IFM12543 - Offshore Funds: Reporting funds: computation of reportable income: equalisation: introduction

‘Equalisation’ refers to arrangements that enable the income that existing investors receive (or have allocated to them) from a fund to be unaffected by new investors purchasing units in a fund. Such arrangements will affect the calculation of reportable income to be reported to unit holders at the end of the period in which the new units are issued.

The method by which reportable income is computed is dependent on whether the reporting fund:

• operates equalisation arrangements (see IFM12546)
• operates full equalisation arrangements (see IFM12548)
• operates no form of equalisation (see IFM12628)

A reporting fund operates equalisation arrangements or full equalisation arrangements if it has given a statement in its application for reporting fund status that it intends to operate such arrangements (see IFM12423).

If a fund operates either full equalisation or equalisation, adjustments will be made to reportable income under regulation 72 of SI 2009/3001. The difference between these two methods of operating equalisation is that an equalisation amount will be included in the report to investors where a fund operates full equalisation, whereas no equalisation amount is reported to investors where only equalisation is operated.