Regulation 87 Interpretation of regulation 81(c)

(1)

For the purposes of regulation 81(c) a diversely owned fund has a “loan relationship” where the fund stands (whether by reference to a security or otherwise) in the position of a creditor or debtor as respects any money debt and either—

(a)

that debt is one arising from a transaction for the lending of money, or

(b)

that debt is not one which arose from a transaction for the lending of money but is one—

(i)

on which interest is payable to or by the diversely owned fund, or

(ii)

in relation to which exchange gains or losses arise to the diversely owned fund, or

(iii)

as respects which the conditions in paragraph (2) below are satisfied.

(2)

The conditions referred to in paragraph (1)(b)(iii) are that—

(a)

the diversely owned fund stands in the position of creditor in relation to the money debt, and

(b)

the money debt is one from which a discount (whether of an income or capital nature) arises to the diversely owned fund.

(3)

In this regulation “exchange gains or losses” means profits or gains or losses which arise as a result of comparing at different times the expression in one currency of the whole or some part of the valuation put by the diversely owned fund in another currency on an asset or liability of the diversely owned fund.

(4)

For the purposes of this regulation a “money debt” is a debt which is, or has at any time been, one that falls, or that may at the choice of the debtor or of the creditor, fall to be settled—

(a)

by the payment of money,

(b)

by the transfer of a right to settlement under a debt which is itself a money debt, or

(c)

by the issue or transfer of shares in any company,

disregarding any other alternative exercisable by either party.

(5)

Subject to paragraph (6), where an instrument is issued by any person for the purpose of representing security for, or the rights of a creditor in respect of, any money debt, then (whatever the circumstances of the issue of the instrument) that debt shall be taken for the purposes of this regulation to be a debt arising from a transaction for the lending of money.

(6)

For the purposes of this regulation a debt does not arise from a transaction for the lending of money to the extent that it is a debt arising from rights conferred by shares in a company.

(7)

For the purposes of this regulation so far as relating to exchange gains and losses, any currency held by the diversely owned fund shall be treated as a money debt.

(8)

For the purposes of this regulation “money” includes money expressed in a currency other than sterling.

(9)

For the purposes of regulation 81(c) a “related transaction” in relation to a loan relationship means any disposal or acquisition (in whole or in part) of rights or liabilities under that relationship.