IFM12540 - Offshore Funds: Reporting funds: computation of reportable income: adjustments for special classes of income: index tracking funds

Regulation 68A of SI 2009/3001

In a case where a reporting fund is an ‘index tracking fund’ meeting the conditions below then it may disregard the regulations relating to calculating reportable income from holdings in non-reporting funds (regulations 69 to 71) in respect of a particular holding in a non-reporting fund where the following conditions are met:

• In accordance with the reporting fund’s rule or the instrument constituting the reporting fund, the aim of the fund’s investment policy is to replicate the performance of a qualifying index;
• the main purpose or one of the main purposes of the investment in the non-reporting fund is to represent the composition of a qualifying index; and
• the capital and income return of the reporting fund replicates as closely as practicable the returns of the investments comprised in the qualifying index.

An index is a “Qualifying index” if it is based on the value of securities listed on a recognised stock exchange or admitted to trading on a regulated market and an authority responsible for regulating offshore funds recognises the index on the basis that:

• its composition is sufficiently diverse;
• it represents an adequate benchmark for the market to which it refers;
• it is published in such a way that it is widely available; and
• it is calculated and published by a body which is managed independently from the management of the reporting fund.

In a case where regulation 68A applies the reporting fund should compute reportable income in accordance with the principles set out in regulations 63 to 67 so as to meet the conditions relating to the capital and income returns of the fund.