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Summary of

Securities Act (Livestock Improvement Corporation Limited) Exemption Notice 2004

2004/50

Gazetted on 18 March 2004
Expires on 31 March 2009

Effects of the Exemption
The exemption

• allows Livestock Improvement Corporation Limited (LIC) to list on the NZAX using a disclosure document under the Listing Rules rather than a NZAX prospectus; and
• allows subsequent transfers of the investment shares to be made without a registered prospectus and investment statement; and
• exempts holders of investment shares (other than LIC) from sending periodic and on request information to every investment share holder.

Background
LIC is to restructure its share structure by subdividing each existing share in LIC held by shareholders on LIC's share register at 5pm on 25 March 2004.

LIC told the Commission that the restructure is not to raise additional capital, but to create a mechanism so that shareholders hold shares that represent, to some extent at least, the "fair value" of their share in the capital of LIC.

Each existing share is to be subdivided into:

• 1 co-operative control share with a nominal value of $1.00; and
• 10 investment shares with no nominal value.

Co-operative control shares are to be issued to dairy farmers who purchase more than $500 worth of qualifying products and services in any one year. They are the only class of shares with voting rights.

Investment shares are to be issued to holders of co-operative control shares. Investment share holders have no voting rights but are entitled to receive the distributable profits of LIC. It will be compulsory for supplying shareholders to hold investment shares.

LIC intends to list only the investment shares on the NZAX.

Trading of the investment shares will be restricted to LIC shareholders and therefore can only be conducted between members. Any changes in holding of investment shares will be achieved through the market, at the market price. Trading after the share allocation will not involve LIC and will depend on the willingness of shareholders to buy and sell shares.

The exemption
LIC and every holder of investment shares is exempted, subject to conditions, from sections 37 and 37A of the Act and from the Regulations, except regulation 8, in respect of investment shares.

Every holder of investment shares (except LIC) is exempted, subject to a condition, from sections 54A and 54B of the Act.

Conditions
The exemptions from the prospectus and investment statement provisions in sections 37 and 37A and the regulations are subject to the conditions that

• before the investment shares are listed on the NZAX, NZX has approved a disclosure document for the investment shares which includes all matters set out in Appendix 3 of the NZAX listing rules; and
• LIC posts the disclosure document on its website; and
• LIC sends the disclosure document to an investor on request and free of charge.

The exemptions from sections 54A and 54B requiring certain information to be sent to investors are subject to the condition that the disclosure document states that sections 54A and 54B apply to LIC and that investors may contact LIC if they require the information referred to in those sections.

Reasons
LIC is listing on the NZAX but is not raising new capital. Ordinarily this would mean that Securities Act disclosure would not be required.

However, because the investment shares to be listed are being allocated without an "offer", the Securities Act will apply to the first subsequent transfer of these shares. This means both LIC and the first seller of the shares will be "issuers" under the law.

The exemption allows the listing and subsequent trading to proceed as would ordinarily be the case for a listing where no new capital is being raised. Without the exemption both LIC and the original holders of the shares would need to produce a registered prospectus and investment statement.

The conditions of exemption require that existing shareholders are given information about the investment shares and details of the contact person should they require periodic or on request information about the securities.