Copy of Enforceable Undertaking

View Enforceable Undertaking in PDF format.

This undertaking is offered to the Securities Commission for acceptance under section 69J of the Securities Act 1978 by:

Auckland Investment Properties Limited ("AIP")
229 - 243 Stafford Street
TIMARU

And by

Commercial Investment Properties Limited ("CIP")
C/- Hubbard Churcher & Co
Chartered Accountants
39 George Street
TIMARU

And by

Cheryl Tracy Macaulay ("Ms Macaulay")
223 White Road
RD 26
TEMUKA

Background

Parties

1.

AIP is a company registered under the Companies Act 1993. It was incorporated on 28 May 2004. AIP intended to raise finance, by way of an offer of equity securities and bank loan, in order to acquire and then manage a commercial investment property.

2.

CIP is a company registered under the Companies Act 1993. It was incorporated on 11 March 2003. CIP was the promoter of the offer by AIP. It was envisaged that once AIP had acquired a commercial property, AIP would, with approval of its directors, contract CIP's services as property manager. CIP has previously acted, and continues to act, as promoter of offers of securities in companies investing in commercial property.

3.

Ms Macaulay is the sole director and shareholder of AIP and CIP. It was intended that, upon the issue and allotment of the securities, Ms Macaulay would resign as director of AIP and new directors would be appointed by its shareholders.

Circumstances of offer

4.

AIP registered a prospectus dated 26 July 2004 ("Prospectus"). It also prepared and distributed an investment statement dated 12 August 2004 ("Investment Statement") and advertising including a newspaper advertisement and an advertising brochure ("Advertising"). The investment statement recorded that the offer was due to close on 16 September 2004.

5.

The offer in the Prospectus was for 5,400,000 ordinary $1 shares. The Prospectus stated that AIP would acquire a commercial investment property meeting particular criteria. It was envisaged that the particular property to be purchased would require approval by the newly appointed directors. Prospective financial and other information contained in the Prospectus was of a general nature.

6.

The offer in the Investment Statement was for 5,200,000 $1 shares, comprising 520,000 ordinary shares and 4,680,000 redeemable preference shares stapled together in parcels of 99 redeemable preference shares to 1 ordinary share. It was envisaged that the redeemable preference shares would carry a right to a dividend, while the ordinary shares would carry voting rights. The Investment Statement stated that AIP would acquire a particular investment property, namely 8 Tolich Place, Auckland. Prospective financial and other information contained in the Investment Statement related to 8 Tolich Place. The Advertisements contained information about the investment in 8 Tolich Place.

Issues identified

7.

The Commission had a number of concerns with the offers made by AIP in the Prospectus, Investment Statement and Advertising. The two matters of most concern to the Commission related to the variation between the Prospectus and the Investment Statement, and the statement of the rate of return.

8.

For these reasons, amongst others, the Commission formed the view that the offers did not comply with section 33(1) of the Securities Act 1978 ("Act") in that they were not made in or accompanied by an investment statement that complied with the Act and the Securities Regulations 1983 ("Regulations"), nor were they made in an authorised advertisement, nor in or accompanied by a registered prospectus that complied with the Act and Regulations.

9.

In particular given the varying content of the Prospectus and Investment Statement described at paragraphs 5 and 6 above, the Commission formed the views that:

(a)

the offers in the Prospectus and the Investment Statement were inconsistent and for different securities;

(b)

there was no registered prospectus for the securities offered in the Investment Statement so allotment of the securities offered in the Investment Statement was prohibited by section 37 of the Act; and

(c)

the Prospectus omitted material information about the investment in 8 Tolich Place.

10.

The Commission also formed the view that the Investment Statement and Advertising were likely to deceive or mislead investors about the rate of return. The rate was stated as 10.40%. However this was calculated as the return on the cost of the redeemable preference shares, rather than the return on the cost of the total investment.

Action taken by the Commission and the parties

11.

As a result of these and other concerns, on 13 September 2004 the Commission made orders:

(a)

suspending the registration of the Prospectus under section 44(1)(a) of the Act; and

(b)

suspending the Investment Statement under section 38F(1)(d) of the Act; and

(c)

prohibiting the distribution of the newspaper advertisement, the advertising brochure, and any advertisements which relate to the offer of securities to which those advertisements relate under section 38B(1) of the Act.

12.

Upon receiving notice of the Commission's concerns AIP took immediate steps to obtain advice from lawyers experienced in securities law. On receipt of that advice AIP:

(a)

acknowledged the concerns raised by the Commission;

(b)

terminated the Offer and refunded all money to investors; and

(c)

notified its intention to fully co-operate with the Commission.

13.

Again as a result of the concerns including those noted at paragraphs 7 to 10 above, on 24 September 2004 the Commission further made orders:

(a)

cancelling the registration of the Prospectus under section 44(1)(b) of the Act; and

(b)

prohibiting the distribution of Investment Statement under section 38F(1)(e) of the Act.

14.

As at the date of this undertaking all subscription money has been returned to subscribers with interest and the offers in the Investment Statement and Prospectus have been withdrawn.

15.

AIP, CIP and Ms Macaulay wish to remedy the situation and ensure that no similar events occur. AIP, CIP and Ms Macaulay have offered the undertakings set out below. The Commission has agreed to accept these undertakings under section 69J of the Act.

Undertakings

Undertakings relating to offer by AIP

16.

AIP, CIP and Ms Macaulay undertake not to allot any securities in relation to the offers made in the Prospectus or the Investment Statement and will not distribute, or make any further use of the Prospectus, Investment Statement and Advertising referred to above and will prohibit any of AIP's, CIP's or Ms Macaulay's employees or agents from making use of these documents.

17.

AIP, CIP and Ms Macaulay undertake (to the extent they have not already done so, if any) to forthwith return all subscription monies received in relation to the Offer to subscribers together with interest in terms of section 37 and 37A of the Act (as applicable), whether received prior to or after the giving of this undertaking.

General undertakings

18.

These "general undertakings" are given by AIP and CIP, and by Ms Macaulay both in her capacity as director of AIP and CIP, and in her individual capacity in relation to any offer of securities to the public in which she is currently, or may in the future, be involved as an issuer or a director of an issuer or a promoter.

19.

AIP, CIP and Ms Macaulay, will not offer securities to the public for subscription, other than in an investment statement, registered prospectus or authorised advertisement that complies with the Act and the Regulations, or in accordance with any applicable exemption contained in the Act or granted by the Commission.

20.

AIP, CIP and Ms Macaulay will ensure that employees and external marketing advisers and agents who prepare advertising for AIP, CIP or Ms Macaulay are aware of the requirements relating to offers of securities under securities laws.

21.

AIP, CIP and Ms Macaulay will not distribute, or permit any person to distribute, any document or other material containing or referring to an offer of securities to the public unless it has been prepared or reviewed by professional advisers experienced in securities law.

22.

Without limiting paragraph 21 above, AIP, CIP and Ms Macaulay will take all reasonable steps to ensure that no agent distributes or permits the distribution of any document or other material containing or referring to an offer of securities to the public unless it has been prepared or reviewed by professional advisers experienced in securities law.

23.

23. AIP, CIP, and Ms Macaulay, will:

(a)

in conjunction with its legal advisors prepare a Compliance Plan for ensuring compliance with all securities laws;

(b)

take all reasonable steps to ensure that all employees are familiar with, and adhere to, the Compliance Plan;

(c)

arrange for the Compliance Plan to be reviewed, and if necessary updated, annually;

(d)

arrange for its auditors to report on its compliance with the Compliance Plan annually; and

(e)

ensure that an appropriately qualified and experienced senior member of staff is responsible for compliance with these undertakings and with the law.

Acknowledgements

24.

AIP, CIP and Ms Macaulay acknowledge that the Commission:

(a)

may issue a media release referring to the undertaking and to all of the concerns of the Commission which led to the undertaking being executed;

(b)

may from time to time publicly refer to the undertaking; and

(c)

will make this undertaking available for public inspection.

25.

AIP, CIP and Ms Macaulay acknowledge that this undertaking does not derogate from the rights and remedies available to the Commission or to any other person or entity arising from the conduct described in the undertaking.

26.

AIP, CIP and Ms Macaulay acknowledge that the Commission's acceptance of an enforceable undertaking under section 69J of the Act does not affect the Commission's power to investigate future conduct of any person, to take any action or exercise any power under the Act, or any other legislation, or to refer any matter for criminal prosecution or seek any civil penalties.

Signed for and on behalf of Auckland Investment Properties Limited
by its duly authorised officer:
Cheryl Tracy Macaulay
Director

Signed for and on behalf of Commercial Investment Properties Limited
by its duly authorised officer:
Cheryl Tracy Macaulay
Director

Signed by Cheryl Tracy Macaulay

Accepted by the Securities Commission
pursuant to section 69J of the Securities Act 1978
by its authorised delegate:
Kathryn Ann Rogers
Associate Counsel

[Dated this 29^th day of November 2004.]