PROSPECTUS OF SANTANDER MULTI-MANAGER EQUITY FUND Santander Multi-Manager Equity Fund is an investment company with variable capital registered in the United Kingdom under registered number IC000249.
This document constitutes the Prospectus for the Santander Multi-Manager Equity Fund ( the Company ) and has been prepared in accordance with The Open Ended Investment Companies Regulations 2001 and the rules contained in the Collective Investment Schemes Sourcebook published by the Financial Services Authority as part of its handbook of Rules and Guidance (together the Regulations ). Copies of this Prospectus have been sent to the Financial Services Authority, Deloitte & Touche as auditors and The Royal Bank of Scotland plc as Depositary. The Prospectus is based on information, law and practice at the date hereof but where it refers to any statutory provision or regulation this includes any modification or re-enactment that has been made. The Company is not bound by any out of date prospectus and potential investors should check that they have the most recently published prospectus. Santander Asset Management UK Limited, the authorised corporate director (ACD) of the Company, is responsible for the information contained in this Prospectus and accepts responsibility accordingly. It has taken all reasonable care to ensure that, to the best of its knowledge and belief, the information in this document does not contain any untrue or misleading statement or omit any matters required by the Regulations to be included in it. No person has been authorised by the Company to give any information or to make any representations in connection with the offering of Shares other than those contained in the Prospectus and, if given or made, such information or representations must not be relied on as having been made by the Company. The delivery of this Prospectus (whether or not accompanied by any reports) or the issue of Shares shall not, under any circumstances, create any implication that the affairs of the Company have not changed since the date hereof. The Depositary is not responsible for the information contained in this Prospectus and accordingly does not accept any responsibility for such information under the FSA Regulations or otherwise. The distribution of this Prospectus and the offering of Shares in certain jurisdictions may be restricted. Persons into whose possession this Prospectus comes are required by the Company to inform themselves about and to observe any such restrictions. This Prospectus does not constitute an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not authorised or to any person to whom it is unlawful to make such offer or solicitation. Shares in the Company are not listed on any investment exchange. Potential investors should not treat the contents of this Prospectus as advice relating to legal, taxation, investment or any other matters and are recommended to consult their own professional advisors concerning the acquisition, holding or disposal of Shares. The provisions of the Instrument of Incorporation are binding on each of its Shareholders (who are taken to have notice of them). This Prospectus has been approved for the purpose of section 21(1) of the Services and Markets Act 2000 by Santander Asset Management UK Limited. If you are in any doubt about the contents of this Prospectus you should consult your professional advisor. This Prospectus is dated and is valid as at 15 December 2008.
- 3 - Contents 1 The Company and its Funds 2 Company Structure 3 Shares 4 Management and Administration 5 The Depositary 6 Investment Advisors 7 Administrator and Registrar 8 Auditor 9 General 10 Register of Shareholders and Statements 11 Buying Selling and Switching Shares 12 Share Prices 13 Stamp Duty and Reserve Tax 14 Prevention of Money Laundering 15 Compulsory Transfer or Redemption of Shares 16 Suspension of Dealings in Shares 17 Calculation of Net Asset Value 18 In Specie Redemption 19 Issue of Shares in Exchange for In Specie Assets 20 US Persons 21 Risk Factors 22 Fees and Expenses 23 Income Abbey National Multi Manager Bond Fund
4 24 Reports to Shareholders 25 UK Taxation 26 Change Process 27 Shareholder Meetings and Voting Rights 28 Winding Up of the Company or a Fund 29 General Information Appendix 1 Appendix 2 Appendix 3 Appendix 4 Schedule 1 The Funds Investment Powers and Safeguards Eligible Markets Dilution Estimates Performance Data
5 1. TERMS USED IN THIS DOCUMENT Act ACD Business Day Company means the authorised corporate director of the Company. means the authorised corporate director of the Company. means a day on which the UK Listing Authority is open for business. means Santander Multi-Manager Equity Fund. Custodian Depositary OEIC Regulations FSA Regulations FSA Fund Shares UCITS Schemes Valuation Point means the Bank of New York, the custodian of the Company means Royal Bank of Scotland plc, the depositary of the Company. means The Open-Ended Investment Companies Regulations 2001 as amended or re-enacted from time to time. means the provisions of The Financial Services Authority Collective Investment Schemes ( COLL ) Sourcebook as amended or re-enacted from time to time. means the Financial Services Authority. means each of the current sub-funds of the Company, details of which are set out in Appendix 1 and Funds shall be construed accordingly. means shares in the capital of the Company, being shares which relate to a particular class of shares of a Fund. means authorised funds which comply with the conditions necessary to enjoy the rights conferred by the European Council Directive of 20 December 1985 on the co-ordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (as amended). means 12.00 noon UK time on each Business Day in each calendar month.
Terms (other than those defined above) which are defined in the Glossary section of the FSA Regulations have the same meaning, unless the context otherwise requires, when used in this document. 6
7 1. THE COMPANY AND ITS FUNDS 1.1 The Company The Santander Multi-Manager Equity Fund is an open-ended investment company with variable capital incorporated in the United Kingdom under registered number IC000249 and authorised by the Financial Services Authority (FSA) with effect from 1 August, 2003. 1.2 Head Office The Head Office of the Company is at 301 St.Vincent Street, Glasgow, G2 5HN, United Kingdom and is also the address of the place in the United Kingdom for service on the Company of notices or other documents required or authorised to be served on it. The Company has been established as an umbrella company (as defined in the FSA Regulations) for an unlimited duration. The Company has been certified by the FSA as complying with the conditions necessary for it to enjoy the rights conferred by the EC Directive on undertakings for collective investment in transferable securities ( UCITS ). 1.3 Share Capital The maximum share capital of the Company is 100 billion and the minimum share capital of the Company is 100. Shares in the Company have no par value and therefore the share capital of the Company at all times equals the Company s Net Asset Value. 1.4 Base Currency The base currency of the Company is UK sterling. However, the Company has the power to issue one or more classes of share capital denominated in a currency other than UK sterling, subject to and in accordance with FSA Regulations. 2. Company Structure The Company is a UCITS scheme structured as an umbrella under the FSA Regulations, which comprises various Funds, each of which is operated as a distinct Fund with its own portfolio of investments. The assets of each Fund are treated as separate from those of every other Fund and will be invested in accordance with that Fund s own investment objective and policy. In addition, each Fund may have more than one share class allocated to it. Where a new Fund or share class is established an updated prospectus will be prepared setting out the relevant information concerning the new Fund or share class. The Shares of each class allocated to a Fund of the Company will rank equally with the following possible exceptions: 1) the level of fees and expenses to be charged, the minimum subscription and the minimum holding, or
8 2) if, for a period of 24 consecutive months after the first issue of Shares in the Company, Shares in respect of fewer than two Funds are in issue, the ACD (see section [ ]) shall take such action as is necessary to reflect that the Company is no longer an umbrella or to cause Shares in respect of more than one Fund to be in issue. This does not apply if winding-up of the Company has begun on or before the expiry of the 24-month period. The Funds in which Shares are currently available are as follows: Equities UK Growth UK Equity UK Balanced North America Europe The Funds are all UCITS schemes within the meaning of the FSA Regulations. Full details of each Fund, their investment powers, safeguards, management and administration are set out in Appendices 1, 2 and 3 respectively. When there is more than one Fund in issue, each Fund has a specific portfolio of assets and investments to which each Fund s assets and liabilities are attributable and investors should view each Fund as a separate investment entity. Investors should be aware that the Company s creditors may, however, look to all the Company s assets for payment regardless of the Fund in respect of which debt has arisen. Assets may be re-allocated to and from other Funds if it is necessary to do so to satisfy any creditor proceeding against the Company. In the event that any assets are so re-allocated,the ACD will advise Shareholders in the next report to Shareholders (see also paragraph 21 (Risk Factors)). Each Fund will be charged with the liabilities,expenses, costs or charges of the Company attributable to that Fund and within the Funds, charges will be allocated between share classes in accordance with the terms of issue of those share classes. Any assets,liabilities, expenses, costs or charges not attributable to a particular Fund may be allocated by the ACD in a manner which is fair to Shareholders as a whole but they will normally be allocated to all Funds pro rata to the value of the net assets of the relevant Funds. 2.1 Investment Objectives and Policies of the Funds The aim of each of the Funds is to provide investors with superior, risk-adjusted returns over the long-term. The Company will seek to achieve the objective on behalf of each Fund through the careful selection of investment advisor(s) which are, in the opinion of the ACD, of the highest quality record. The ACD will be responsible for the selection and appointment of one or more investment advisors to each Fund to provide investment management and advisory services in respect of the assets of the Fund. Where there is more than one investment advisor appointed
9 to a Fund, the ACD will decide the portion of the assets of the Fund over which each investment advisor is appointed. The ACD will monitor the performance of the investment advisor(s) to each Fund in order to assess the need, if any, to make changes/replacements. Shareholders will be notified of any change in the next annual/interim report or other periodic documentation sent to shareholders. Investments will be in a diversified portfolio of assets including collective investment scheme units, deposits and money market instruments. The investment objectives and policy of each Fund are set out in Appendix 1. 2.2 Investment Powers and Safeguards The assets of each Fund will be invested with the aim of achieving the investment objective and policy of that Fund. They must be invested so as to comply with the investment and borrowing powers and restrictions set out in the FSA Regulations, the Instrument of Incorporation and this Prospectus. A summary of the investment powers and safeguards applicable to each Fund is set out in Appendix 2. 2.3 PEP/ISA Qualification Under current law, Shares in each Fund are not qualifying investments for the purpose of the Personal Equity Plan Regulations 1989 (as amended) and The Individual Savings Account Regulations 1998 (as amended). Accordingly, it is not intended that the Company, or any of the Funds, will comply with the CAT (Charges, Access, Terms) standards. 3 Shares 3.1 Classes of Share within the Funds Each Fund currently has one share class, the A Share class which are gross income shares. Income attributable to the A Shares is distributed to Shareholders in respect of each accounting period. At a later date, Retail and B Share classes will be made available for investors. 4 Management and Administration 4.1 Authorised Corporate Director The authorised corporate director ( ACD ) of the Company is Santander Asset Management UK Limited which is a private limited liability company incorporated in Scotland on 14 September, 1987 under Registration number 106669. The ultimate holding company of the ACD is Santander Asset Management UK Holdings Limited which is incorporated in England and Wales. 4.2 Registered Office and Head Office
10 Abbey National House, 301 St.Vincent Street, Glasgow G2 5HN, United Kingdom 4.3 Share Capital The authorised share capital of the ACD is 4,750,000 made up of 4,750,000 ordinary shares of 1 nominal value each, of which 4,750,000 ordinary shares have been issued fully paid up. 4.4 Regulatory Authority The ACD is regulated by the FSA of 25 The North Colonnade, Canary Wharf, London E14 5HS, UK and is authorised to carry on investment business in the UK. 4.5 Terms of Appointment of the ACD The appointment of the ACD was made under an Agreement dated 26 August, 2003 between the Company and the ACD, the ( ACD Agreement ). The ACD is responsible for managing and administering the Company's affairs in compliance with the FSA Regulations. Under the terms of the Agreement, the ACD is to provide investment management services in respect of the Funds. The ACD will also provide administrative, accounting and secretarial services to the Company. No separate registrar s fee will be payable to the ACD for its services to the Company. The ACD may appoint one or more investment advisors to whom it may delegate all or part of the day to day conduct of its investment management responsibilities in respect of any Fund. If more than one investment advisor is appointed to a Fund, the ACD shall allocate the assets of the Fund between the investment advisors in such proportions as it shall, at its discretion, determine. The ACD Agreement commences on the date of incorporation of the Company and provides that the appointment of the ACD will continue in force unless and until terminated in specified circumstances (including material breach). The Agreement may be terminated by either party giving the other written notice if the other party is in material breach which has not been remedied in 30 days. It terminates automatically if the ACD ceases to be authorised for the purposes of the FSA, the regulations or rules made pursuant to the FSA, or if the Company is wound up. The Company may terminate the Agreement on six months notice in writing. The ACD may terminate the agreement on six months notice in writing (subject to the appointment of a successor). Termination cannot take effect until the FSA has approved the change of director. The Agreement includes an indemnity from the Company to the ACD in respect of any liabilities incurred by the ACD by reason of its performance or non-performance of its obligations or functions under the Agreement except in the event of fraud, negligence, wilful default, breach of trust or breach of duty by the ACD. The ACD may provide similar services for other clients, but will endeavour to ensure fair treatment as between the Company and other customers whose funds are managed or advised by the ACD.
11 4.6 Other Schemes Managed/Operated by the ACD The ACD also currently acts as authorised corporate director for Santander Multi-Manager OEIC and Santander Multi-Manager Bond Fund, open-ended investment companies with variable capital incorporated in Scotland. 5 The Depositary The Depositary of the Company is The Royal Bank of Scotland plc. The Depositary is incorporated in Scotland as a public limited company. 5.1 Head Office Gogarburn, PO Box 1000, Edinburgh, EH12 1HQ. 5.2 Registered Office 36 St. Andrew Square, Edinburgh EH2 2YB. 5.3 Ultimate Holding Company The Royal Bank of Scotland Group plc, which is incorporated in Scotland. 5.4 Principal Business Activity The principal business activity of the Depositary is banking. 5.5 Regulatory Authority The Depositary is regulated by the FSA of 25 The North Colonnade, Canary Wharf, London E14 5HS, UK and is authorised to carry on investment business in the UK by virtue of that membership. 5.6 Terms of Appointment of the Depositary The appointment of the Depositary was made under an agreement dated 21 February 2005 between the Company, the ACD and the Depositary (the Depositary Agreement ). The Depositary is responsible for the safekeeping of all of the scheme property of the Company. The Depositary will retain the services of the Bank of New York to assist in the safekeeping of the scheme property. The Depositary has a duty to take reasonable care to ensure that the Company is managed in accordance with the FSA Regulations relating to pricing of, and dealing in, Shares and income of the Funds. The Depositary Agreement provides for termination by either the Company or the Depositary giving not less than 90 days prior notice in writing to the other party. However, the Depositary may not retire voluntarily except on the appointment of a new depositary. The Depositary
12 Agreement shall be terminated by notice in writing if the FSA obtains a court order to remove the Depositary or the Depositary is wound up. The Depositary accepts responsibility for its acts and omissions in the event of fraud, negligence or wilful default and, in addition accepts responsibility for the acts or omissions of its global custodian as if they were its own acts or omissions. 6 Investment Advisors The ACD has appointed Santander Portfolio Management UK Limited, an FSA authorised entity, to act as investment advisor in respect of the assets in the Funds. The ACD and Santander Portfolio Management UK Limited are members of the same group. In addition to acting as investment advisor for the Funds comprising the Santander Multi- Manager Equity Fund, the principal business activities of Santander Portfolio Management UK Limited normally include acting as a discretionary investment manager and authorised corporate director of collective investment schemes. The appointment of an investment advisor provides for the advisor to be responsible, subject to the overall control of the ACD, for day to day investment of the assets subject to the appointment in accordance with the relevant investment objectives. The fees payable to the investment advisor are to be met by the ACD out of the fees payable by the Fund and are not an obligation of the Company. Any appointment can be terminated by either party giving not less than 90 days prior notice in writing to the other party and may terminate automatically in certain events, including the insolvency of the advisor or the advisor ceasing to be permitted to provide fund management and advisory services to the Company for regulatory or legal reasons. The appointment of the Investment Advisor provides that it may with the consent of the ACD delegate any part or all of its functions, powers and duties. The Investment Advisor has delegated fund management of the undernoted Funds to the entities stated alongside each Fund. All of the entities to whom the Investment Advisor has delegated fund management are regulated by the FSA. The fees payable to such entities are to be met by the Investment Advisor out of the fees payable to it by the Company and are not an obligation of the Company. Any appointment of an entity to whom the Investment Advisor has delegated fund management can be terminated by either party giving not less than 90 days written notice to the other and may terminate immediately by notice if required by any competent legal or regulatory authority, in the event of material changes to key personnel or material breach or automatically in certain events including the insolvency of such entities. UK Growth UK Equity UK Balanced North America Europe Barclays Global Investors Limited State Street Global Advisers Limited J P Morgan Fleming Asset Management (UK) Limited Goldman Sachs Asset Management International and Deutsche Asset Management Limited State Street Global Advisers Limited, AXA Rosenberg Investment Management Limited, Oechsle International Advisors Limited
13 The Investment Advisors liability to the ACD for all matters delegated are not affected as a consequence of such delegation. 7 Registrar Santander Asset Management UK Limited, Abbey National House, 301 St. Vincent Street, Glasgow G2 5HN, United Kingdom 8 Auditor Deloitte & Touche LLP, Stonecutter Court, 1 Stonecutter Street, London EC4A 4TR, United Kingdom 9 General The Company, the ACD and the Depositary must each comply with the relevant requirements of the FSA Regulations in a timely manner unless delay is lawful and also in the interests of the Company. The ACD and the Depositary may retain the services of the other, or third parties to assist them in fulfilling their respective roles. The only exceptions to this are that: - the Depositary may not delegate oversight of the Company to the Company, the ACD or any associate of the Company or the ACD or custody or control of the scheme property to the Company or the ACD; and - any delegation of custody of scheme property must be under arrangements which allow the custodian to release documents into the possession of a third party only with the Depositary's consent. Where functions are performed by third parties, the ACD remains responsible for the management of the scheme property and, if the third party is an associate, any other functions which are within the role of the ACD. The FSA Regulations contain various requirements relating to transactions entered into between the Company and the ACD, any investment advisor or any associate of them which may involve a conflict of interest. These are designed to protect the interests of the Company. Certain transactions between the Company and the ACD, or an associate of the ACD, may be voidable at the instance of the Company in certain circumstances.
14 10 Register of Shareholders and Statements Ownership of Shares will be evidenced by an entry on the Company s Register of Shareholders. The register of shareholders is maintained by the ACD at Abbey National House, 301 St. Vincent Street, Glasgow G2 5HN, UK. It may be inspected by any shareholder or his duly authorised agent during normal business hours at that address, without charge. All Shares are in registered form. Copies of the entries on the Register relating to a shareholder are available on request by that shareholder without charge. The Company has the power to close the register for such periods not exceeding 30 days in any one year. 11 Buying, Selling and Switching Shares 11.1 General Each Fund is currently designed for institutional investors wishing to attain the investment objective of that Fund who are able to accept the risks outlined in this Prospectus. The ACD will be available to deal with requests to sell or redeem Shares between 9 a.m. and 5 p.m. on each Business Day. Applications to buy, sell or switch Shares may be made by post. The Shares will be bought, sold or switched at a forward price. A forward price is the price determined at the next valuation of the property of the relevant Fund after the receipt by the ACD of the investor's instructions. Requests received prior to the 12 noon valuation point will be dealt that day. If requests are received after the valuation point, then they receive the price at the next valuation point. The prices will be published on each Business Day in The Financial Times or as determined by the ACD and notified to the Shareholders. Shares in the Company are not listed or dealt on any investment exchange. 11.2 Minimum Subscriptions and Holdings The minimum investment amounts are as follows: minimum initial subscription for A Shares 1,000,000 minimum subsequent subscription for A Shares 1.50 minimum withdrawal amount for A Shares 1.50 (provided a minimum value of 1,000,000 in Shares is held in the relevant Fund after the redemption takes place)
15 The minimum holdings, minimum withdrawal amounts and minimum purchase amounts referred to above may be waived by the ACD. 11.3 Buying and Selling Shares Applications to purchase Shares must be made in writing to the ACD at Abbey National House, 301 St. Vincent Street, Glasgow G2 5HN, United Kingdom. A contract note will be sent normally by the close of the next Business Day after the Valuation Point following receipt of the application. This will show the number of Shares purchased and the price. Share certificates will not be issued. A notice of the applicant's right to cancel the deal will be sent separately within seven days of the relevant Valuation Point, if appropriate. The application monies are due on receipt by the applicant of the contract note. Subscription monies representing less than the purchase price of a whole Share will not be returned to the applicant. Fractions of Shares will be issued in such circumstances to the nearest whole thousandth of a Share. Instructions to redeem Shares may be made in writing. A contract note will be issued giving details of the Shares sold and the price used. Payments to satisfy a redemption request will be made by direct credit or by cheque and will normally be issued by the close of the fourth Business Day after the later of the relevant Valuation Point and receipt by the ACD of a written and signed renunciation request in respect of the appropriate number of Shares. Apart from circumstances in which a shareholder is redeeming his or her entire holding of Shares in a Fund: (a) (b) fractions of Shares will be credited to a shareholder where any part of the redemption monies for Shares represents less than the redemption price for one Share, provided, however, that fractions shall not be less than one thousandth of a Share; and redemption monies representing less than one thousandth of a Share will not be returned to a shareholder, but will be retained by the Company in order to defray administration costs. Once a request to redeem Shares has been given, it cannot subsequently be withdrawn. 11.4 Switching between Funds Shareholders are entitled (subject to certain restrictions) to switch all or part of their Shares in one Fund for Shares of a different class in that Fund or Shares of the same, or a different, class in a different Fund. Switching may be requested in writing to the ACD (see address in section 2.4). In the case of joint shareholders, the request must be signed by all the joint holders. A switch involves a sale of the Shares held and a purchase of new Shares. The ACD may make a switch charge, subject to the FSA Regulations. The charge would represent the difference between initial charges if the switch was to a Fund with a higher initial charge.
16 If a requested switch would result in the Shareholder holding original or new shares of a number or value which is less than the minimum holding in the relevant Fund(s), the ACD may, if it thinks fit, either convert the whole of the applicant's original or refuse to convert any of the original holding. Investors subject to UK tax on capital gains should note that a switch is treated as a chargeable disposal for the purposes of UK tax on capital gains. Accordingly if a gain is realised on such a transaction this may give rise to capital gains tax liability for UK resident shareholders. No rights to cancel any purchase of Shares under the FSA Regulations will be given to shareholders who switch their Shares for Shares in the same or any other Fund. 12. SHARE PRICES 12.1 Price of a Share Shares in all the Funds will launch at a price of 1 each, after which they will be on a single mid-market pricing basis in accordance with the FSA Regulations. The price of a Share is the net asset value attributable to the relevant Share class divided by the number of Shares of that class in issue. The net asset values attributable to each Share class of each Fund will normally be calculated at 12 noon UK time on each Business Day. The ACD reserves the right to revalue a Share class or Fund at any time, at its discretion. 12.2 Dilution Levy The value of the property of a Fund may be reduced as a result of the costs incurred in the dealings in the Fund s investments and any difference between the buying and selling price of such investments. In order to prevent such dilution and consequent potential adverse effect on remaining shareholders, the ACD has the power to charge a dilution levy when Shares are bought or sold. Any dilution levy would be paid into (or retained by) the Fund and would become part of the scheme property of the relevant Fund. The dilution levy for each Fund will be calculated by reference to the costs of dealing in the underlying investments of that Fund, including any dealing spreads, commission and transfer taxes. The ACD may charge a discretionary dilution levy on the sale and redemption of Shares if, in its opinion, the existing shareholders or remaining shareholders might otherwise be adversely affected. In particular, the dilution levy may be charged in the following circumstances: - on a Fund experiencing large levels of net sales relative to its size; - on large deals. For these purposes a large deal is defined as 5% or more of the size of the Fund; - where a Fund is in continual decline; and
17 - in any other case where the ACD is of the opinion that the interest of shareholders require the imposition of a dilution levy. If an investor s proposed transaction falls within one of the above circumstances, the investor may enquire as to whether a dilution levy will apply in respect of that transaction before giving instructions for that transaction. Where a dilution levy is charged the amount will be clearly stated on the relevant contract note. A dilution levy is paid to (or retained by) the Fund to protect the interests of investors by ensuring fund performance is not materially disadvantaged. The dilution levy is not applied for the benefit of the Investment Manager. As dilution is directly related to the inflows and outflows of monies from the Fund, it is not possible to predict accurately whether dilution will occur at a future point in time. The ACD expects to apply a dilution levy on most occasions where Shares are issued or redeemed and based on historical dealing data an estimate of the typical levy in respect of each Fund is as set out in Appendix 4. 13 Stamp Duty Reserve Tax The provisions of Schedule 19 to the Finance Act 1999 (as applied to open-ended investment companies by The Stamp Duty and Stamp Duty Reserve Tax (Open-ended Investment Companies) Regulations 1997, as amended) impose a charge to stamp duty reserve tax ( SDRT ) on dealings in the shares of UK open-ended investment companies. In the case of the Company, the dealings that may attract this charge to tax are the redemption of Shares in a Fund, the sale or other transfer of Shares in a Fund to another person (subject to certain exemptions) and a switch of Shares in one Fund to Shares of another Fund. By virtue of the Company being constituted as an umbrella company, each Fund will normally be treated as representing a separate open-ended investment company for the purposes of applying this charge to SDRT. The maximum rate of tax payable is 0.5% of the market value of the Shares that are subject to the chargeable transaction in question (as summarised above). This is subject, however, to two possible reductions, which in outline are as follows:- The first reduction applies where, during a specified two-week period in which the transaction takes place, the Fund concerned has redeemed more Shares than it has issued (ignoring any redemptions in specie and also treating a sale or other transfer of Shares as constituting both a redemption and an issue for this purpose). Where this happens, the charge is reduced by applying the ratio of shares issued to shares redeemed during that period. The second reduction applies where, in the same two-week period, the Fund concerned has held any exempt investments (which means, broadly, assets that can be transferred free of stamp duty and SDRT and holdings in collective investment schemes that invest solely in certain types of debt-security). The charge is then reduced by applying the ratio of the value of the relevant Fund s non-exempt investments to the value of the Fund s total investments.
18 Any SDRT payable is a liability of the Company (except where a sale or other transfer of Shares is implemented in a way which does not involve any change in the Company s register of shareholders, in which case the SDRT is a liability of the transferee instead). SDRT arising on a redemption of shares may be charged directly to the property of the Fund. This would have the effect of increasing the expenses incurred by the Fund, but would also mean that SDRT did not form part of any entry or exit charge incurred by shareholders on entering or exiting the Fund. Alternatively, the ACD may charge an SDRT provision to the incoming and/or outgoing shareholder by way of an entry or exit charge. The ACD will pay any SDRT provision to the Fund. The charging of an SDRT provision increases the payment required to be made by the incoming shareholder on the creation or issue of shares and/or decreases the payment to be made to the outgoing shareholder on the redemption of shares. The effect is the same in the case of a third party transfer, except that the transferor and/or transferee will be required to pay for the SDRT provision to the ACD. A provision for SDRT will usually be calculated by the ACD on the 14th day of each month. The ACD reserves the right to make provision for the payment of SDRT as an addition to the price of Shares issued or as a deduction from the price of Shares redeemed. Such provision may be made frequently. The ACD will make provision for SDRT as it deems appropriate, subject to a maximum rate of the rate that it is estimated would be derived by applying SDRT to the value of the shares being created, issued or redeemed (including in respect of redemptions and issues that are large deals, that is transactions involving 3% or more of the issued shares of any Fund) and will account for such provision as a dealing expense of the Fund. This SDRT provision will not be dependent on the size of the deal and any provision will be deducted from the capital property of the relevant Fund. SDRT will be paid by the Fund where the liability arises, except in the case of third-party transfers of Shares, when the Company may refuse to enter the purchaser of the Shares to the Register of Holders unless the transferee has paid for the account of the Company such amount as the ACD determines, not exceeding the amount that would be paid if SDRT were payable on the shares being transferred. This does not apply to transfers excluded by Schedule 19 of the Finance Act 1999 (or any statutory modification or re-enactment thereof) from a charge to SDRT. The ACD expects to make a charge of 0.5% in respect of SDRT and to apply this to reduce the sums received by outgoing shareholders on a redemption of Shares. The charge will be reduced if the number of redemptions exceeds the number of new issues (as described above). 14 Prevention of Money Laundering Companies conducting investment business are responsible for compliance with money laundering prevention regulations. Shareholders may be asked to provide proof of identity when buying, selling or switching Shares. Until satisfactory proof of identity is provided, the ACD reserves the right to refuse to issue Shares, to switch Shares or pay the proceeds of sale. 15 Compulsory Transfer or Redemption of Shares The ACD may impose the restrictions it thinks necessary to ensure that no shares in the Company are acquired or held by any person in breach of law or governmental regulation (or
19 any interpretation of a law or regulation by a competent authority) of any country or territory. The ACD may reject any application for, or sale of, Shares or any exchange notice given. If the ACD becomes aware that: - any Shares are owned directly or beneficially in breach of any law or governmental regulation; or - the shareholder in question is not eligible to hold such Shares or if it reasonably believes this to be the case, then the ACD may give notice requiring the transfer or repurchase of such Shares. If any person does not take those steps within 30 days, he shall then be deemed to have given a written request for the redemption of all of his Shares. A person who becomes aware that he is holding or owning Shares in breach of any law or governmental regulation, or is not eligible to hold those Shares, must either: - transfer all those Shares to a person qualified to own them; or - give a request in writing for the redemption of all such Shares, unless he has already received such a notice from the ACD to transfer the Shares or for them to be repurchased. 16 Suspension of Dealings in Shares If the ACD or the Depositary is of the opinion that due to exceptional circumstances there is good and sufficient reason to suspend the issue, cancellation, sale and redemption of Shares in any or all of the Funds of the Company, having regard to the interests of shareholders or potential shareholders, then, if the Depositary agrees, the ACD may, or, if the Depositary requires, the ACD will suspend dealings for a period of up to 28 days. Re-calculation of the Share price will commence at the next relevant Valuation Point after the period of suspension. 17 Calculation of Net Asset Value The value of the scheme property of the Company or sub-fund (as the case may be) shall be the value of its assets less the value of its liabilities determined in accordance with the following provisions. 17.1 All the scheme property (including receivables) is to be included, subject to the following provisions. 17.2.. Property which is not cash (or other assets dealt with in paragraph 3 below) or a contingent liability transaction shall be valued as follows and the prices used shall (subject as follows) be the most recent prices which it is practicable to obtain: (a) units or shares in a collective investment scheme:
20 (i) (ii) (iii) if a single price for buying and selling units or shares is quoted, at that price; or if separate buying and selling prices are quoted, at the average of the two prices providing the buying price has been reduced by any initial charge included therein and the selling price has been increased by any exit or redemption charge attributable thereto; or if, in the opinion of the ACD, the price obtained is unreliable or no recent traded price is available or if no recent price exists, at a value which, in the opinion of the ACD, is fair and reasonable; (b) any other transferable security: (i) (ii) (iii) if a single price for buying and selling the security is quoted, at that price; or if separate buying and selling prices are quoted, at the average of the two prices; or if, in the opinion of the ACD, the price obtained is unreliable or no recent traded price is available or if no price exists, at a value which, in the opinion of the ACD, is fair and reasonable; (c) property other than that described in (a) and (b) above: at a value which, in the opinion of the ACD, represents a fair and reasonable mid-market price. 17.3. Cash and amounts held in current and deposit accounts and in other time-related deposits shall be valued at their nominal values. 17.4 Property which is a contingent liability transaction shall be treated as follows: (a) (b) (c) if a written option, (and the premium for writing the option has become part of the scheme property), deduct the amount of the net valuation of premium receivable. If the property is an off-exchange derivative the method of valuation shall be agreed between the ACD and depositary; if an off-exchange future, include at the net value of closing out in accordance with a valuation method agreed between the ACD and the depositary; if any other form of contingent liability transaction, include at the net value of margin on closing out (whether as a positive or negative value). If the property is an off-exchange derivative, include at a valuation method agreed between the ACD and the depositary. 17.5 In determining the value of the scheme property, all instructions given to issue or cancel shares shall be assumed to have been carried out (and any cash paid or received) whether or not this is the case.
21 17.6 Subject to paragraphs 7 and 8 below, agreements for the unconditional sale or purchase of property which are in existence but uncompleted shall be assumed to have been completed and all consequential action required to have been taken. Such unconditional agreements need not be taken into account if made shortly before the valuation takes place and, in the opinion of the ACD, their omission will not materially affect the final net asset amount. 17.7 Futures or contracts for differences which are not yet due to be performed and unexpired and unexercised written or purchased options shall not be included under paragraph 6. 17.8 All agreements are to be included under paragraph 6 which are, or ought reasonably to have been, known to the person valuing the property. 17.9 Deduct an estimated amount for anticipated tax liabilities at that point in time including (as applicable and without limitation) capital gains tax, income tax, corporation tax and advance corporation tax, value added tax, stamp duty and stamp duty reserve tax. 17.10 Deduct an estimated amount for any liabilities payable out of the scheme property and any tax thereon treating periodic items as accruing from day to day. 17.11 Deduct the principal amount of any outstanding borrowings whenever payable and any accrued but unpaid interest on borrowings. 17.12 Add an estimated amount for accrued claims for tax of whatever nature which may be recoverable. 17.13 Add any other credits or amounts due to be paid into the scheme property. 17.14 Add a sum representing any interest or any income accrued due or deemed to have accrued but not received. 18 In Specie Redemption If a shareholder requests the redemption or cancellation of Shares, the ACD may, if it considers the deal substantial in relation to the total size of the Fund concerned, arrange for the Company to cancel the Shares and transfer scheme property to the shareholder instead of paying the price of the Shares in cash, or, if required by the shareholder, pay the net proceeds of sale of the relevant scheme property to the shareholder. A deal involving Shares representing 5% or more in value of a Fund will normally be considered substantial, although the ACD may in its discretion agree an in specie redemption with a shareholder whose Shares represent less than 5% in value of the Fund concerned. Before the proceeds of cancellation of the Shares become payable, the ACD will give written notice to the shareholder that scheme property (or the proceeds of sale of that scheme property) will be transferred to that shareholder. The ACD will select the property to be transferred (or sold) in consultation with the Depositary. They must ensure that the selection is made with a view to achieving no greater advantage or disadvantage to the redeeming shareholder than to continuing shareholders. The Company
22 retains from that property (or proceeds) the value (or amount) of any stamp duty reserve tax to be paid on the cancellation of Shares. 19 Issue of Shares in Exchange for In Specie Assets The ACD may arrange for the Company to issue Shares in exchange for assets other than money, but will only do so where the Depositary is satisfied that the Company s acquiring those assets in exchange for the Shares concerned is not likely to result in any material prejudice to the interests of shareholders or potential shareholders. The ACD will ensure that the beneficial interest in assets is transferred to the Company with effect from the issue of the Shares. The ACD will not issue Shares in any Fund in exchange for assets the holding of which would be inconsistent with the investment objective of that Fund. 20 US Persons The Shares have not been and will not be registered under the United States Securities Act of 1933 as amended ( Securities Act ) and, subject to certain exceptions, may not be offered or sold in the United States of America, its territories and possessions, any State of the United States of America and the District of Columbia ( United States of America ) or offered or sold to US Persons (as defined below). The Company has not been and will not be registered under the United States Investment Company Act of 1940, as amended. The ACD has not been and will not be registered under the United States Investment Advisors Act of 1940. US Person means: (a) (b) (c) (d) (e) (f) a resident of the United States of America; a partnership or corporation organised or incorporated under the laws of the United States of America; any estate or trust the executor, administrator or trustee of which is a US Person unless, in the case of trusts of which any professional fiduciary acting as trustee is a US Person, a trustee who is not a US Person has sole or shared investment discretion with respect to trust assets and no beneficiary of the trust (and no settlor if the trust is revocable) is a US Person; any estate or trust the income of which from sources outside the United States of America is includable in gross income for purposes of computing United States income tax payable by it; any agency or branch of a foreign entity located in the United States of America; any discretionary or non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary located within or outside the United States of America for the benefit or account of a US Person;
23 (g) (h) (i) (j) any discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organised, incorporated or (if an individual) resident in the United States of America, except that any discretionary account or similar account (other than an estate or trust) held for the benefit or account of a non-us Person by a dealer or other professional fiduciary organised, incorporated or (if an individual) resident in the United States of America shall not be deemed a US Person; any firm, corporation or other entity, regardless of citizenship, domicile, status or residence if under the income tax laws of the United States of America from time to time in effect, the ownership thereof would be attributed to one or more US Persons; any partnership, corporation or other entity if (i) organised or incorporated under the laws of any foreign jurisdiction and (ii) owned or formed by a US Person or Persons principally for the purpose of investing in securities not registered under the US Securities Act of 1933 (including but not limited to Shares of the Fund); or any other person or entity whose ownership of Shares or solicitation for ownership of Shares the ACD through their officers or Directors, shall determine may violate any securities law of the United States of America or any state or other jurisdiction thereof. United States of America includes its territories and possessions. 21 Risk Factors Potential investors should consider the following risk factors before investing in the Company. 21.1 Past Performance Past performance data appears in Schedule 1 for each of the Funds. Past performance does not necessarily indicate future performance. It can only serve as a guide and can in no way provide a guarantee of returns that you will receive in the future. 21.2 Fluctuations in Value With any stockmarket investment, whether equities or bonds, the capital value of the investor s original investment is not guaranteed. The value of investments and the income from them may go down as well as up and the investor may not get back the amount invested. The amount of risk to which investors are exposing their capital will vary. There are a number of factors which affect the level of risk. Where relevant, investors should take the following factors into account: 21.3 Overseas Investments/Currency Exchange If investors choose a Fund which invests overseas, they should note that, as the Funds are sterling based and contain foreign investments, they will be affected by fluctuations in rates of currency exchange, in addition to the usual stockmarket fluctuations.
24 21.4 Emerging Markets Investors looking at Funds covering emerging markets around the world should be aware that they can be more volatile than Funds covering established markets. For example, the systems and standards of dealing, settlement and custody of shares in these markets may not be as high as those in more developed markets and may therefore result in failed or delayed settlement of transactions. Shares listed on the smaller stockmarkets also tend to be less marketable than in more developed stockmarkets resulting in greater price fluctuation. Although care is taken to understand and manage such risks, ultimately the Fund shareholders bear the risks of investing in such markets. 21.5 Equities Funds investing in the shares of companies (equities) tend to be more volatile than bond Funds, but also offer greater potential for growth. The value of the underlying investments in the equity Funds may fluctuate - sometimes quite dramatically - in response to the activities and results of individual companies, as well as in connection with general market and economic conditions. 21.6 Suspension of Dealing In certain circumstances, the investor s right to redeem Shares may be suspended (see section 11. 21.7 Liabilities of the Company 21.7.1 Shareholders not Liable for Debts Shareholders are not liable for the debts of the Company. A shareholder is not liable to make any further payment to the Company after he or she has paid the purchase price of the Shares. 21.7.2 No Ring-Fencing of Funds in an Umbrella Company Each fund in an umbrella company, in usual circumstances, is treated as having its own assets and liabilities. However, the assets of each Fund are not 'ring fenced' and, if the Company is unable to meet liabilities attributable to any particular Fund out of the assets attributable to that Fund, the excess liabilities may have to be met out of the assets attributable to the other Fund(s). Assets may be transferred between Funds if it is necessary to do so to satisfy any creditor proceeding against certain of the assets of the Company. 22 FEES AND EXPENSES 22.1 ACD's Fees and Expenses 22.1.1 Preliminary Charge The current rate of the preliminary charge on the sale of any Shares in any Fund is set out in the details of each Fund in Appendix 1. The charge is calculated as a percentage of the price of a Share and is added to the purchase price.