Answer ... Closed-end funds have no investment or borrowing restrictions.

Collective investment schemes (CIS) have investment restrictions; for example, they may not:

• purchase a security, other than a debt security issued by the government of Mauritius or the government of any other country, if immediately after the purchase, more than 5% of its net assets, taken at market value at the time of purchase, would be invested in securities of that issuer;
• purchase and hold more than 10% of a class of securities of that issuer;
• purchase real estate;
• obtain a mortgage;
• purchase a security for the purpose of exercising control or management of the issuer;
• purchase an illiquid asset if, immediately after the purchase, more than 10% of the net assets of the CIS would consist of illiquid assets;
• subscribe to securities offered by a company in formation;
• engage in the business of underwriting or marketing securities of any other issuer;
• purchase or sell derivatives, except within the limits established by the Financial Services Commission (FSC) or in the case of a specialised CIS authorised by the FSC; or
• purchase or sell a physical commodity, including precious metals, except in the case of a specialised CIS authorised by the FSC.

The above restrictions may be lifted on application to the FSC, provided that:

• the CIS provides sufficient justification to depart from the regulations; and
• the prospectus of the CIS sets out, among other things:
• • the investment rules that the CIS will follow; and
  • risk warnings for the nature of the risks being undertaken (eg, derivative risks).

Answer ... There is a specialised CIS regime. A specialised CIS is one that invests in real estate, derivatives, commodities (including physical commodities/precious metals) or any other product authorised by the FSC.

The FSC will determine:

• which of the regulations will apply;
• whether specific rules should be imposed; and
• the conditions that will apply to the specialised CIS.