• About
• Publications
• Exemptions
• Notices
• What's new?
• International
• Speeches
• Information for investors
• Contact us
• Site map
• Home

Summary of

Securities Act (Commodity Strategies Pty Limited) Exemption Notice 2003

2003/339

Gazetted on 3 December 2003
Expires on 30 November 2008

Effects of the exemption
The exemption applies to Commodity Strategies Pty Limited's offer of units in an unregistered Australian unit trust, Portfolio Strategies Core Portfolio, to the public in New Zealand. The offer can be made in a prospectus which contains information specified for unit trusts rather than information specified for participatory securities. As well, the issuers will be able to allot bonus securities to unit holders without ensuring the prospectus and investment statement for the units in the Trust are current and not false or misleading. The issuer can allot bonus securities without ensuring the amount payable on application is at least 10% of the nominal amount of the security.

Background
Commodity Strategies Pty Limited (CSPL) as trustee and manager, proposes to offer Class B units (Units) in an unregistered Australian unit trust called Portfolio Strategies Core Portfolio (the Trust). The Trust is constituted and established in Australia. The Trust is a unit trust in which investors' application money is pooled and invested on their behalf. Investors are issued Units in the Trust and those Units will represent a proportionate holding of the Trust's total value.

The Trust as constituted does not fall within the ambit of the definition of Unit Trust under the Unit Trusts Act 1960. Under New Zealand law the Units and any bonus securities paid to Unit holders would be considered to be participatory securities. The exemption allows the Units to be offered using alternative conditions similar to those which apply to unit trusts rather than strictly complying with the law relating to offers of participatory securities.

The exemption
CSPL is exempted, subject to conditions, from section 37(A)(1)(b) and (c) and 37A(2) of the Act and from regulation 3(3) in respect of the bonus securities paid to Unit holders in the Trust.

Conditions
The exemption from section 37(A)(1)(b) and (c) and 37A(2) is subject to conditions that bonus securities allotted to a Unit holder

• are the same kind as the bonus securities being allotted ; and
• were issued on terms which require the Unit holder to accept the bonus securities as consideration for forgoing the right to receive any part of any distribution declared by the issuer and otherwise payable to that Unit holder.

The exemption from section 37(A)(1)(b) and (c) is subject to further conditions that

• the prospectus and investment statement describe the bonus securities and the terms and conditions of the bonus securities; and
• when the bonus securities are allotted the Unit holder is told that the current prospectus, investment statement, trust deed, deed of participation, annual report and financial statements are available on request and free of charge; and
• the terms of the offer require that when the price of the bonus securities is set, the issuer does not have information that would have an adverse effect on the realisable price of the bonus securities if it were publicly available; and
• if the issuer issues bonus securities they are issued to all Unit holders other than holders outside New Zealand excluded because of the risk of breaching laws of the overseas country; and
• the terms of bonus securities are disclosed to the Unit holder;
• and the bonus securities issued to the Unit holder have the same rights as bonus securities issued to all other Unit holders.

The exemption from regulation 3(3) is subject to the condition that the prospectus contains all the information and other matters specified in

• clauses 3 and 18 of Schedule 3; and
• schedule 3A (except clause 3) applied as if they refer to
  • a unit refers to a Unit; and
  • a unit trust refers to the Trust; and
  • a unit holder refers to a Unit holder; and
  • a unit trustee refers to a statutory supervisor of the Trust; and
  • a trust deed refers to a deed of participation.

The exemption is subject to the further condition that if the information to be contained in the prospectus is not set out in the same order as in Schedule 3A, the prospectus has an index.

Reasons
The securities are similar to units in a unit trust. The exemption from regulation 3(3) provides prospective investors with information that is more appropriate for an investment in a unit trust than if the prospectus contained the information required by the Third Schedule. The conditions of exemption allow CSPL to comply with the disclosure provisions for unit trusts rather than the provisions for participatory securities.

The exemption from regulation 3(3) is consistent with the Commission's policy for group investment funds, which are similar to unit trusts, whereby issuers of group investment funds are permitted to include information in the prospectus similar to that required for unit trusts under Schedule 3A as if it referred to group investment funds rather than unit trusts.

The exemption from section 37A(1)(b) and (c) would reduce unnecessary compliance costs for CSPL in that the prospectus will not need to be updated before the compulsory allotment of bonus securities. The conditions of exemption require that prospective investors are given information about the Units and about the terms and conditions of the compulsory allotment of bonus securities so they can make an informed decision before subscribing for the Units.

Although the compulsory nature of the bonus securities would enable the issuer to allot them without ensuring that the prospectus and investment statement are current and not false or misleading, the conditions of the exemption from section 37A(1) (b) require that investors are given information that is likely to have a material adverse effect on the realisable price of the bonus securities. At the time of allocation of bonus securities investors can obtain the latest documents about the Trust.

The policy and purpose of section 37A(2) is to ensure that participatory schemes have sufficient funds to commence business and to ensure that all investors have made a genuine practical commitment to the scheme by a minimum payment at that time. The circumstances behind the policy of section 37A(2) do not appear to apply to the allotment of bonus securities and the provision would be difficult for CSPL to comply with.