PART III SPECIFIED INVESTMENTS

F1Alternative finance investment bonds77A

1

Rights under an alternative finance investment bond, to the extent that they do not fall within article F277 or 78.

2

For the purposes of this article, arrangements constitute an alternative finance investment bond if—

a

the arrangements provide for a person (“the bond-holder”) to pay a sum of money (“the capital”) to another (“the bond-issuer”);

b

the arrangements identify assets, or a class of assets, which the bond-issuer will acquire for the purpose of generating income or gains directly or indirectly (“the bond assets”);

c

the arrangements specify a period at the end of which they cease to have effect (“the bond term”);

d

the bond-issuer undertakes under the arrangements—

i

to make a repayment in respect of the capital (“the redemption payment”) to the bond-holder during or at the end of the bond term (whether or not in instalments); and

ii

to pay to the bond-holder other payments on one or more occasions during or at the end of the bond term (“the additional payments”);

e

the amount of the additional payments does not exceed an amount which would, at the time at which the bond is issued, be a reasonable commercial return on a loan of the capital; and

f

the arrangements are a security admitted to—

i

an official list (in accordance with the provisions of Directive 2001/34/EC of the European Parliament and of the Council on the admission of securities to official stock exchange listing and on information to be published on those securities); or

ii

trading on a regulated market (within the meaning of Article 4.1(14) of Directive 2004/39/EC of the European Parliament and of the Council on markets in financial instruments) or on a recognised investment exchange (within the meaning of section 285 of the Act).

3

For the purposes of paragraph (2)—

a

the bond-issuer may acquire the bond assets before or after the arrangements take effect;

b

the bond assets may be property of any kind, including rights in relation to property owned by someone other than the bond-issuer;

c

the identification of the bond assets mentioned in paragraph (2)(b) and the undertakings mentioned in paragraph (2)(d) may (but need not) be described as, or accompanied by a document described as, a declaration of trust;

d

the reference to a period in paragraph (2)(c) includes any period specified to end upon the redemption of the bond by the bond-issuer;

e

the bond-holder may (but need not) be entitled under the arrangements to terminate them, or participate in terminating them, before the end of the bond term;

f

the amount of the additional payments may be—

i

fixed at the beginning of the bond term;

ii

determined wholly or partly by reference to the value of or income generated by the bond assets; or

iii

determined in some other way;

g

if the amount of the additional payments is not fixed at the beginning of the bond term, the reference in paragraph (2)(e) to the amount of the additional payments is a reference to the maximum amount of the additional payments;

h

the amount of the redemption payment may (but need not) be subject to reduction in the event of a fall in the value of the bond assets or in the rate of income generated by them; and

i

entitlement to the redemption payment may (but need not) be capable of being satisfied (whether or not at the option of the bond-issuer or the bond-holder) by the issue or transfer of shares or other securities.

4

An instrument excluded from paragraph (1) of article 78 by paragraph (2)(b) of that article is not thereby taken to fall within paragraph (1) of this article.