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Copy of Enforceable Undertaking


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

NZFIL 3 Limited (the "company")
199/2 Papamoa Beach Road
Papamoa, Tauranga

And

NZ Forestry Investments Limited (the "promoter")
231 Dickson Road
Papamoa

And the sole director of both companies:

Mr Ross Anthony Collins (the "director")
231 Dickson Road
Papamoa

Background

  1. The company was incorporated on 11 December 2002. It has one shareholder, the director. Prior to incorporation of the company the director and the promoter had offered shares in the company to the public for subscription, without a registered prospectus or investment statement, as required by the Securities Act 1978.

  2. The offer of shares was intended to raise capital for a forestry investment scheme. The shares offered to the public were non-voting shares conferring a right to participation in the assets of the company on liquidation (the "non-voting shares"). It was intended that shareholders would receive a return by way of a distribution of the assets of the company following the harvest of trees in the forestry scheme. The director would retain his non-voting share, which does not confer any right to participate in the proceeds of the harvest.

  3. On 1 November 2002 the Commission, acting under section 38B of the Securities Act 1978, prohibited all advertising for this offer, and issued a public warning against investing in this and other schemes that do not have the required offer documents.

  4. On 14 March 2003 a prospectus for an offer of non-voting shares in the company was delivered to the Registrar of Companies for registration under section 42 of the Securities Act 1978. The prospectus was duly registered.

  5. Following this the company began offering non-voting shares to the public using an undated investment statement. The Commission received a number of queries in April and May 2003 about the new offer and the investment statement and other advertisements for the offer.

  6. The Commission had concerns that the undated investment statement for the offer appeared seriously deficient in its compliance with the law, and appeared likely to mislead, deceive, or confuse prospective investors concerning the investment. The Commission also had concerns that the advertising for the offer distributed by some agents did not comply with the law and was likely to mislead, deceive, or confuse investors.

  7. The Commission met on 28 May to consider the company's advertising, investment statement, and registered prospectus. The Commission decided on that date to prohibit distribution of all advertising for the offer under section 38B of the Securities Act 1978, and gave notice to the company that it would meet to consider whether to prohibit the investment statement for the offer under section 38F of the Securities Act 1978 and to cancel registration of the prospectus under section 44 of the Securities Act 1978.

  8. The Commission wrote to the company setting out its concerns with the offer documents for the share offer and gave notice of the meeting, and invited the company to appear and be represented at the meeting.

  9. The company, the promoter, and the director acknowledge the concerns the Commission holds regarding the investment statement and advertising for the share offer referred to above and have (as applicable) offered the undertakings set out below. The Commission has agreed to accept these undertakings under section 69J of the Securities Act 1978 as an alternative to the actions referred to in paragraph 7.

Undertakings

Investment Statement

  1. The company will withdraw from distribution, and make no further use, of the undated investment statement used for the offer of the non-voting shares prior to 28 May 2003.

  2. The company, the promoter, and the director will not offer further securities to the public for subscription, or make any further offer of non-voting shares, other than in an investment statement, registered prospectus, or authorised advertisement that complies with the Securities Act 1978 and the Securities Regulations 1983.

  3. The director will seek appropriate professional advice in preparing or finalising the form of any new investment statement.

  4. The company will provide a copy of a new investment statement to all persons who have subscribed for non-voting shares on the basis of the undated investment statement and will offer each of these people the opportunity to re-invest on the basis of the new investment statement.

  5. The company will hold all subscription monies received under the undated investment statement in trust and will refund, together with any interest earned, the subscription of any person who does not, within 15 working days of a new investment statement being provided to that person, re-apply for non-voting shares on the application form attached to the new investment statement.

Prospectus

  1. The company will review the prospectus with the assistance of appropriate professional advisers and, if necessary, will deliver an appropriate Memorandum of Amendments for registration.

Advertising

  1. The company and the promoter will not distribute or permit the distribution by any person of any advertisement for non-voting shares unless the advertisement has been prepared or reviewed by appropriate professional advisers.

  2. The company, the promoter, and the director will take all reasonable steps to ensure that no agent for the offer or sale of non-voting shares distributes or permits the distribution of any advertisement other than one prepared or reviewed by the company and its professional advisers under clause 16.

  3. In observance of section 35 of the Securities Act 1978, the company, the director, and the promoter will not conduct or permit door-to-door sales of securities of the company.

Corporate governance and management systems

  1. The company will at all times after 30 June 2003 have at least one appropriately experienced, independent director.

  2. The company and its legal adviser will develop a training programme for all agents involved in the offer or sale of non-voting shares regarding the requirements of the Securities Act 1978 and the Securities Regulations 1983 relating to the offer and advertising of securities.

  3. The company will develop and enforce a code of conduct which requires its directors, staff, and agents to maintain high ethical standards in seeking investment funds from the public and in ongoing relations with investors.

  4. The company will initiate an audit programme of all branch offices and the working and promotional materials of agents to check whether documentation and conduct complies with the law and is not likely to mislead investors. The company will forward monthly reports of the audit programme to the Commission during the offer period for the non-voting shares.

  5. The director will take all reasonable steps to ensure compliance by the company and the promoter with the applicable undertakings in paragraphs 10 to 23, including in his capacity as sole voting shareholder of the company and the promoter.

Acknowledgements

  1. The Company and the Director acknowledge that the Commission:

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

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

    3. will make this undertaking available for public inspection

  2. The Company and the Director 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.

  3. The Company and the Director acknowledge that the Commission's acceptance of an enforceable undertaking under section 69J of the Securities Act 1978 does not affect the Commission's power to investigate future conduct of any person, to take any action or exercise any power under the Securities Act 1978 or any other legislation, or to refer any matter for criminal prosecution or seek any civil penalty.

Signed for and on behalf of NZFIL 3 Limited
by its duly authorised officer:

[Ross Anthony Collins]
Director


Signed for and on behalf of NZ Forestry
Investments Limited by its duly authorised officer:

[Ross Anthony Collins]
Director


Signed by Ross Anthony Collins

[Ross Anthony Collins]


Accepted by the Securities Commission
pursuant to section 69J of the Securities Act 1978
by its authorised delegate:

[Liam Mason]


[Dated this 18th day of June 2003.]

 

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