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Fiduciary Services
Citicorp Trustee Company Limited
Citigroup Centre, Canada Square, Canary Wharf, London E14 5LB
Regulatory Update
16 February 2006

SORP

The SORP on Financial Statements of Authorised Funds was issued by the IMA in January and applies to accounting periods that began on or after 1st January 2006. In particular Managers should be aware that investments should now be shown on the balance sheet at their bid value for both single and dual priced funds

Effective Yield

· For accounting periods starting on or after 1st January 2007, income should be accounted for on an effective yield basis The SORP recognises that when first implemented, there is a possibility that the amortised purchase price cannot be obtained without effort and cost and in this event, an alternative basis of calculation should be agreed and disclosed instead.

Debt Securities

· For accounting periods beginning before 1st January 2007, where funds invest in debt securities that are issued at a significant discount or premium to the maturity value, the total income should be spread over the life of the security on an appropriate basis. The amortisation of a discount or premium must also be reflected in the accounts.

CP 05/13

The consultation period for this paper ended on the 6th January 2006 and CTCL contributed to the response given by DATA.

The paper discussed ideas regarding the extent to which retail investors would benefit from the Manager reporting on broker commission arrangements where these are "bundled" or "softed" and the level of detail which could be understood by a non-sophisticated investor. The FSA also asked questions on whether there should be an individual or body to act as the representative of retail investors to consider disclosures and to interact with managers and if the Depositary should fulfill this role for Unit Trusts and OEICs.

It is likely that rules and guidance will become effective from 1st July 2006. Following a review of the responses received from the industry, a further paper will be published by the FSA at the end of the first quarter.

Eligible Assets

The Committee of European Securities Regulators (CESR) published a feedback statement in relation to its second consultation on definitions concerning eligible assets for investment by UCITS, together with final guidelines for the EU Commission on the 26th January. The paper included views on the eligibility of derivatives which are based upon indexes of non-eligible assets such as property, commodities and hedge funds. The committee concluded that Commodity and Property based indexes could be permissible but indexes based upon hedge fund would not be appropriate at this time although this will be re-considered again in October 06.

FSA Consultation on CIS pricing methodology

The FSA is planning to consult the industry in April 2006 on various proposals relating to the pricing methodology of authorized funds and in particular whether to introduce mandatory single pricing and if so with which options should be permissible i.e. swinging price or dilution levy?

In this connection the FSA has sent a CIS Pricing questionnaire to Managers to seek their views and completed responses must be received no later than the 28th February 2006.

CP05/14 - Proposed changes to CIS and COLL Sourcebooks

Final comments were provided to the FSA by the industry at the end of last year in response to CP05/14 which is expected to become effective from April 2006.

Changes that were proposed by the FSA included;

· OEIC AGMs - A 60 days notice period to allow ACD's to discontinue meetings in the future with disclosure of this policy in the prospectus and Long form Report and accounts

· Scheme Prospectus requirements - changes were suggested including disclosure to Investors on whether or not the box is used by the Manager to make a profit and the identification of the category of the scheme i.e. UCITS or non UCITS to investors

· Unitholder Meetings - Rule changes to allow prohibited voters to vote in instances where all voter are currently ineligible to vote under the existing rules. This is of particular relevance to Managers seeking approval for mergers.

· Report and Accounts - the ability to publish long form report and account on individual sub-funds

· Investment and Borrowing Powers -changes to the borrowing limits on property funds

· Qualified Investor Schemes - changes to make the Manager accountable for reviewing and updating the prospectus in relation to material changes.

Future Dates

· 12 February 2007 - Possible revocation of the FSA's CIS sourcebook (ICIS)

· 13 February 2007 - Operators of UCITS schemes that were authorised on or before 13 February 2002 have until 13 February 2007 to comply with the requirements of the Product Directive

· 13 February 2007 -COLL will apply to all authorised funds

Contents

Fiduciary Services Citicorp Trustee Company Limited Citigroup Centre, Canada Square, Canary Wharf, London E14 5LB Regulatory Update 16 February 2006

Fiduciary Services
Citicorp Trustee Company Limited
Citigroup Centre, Canada Square, Canary Wharf, London E14 5LB
Regulatory Update
16 February 2006