that last -
mentioned State ,
2 . By wav of derogation from paragraph 1 , a CIUTS granted the permission
provided for in Article 34(b ) shall , if it markets its -unit's in a ' •
Member State other than the.t in which it is situated , publish in this other
Member State a prospectus in accordance .with Article 32(l ).
Section IX - Provisions concerning the comoetent authorities
Article 53
Member States shall designate the competent authorities who are to carry out
the duties conferred upon them by this Directive , They shall inform the
 Commission thereof indicating any division of duties .
 ---pagebreak---                                         - 56 -
The competent authorities shall supervise the activities throughout the
territory of the Community of CIUTS situated on thoir national territory and
shall , in particular , ensure that the rules laid down by this Directive
are respected , subject to the provisions of paragraph 3 .
2. The competent authorities referred to in Articles 5i 9(l )» 14( 1 ) » 42(3 ),
53(l ), 6o(l ) and ( 3 ), 61(4 ), 62 and 67(3 ) shall be government authorities .
3 . If recourse is had to the power provided by Article 55(l )» then the
authorities responsible for supervising the observance of the marketing
regulations referred to in therein shall be those of the Member State in
which the units are marketed .
4 . The competent authorities shall be granted all the powers , including
those of supervision , necessary to carry out their task . In particular , they
shall have the power to carry out 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 competc-nt 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 for all decisions
refusing applications for authorisation and shall communicate these reasons
to the applicant .
 ---pagebreak---                                         - 57 -
2 . Member States shall provide a right 6f appeal to a court of la.w against
all refusals of authorisation .
3 . Provision shall a? so bo made for a right of .appeal to a court of law
whore an application for authorisation which was properly presented has not
teen acted upon by the competent authorities 'within three months from the
date cf receipt thereof .
Article 61
1 . Member States shall specify such measures , including the possibility of
withdrawal of art hori sat icn , which the competent authorities referred So
in Article 58(1 ) may take with regard to a CIUTS which has violated any law ,
regulation or administrative- provision , or the r-gulations laid down in 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 Articlcs56(3 ) may take with regard to a CIUTS which has violated the
rules provided for in Articles 54(l ) and. 55(l )»
3 . All decisions taken by the authorities pursuant to the preceding
paragraphs shall state the reasons on which they are based and be communicated
to the CIUTS .
Member States shall provide a right of appeal to a court of law against
such a decision .
4 . All decisions to withdraw authorisation shall be communicated without
delay by the competent authorities of the Member State in which the CIUTS
in question is situated to the authorities of the other Member States in
which the units at this CIUTS are marketed .
Artide 62
1 . The winding up cf a CIUTS shall be carried out under the supervision of
the competent authorities in accordance with the regulations laid down by
national legislation .
 ---pagebreak---                                    - 58 -
2.  The competent authorities shall have all the necessary powers in order
to ensure that the interests of unitholders are protected .   Without
prejudice to the powers conferred upon courts in such a matter , Member
States may authorise the competent authorities to appoint liquidators or
to have them appointed by courts .
3 . The ’winding up shall not be carried out in a discriminators' manner with
regard to unitholders from other Member States .
Section X - Specific provisions relating to investment companies which
             market their units exclusively through one or more stock
             exchanges
Article 53
Investment companies which market their units exclusively through one or
more official stock exchanges to whose official quotation the units are
admitted shall not be required to hove a depositary company within the
meaning of this Directive .
The provisions of this Directive which relate to the depositary company
and to its managers shall not therefore apply to these companies .
Article 64
The provisions of Article 42 shall not apply to investment companies
referred to in Article 63 . However , these companies shall , if necessary ,
intervene on the market to prevent the quotation of their units from
deviating by more than 5/= from net asset value of such units . The
competent authorities may exempt these companies from this latter require¬
ment in exceptional cases .
Article 65
1 . The provisions of Articles 39 and 43 shall not apply to the investment
companies referred to in Article 63 .
 ---pagebreak--- 2 . The methods of asset valuation and the methods of calculation of the
net asset value of the units of the companies referred, to in Article 63
shall he set out in the memorandum and articles of association of these
comnanie s . The net asset value shall be established and mode public at '
least twice a week , and its calculation shall be certified as correct by
an independent auditor .
3 . The transferable securities and liquid assets which are part of the
assets of the companies referred to in Aiticle 63 shall be kept in a
special account with one or more credit institutions . This rule shall also
apply to all assets the safekeeping of which can be physically assured by
a crédit institution .
Section XI - Contact Committ ee
Article 66
1.   A Contact Committee shall be set up at the Commission .   The task of
this Committee will be :
a ) to facilitate , without prejudice to Articles loj and 170 of the
    Treaty , the harmonized implementation of the directive through
    regular consultation rela+ing in particular to practical problems
    of implementation ;
b ) to facilitate consultation between Member States as regards the
    stricter or supplementary requirements on the one hand and the
    marketing rules on the other hand, 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 the Directive .
2 . The Contact Committee shall be composed of representatives of the
Member States and represented ives 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 "be convened hy the Chairman either on his own
initiative or at the revest of one of its members .
Section XII •- Transitional provisions , dérogations and final provisions
Article 67
1 , liy way of derogation from Article 8 , Member States may authorise
management companies to issue bearer certificates representing registered
securities of other companies ,
2 , Member States may authorise management companies which , at the time
of notification of the Directive , carry on activities in addition to those
provided for in Article 8 , to continue those activities provided that they
are not of such a nature that they could prejudice the interests of
unitholders ,
3 , If , in the case referred to in paragraph 2 , the management company
is a credit institution or an insurance undertaking , it need only ,
notwithstanding Article 9(l )» inform the competent authorities of the
name of any shareholder holding a number of securities giving' voting
rights in e::cess of     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 68
Member States may allow CIUTS whose depositary companies do not comply
with the conditions provided for in Articles ll(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 may 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 exceeding' these limits , . provided that the total value of
the amounts by which those limits are exceeded is not more than 13^ of the
value of the assets of the CIUTS ,
 ---pagebreak---                                    - 61 -
2 . The amounts referred to in paragraph 1 by which the limits laid down
in Articles 26 and 27 ary be exceeded may be increased under the conditions
provided for in Article 30 .
Article 70
1 . Articles dl and d6 shall not apply to CIUTS whose fund rules or
memorandum and articles of association included on 1 January 1976
provisions permitting borrowing for investment purposes and which , during
the two years preceding this date , actually made use of these provisions .
2.  The possibility of such borrowing shall be clearly indicated in the
prospectus .
3.  However , the amount of the loans contracted under paragraph 1 shall
not exceed 15fo 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 immediately 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 -
         SCTïïïDULE A
DTORMATIOTT TO BE HI GLIDED
 II'T TIE CIUTS FROSFECTUF;
 ---pagebreak---                                                                             - É3 -
                               A ) Regarding unit trusts                                     B ) Regarding investment companies /
        Unit trusts in general                                Management company
I. General data                                  1 -*-• G enera.l data                    I. General ¿ ata
II . G eneral charactejrist ips                  | 11 . General charactoristics           II . General charactt rr stic s
11.1 llame                                       j 11.1 Name or style, registered office  11.1 Name or style , registered office .
                                                 !         and the principal headquarters        and the principal headquarters
                                                 I         if this differs from the              if this differs from the ,
                                                 i         tegistered office .                   registered office .
11.2 Nates of creation and of the first            11.2 Duration,' if limited .           11.2 Dates of the company's incor¬
      ■ sale of units to the public .                                                            poration and of the first sale
         Indicate the duration, if                                                               of units to the public . Indicate
     ‘ limited .                                                                                 the duration, if limited .
                                                 I 11,3 If the company manages other unit
                                                                                                                                    •
                                                 !         trusts or has other business ,
                                                 I         indication of tho other trusts
                                                 ï         and activities .
11.4 Indication of the place where the           |                                        11.4 Indication of the place where the
        fund rules and periodical                1                                               memorandum and articles of
        reports may be consulted .               j                                               association and periodical reports
                                                                                                 of the company may be consulted.
                                                                                           \
11.5 Brief indications relevant to                                                        11.5 Brief indications relevant to
        ur.i t holders of the taxation of                                                        unitholders of the taxation of the
        the fund . Details of whether                                                            company . Details of whether
        de ? ;otions are made at source                                                '         deductions are made at   source
        fixe', the income and capital                                                            from the income and capital
        got'.'· paid by the fund to unit-                                                        gains paid by the company to '
        hoi h:TS .                                                                               unitholders .
 ---pagebreak---                                                                    - 64 -
                               A ) Fe     runts                                          B ) Heffa.rd.inp: investment companies
 i
 Ì          : >. it trusts in general
                                                   Management company             |
    11.6 ¿ rc'.unting ard distribution                                            J 11.6 Accounting and distribution
        . ãrt^s .   ·                                                             f             dates .
                                           12 . Management and, auditing              . 12 . Management and auditing
                                           12.1 Name and position of the under¬         12.1 Dame and position of the under¬
                                                 mentioned persons within the                   mentioned persons within the
                                                 company , with details of their                company , with details of their _
                                                 nain activities outside the              -  · main activities outside the
                                                 company ( viz . relevant                       company ( viz . relevant
                                                 directorships and main duties                  directorships and main duties
                                                 in other companies ):                          in other companies ):
                                                 - Members of the Boa.rd of                     – Members of the - Board of
                                                   Directors , the Supervisory                    Directors , the Supervisory
                                                   Board and the Managing Board ,                 Board and the Managing Board ,
                                                   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 .
                                                 - Pounders , if they still have                - Pounders , if they still have
                                                   responsibilities vis-à-vis       ■             responsibilities vis–à–vis
                                                   the management company .         !             the investment company .
                                            13 « Company capital                  j
                                            13.1 Paid-up capital plus statutory   j
                                        ¡         and voluntary reserves (as per  J
   _        _
                                        i         latest balance sheet )          I
-¡
                                       1                                                13.2 In the event of an authorised
                                                                                                capital ,   indication of the amount .
 ---pagebreak---                   A ) Regarding mit truste
                                                                                             B ) Regardinn
    13.3 ■Derails      of the types and main characteristics of the                 13.3
           units , in particular :                                                        Detaiis    of the different types and main characteristic- I
                                                                                          of the units and in particular :
          - the nature of the right (                       orai 0, oW
                                                                                             of tj-tle, SenS~ii:iGS
                                                                                                         entry m a °rregister
                                                                                                                         certificates providing
                                                                                                                                         account?evidence
              xitie- ' represented by the unit ?
                          soc^ri1:les or certificates providing evidence
                                                                                                                                or in an
              cf title? entry in a register or in an account?                             -  characteristics of the units: registered or bear^rT ~ j
                                                                                             Indication ox denomination in the latter case?
          - characteristics of the units : registered or bearer.
            . Indication of denomination in the latter case?                      j       – indication ef unitholders’ voting rights?
          - exist
              indication    of 'unitholders’ voting rights if these                       ~ SIC'?Ufta?CeS ^ in V:hiGh WindinS“uP can ‘be decided by
                    ?                                                                       !?.          ‘elTb COrapany- ^ ^»ding-up procedure, in ■ !
                                                                                            Pt"A t-cular as regards the rights of unitholders . :         I
              circumstances in which tfcndtogfcu^nanii be- docidod               j
             by, the . unit ^nus3teand iiinging-upeproced'virei'.in’ -prl.±‘ti-
             cular Riy^alnds'.h^ rights of unitholders .
   13.4 Indication of stock exchanges or markets where the
         units are quoted .                                                     J 13.4 units
                                                                                         Indication    of stock exchanges or markets where the
                                                                                                  are quoted .
   M* .                 -gftd conditions of iss^~ of'units' '                   j       £^I2S£dures and conditions gf issue of un its
   14»1 Continuous or block issues .                                            1
                                                                                         Continuous or block issues .
f 14.2 , Issue, or sale by the unit trust, by a marketing
I        organisation, through an intermediary, through^
         ^e stock exchange or another market .
  14.3 Humber of units or duration of issue .
  14*4 Circumstances        in which issue or sale mav^ be
                                                                                EU2  .3
                                                                                        i!H/r+ Sal§ ll th° iBYesi:m^nt company, by a marketing i
                                                                                           t.qm sat-on, through an intermediary , through the stock 1!
                                                                                        exchange or another market .
                                                                                        Humber of units or duration of issue .
        suspended ,                                                              I4.4   Circumstances in which issue or sale mav he
                                                                                        suspended .
 ---pagebreak---                                                                        – SG –
                     A ) Regarding rjiit trusts                                             B ) Regarding investment companies
                                                                                                    ...........             "           " . í
  IS . Procedures, and conditions for repurchase or                         15 . Procedures and conditions for repurchase or              ·
       • redempti on of units and circumstances in which                     .redemption of units and circumstances in which
          vermrchase or redemption may he suspended                                repurchase or redemption may be suspended.
  15 . Outline of distribution rules'                     ' ,               16 .   Outline of distribution rules        .
  15.1 Distribution or reinvestment of profits .                            16.1 Distribution or reinvestment of profits .             ·- ,
  1Ú.2 Precise description of methods used for determining                  16-.2 Precise· description of methods, used for determining
           net jjbhfit 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 revèrme equalisation account is employed ,       :             whether a revenue equalisation account is employed ,      ,
       'method of charging fees and costs ).                                       method of charging fees and costs ).
  16.3 Details of whether thé profit , is distributed in full               16 . 3 Details of whether the profit is distributed in full
         ■ or only in . part and· in the latter case nanes of the                  or only in part and in the latter case names of the
           bodies halving authority to take the relevant decision?;.               bodies haviig authority to taka tie relevant ¿boisions,
  16*4 Foriu of the distribution of profits .( in cash or units ).          16 , 4 Form of . the distribution of profits (in cash or units ).
  2 .,     Business policy .                                                2.     Business policy
  20 »     Dcscrf-ytior. of policy and methods of investment                20 .   Description of policy -and methods of investment
  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.
  20.2 Direction cf 'the fund 5 s investment policy                         ££k2 Direction of the company * s , investment policy
          '( particularly diversification or specialisation in                     ( particulo,rly diversification or specialisation in      j
           geographical terms or as to industry ).                                 geographical terms or as to industry ).
  20.3 Limitations and obligations on investment policy .                   20.3 Limitations and obligations on investment policy .
i
 ---pagebreak---                                                               - 6? -
                   A ) Regarding uni t -trusts                                    B ) Regarding investment companies
I 20. 4 Indication of specific techniques , such as
         contracting of debts or option dealings
         whicn are. permissible in the management of
         the assets .
                                                                    20.4 Indication of specific techniques, such as
                                                                              contracting of debts or option dealings
                                                                              which,  are permissible in the management of
                                                                              the s.SG@ii»G *
        .fei-il rules _for valuation of assets                   | 21 .                       for valuation of assets
   22*                           Bale or_issue price, and the
         regurchaqe _or redemption price of    unit s ^TrT
                                                                 1™                                                                      .
        particular :                         ~
                                                                            particular ( l ):                    ’ L" 11 '
i       - Frequency of calculation of the sale or issue
            price and the repurchase or redemption price;                   - Frequency of calculation of the sale or issue
        - Details of oranges and commissions of all                             price and tne repurchase or redemption price;
           hinds , including taxes relating to sales                       - Details of expenses and commissions of all
           or issues and redemption or repurchase;                             kinds , including taxes relating to sales
       - Method, place and frequency of publication ‘
                                                                                or issues and redemption or repurchase;
           pf these prices .                                              - Method, place and frequency of publication
                                                                               of these prices .
  23. Remunerations payable to the management company,             23 . remunerations payable to the directors, the
       the depositary company or third parties by the                     depositary company or to third parties by the company
       fund and refunds of costs to the management                       <. . nu refunds of costs to the directors , the depositar
       company , the depositary company or third parties
       by the fund .                                                     company or to third parties ,
                                                                   (1) For me investment companies referred to in Article GZ
                                                                        fo]inepngrjeCtlVe? tlXiS huading is                replays by the
                                                                        22 , Method and frequency of calculation of the net
                                                                                asset value of the shares . Method , placo and
                                                                                frequency ol publication of this value .
 ---pagebreak---                                     - 68 -
3 . Infomation concerning the depositary conrany of unit trust s and
    i nvestmcnt compan ies.
3.1 ITaae or style , registered office and the principal headquarters if
    this differs from the registered offico .
3.2 Material provisions of the contract with the management company or the
    investment company not arising from the law , the fund rules or the
    memorandum and. articles of association of the investment company , and.
    relevant to the unitholders .
3.3 Main activity .
4.  Information concerning investment advise rs of nr it trusts and
    investment companies
4.1 Namc or style .
4.2 Material provisions of the contract vjith the management company or the
    investment company which nay he relevant to the unitholders .
4.3 Other significant activities .
 ---pagebreak---            - 69 -
         SCHEDULE    B
INP0H1ATI0N TO EE INCLUDED IN’
   THE PERI GDI CAL REPORTS
 ---pagebreak--- I. Statement of assets and liabilities
   The following items shall be shovm separately :
   a ) transférable securities »
       Particulars of transferable securities must be given in the form of
       a table with a separate line for each different type of secuiity .
       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 ,);
          location ( country of issuer , country of quotation , etc ,);
       “ économie sector ;
       - currency .
       For each security mentioned above the following shall be stated :
       - number or total nominal value ;
       •- total value determined in accordance with the valuation rules laid
          down by the law' , the fund rules or the memorandum and articles of
          association of the investment company . The total value shall be
          expressed in the currency of the CIUTS ;
       ~ proportion in relation to the total assets of the CIUTS ,
   b ) Deposits with banking institutions .
   c ) Dividends and interest receivable , where not already included in the
       valuation of assets under a ), b ) and e ),
   d ) Other amounts receiva.ble ,
   e ) Other assets .
       The following particulars shall be given for each asset :
 ---pagebreak---                                       -■ 71 **
         -- description - and value ;
         - 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 term .
     g ) Other amounts payable ,                    ,
     h ) Value of net assets ,
     i ) The number of units in circulation,
II , Motes, on the statement of assets and liabilities
     a ) Transferable securities not admitted to an official stock exchange
         quotation shall be identified as such ,
     b ) Where the price used for transferable securities is not an official
         quotation , the market referred to or the valuation criteria used
         shall be specified .
     c ) Where the free negotiability of securities is restricted by
         statutory or contractual requirements , this shall be stated ,, and
         the valuation criteria used 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 ( such as conditional operations ) on the
         date when the statement of assets and liabilities of the CIUTS is
         drawn up which are relevant from the point of view of assets shall
         be shown .
 ---pagebreak---                                       - 72 -
       f ) Amounts to be received, or to be paid by the CIUTS 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 by foreign currency ; these amounts shall be
           expressed in the relevant foreign currency with indication of
           their equivalent in the currency of the Member State where the
           CIUTS is situated . Foreign currency means currencies other than
           those in which the CIUTS accounts are kept .
Ill , Revenue account for the reference period
      The following items shall 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
           warrant s ) .
      d ) Appreciation in value where this appears in the revenue account .
      e ) Balance of the revenue equalisation account , if such an accounting
           system is used .
      f ) Management costs where these appear in the revenue account .
      g ) Custody charges where these appear in the revenue account .
      h ) Financial charges and , in particular , interest paid on loams .
      i ) Depreciation in value where this appears in the revenue account .
      j ) Taxes .
      le.) Met anount of revenue
 ---pagebreak---                                     - 73 -
    Items f ) and g ) shall be apportioned , if these costs are invoice I
    separately , according to nature or according to persons making the
    charge . An apportionment shall not bo required when the CIUTS pays
    only lump sums to those persons .
IV. Changes in capital account during the reference period
    The following items shall be shown separately :
    a ) Value of net assets at the beginning of the period .
    b ) Capital movements by way of sale or issue of units and repurchase
        or redemption of units .
    c ) Management costs where these appear in the capital account .
    d ) Custody charges where these appear in 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 c ) and d ) shall be apportioned , if these costs are invoiced
    separately , according to nature or according1 to persons making the
    charge . An apportionment shall not be required when the CIUTS pays
    only lump sums to those persons .
V. Transactions carried out during the reference period^ ^
    The following transactions shall be 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 be shown separately .
D
  This information shall not be required to be included in the annual
  report if it has been published in the half-yearly report .
 ---pagebreak---                                 - 74 -
b ) For er,ch security referred to in. paragraph l(e ) ths gross sale or
    purchase price .
c ) Transactions referred to in paragraph Il(e ) which have been
    settled during- the period , unless they have g’iven rise to a sale
    or purchase included in the statement referred to at ( a ) above .