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Collective Investment Schemes 30 July 2004

Following swiftly on the introduction of the Protected Cell Company Act 2004 and its initial use in captive insurance, the protected cell companies (PCCs) structure has been extended to certain collective investment schemes.

The Protected Cell Companies (Prescribed Class of Business) (Collective Investment Schemes) Regulations 2004 came into effect on 1st August 2004. These regulations provide for funds constituted as International Schemes including Experienced Investor Funds and Professional Investment Funds but excluding Exempt International Schemes, in the Isle of Man to incorporate as, or convert into, protected cell companies.

It is expected that the PCC concept, which provides statutory segregation through partitions (cells) within a company into which separate assets may be placed, will be of particular value for schemes which have a series of sub-funds. The liabilities of each cell are legally ring fenced under Isle of Man law and cross contamination of cells is prevented, giving protection from risk arising from gearing, or otherwise, in other cells.

The Companies (Forms) (No 3) Regulations 2004, which introduce new forms for use when converting or incorporating a company as a PCC also came into operation 1st August 2004.

Coupled with the Isle of Man's Experienced Investor Fund vehicle and initiatives launched during 2003, which included the removal of VAT from funds, the availability of protected cell companies as a structure for funds is another positive step forward for the Island and comes at a time when international interest is growing both in the concept of PCCs and the use of the Isle of Man as a domicile for funds and fund administration.

The availability of PCC legislation for funds is seen as another boost to the Island's growing funds industry which added 1 billion in new assets during the second quarter of 2004 and over 40 new funds in the twelve months to 30th June 2004.

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