»Ê¹ÚÌåÓýapp

To meet the definition of an offshore fund, arrangements must be a mutual fund. Section 356 provides three conditions, A to C, which must be met for arrangements to be a mutual fund - see IFM12231.

Even if all three conditions are met, s357 provides exceptions to certain types of arrangements that would otherwise be mutual funds. »Ê¹ÚÌåÓýapp exceptions are dependent on whether the arrangements are such that they meet the criteria of condition D (s357(2)) and either of the conditions E or F (s357 (1)(b) TIOPA 2010).

Arrangements meet the criteria of condition D where the only occasion on which a reasonable investor would expect to be able to realise an investment based entirely or almost entirely by reference to the net asset value (‘NAV�) of the property or an index of any description is on a winding-up, dissolution or termination of the arrangements. An example is a case where there is a final redemption of a class of interest (s357 (2)).

Section 357(2) has the effect that ‘open-ended� arrangements (i.e. those that enable investors to realise NAV by disposing of their interest) cannot come within the exceptions provided by s357.

»Ê¹ÚÌåÓýapp conditions E or F do, however, except certain types of closed-ended arrangements from the meaning of a ‘mutual fundâ€�.

»Ê¹ÚÌåÓýapp exceptions can also apply to arrangements where a reasonable investor could expect to realise their investment at or close to NAV as a result of the intention of a fund to dispose of its assets in tranches followed by a final distribution of any remaining assets, as opposed to a liquidation of all of the fund’s assets on a winding-up

Further guidance on conditions E and F can be found at IFM12244 and IFM12245 to IFM12249 respectively. See IFM12290 for guidance on limited life companies that are subject to a continuation vote.