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CIS 15.5 Issues and cancellations through the manager and in specie cancellations

Application

CIS 15.5.1R

This section applies to managers and trustees.

Purpose

CIS 15.5.2G
  1. (1)

    CIS 15.5.3 R ensures that investors are able, in certain circumstances, to require direct issues or cancellations of units by the trustee as an alternative to buying units from, or redeeming them with, the manager.

  2. (2)

    CIS 15.5.4 R protects investors in an AUT by enabling the manager, subject to the conditions in that rule, to require a Unitholder who wishes to redeem his units to take, instead of the usual proceeds of redemption, a transfer of assets of the AUT, or if the Unitholder requires, to take the net proceeds of the sale of the assets.

Issues and cancellations through the manager

CIS 15.5.3R
  1. (1)

    At the request of any person, the manager is obliged to instruct the trustee to issue units to that person where the manager would otherwise be obliged to sell them under CIS 15.4.3 R (Manager's obligation to sell).

  2. (2)

    At the request of any Unitholder, the manager is obliged to instruct the trustee to cancel units held by that Unitholder where the manager would otherwise be obliged to redeem them under CIS 15.4.7 R (Manager's obligation to redeem).

  3. (3)

    The price of a unit issued or cancelled under this rule must be the issue or cancellation price of a unit of the relevant class notified to the trustee at the next valuation point after the request referred to in (1) or (2), except for an issue to which CIS 15.2.5 R (Initial price) applies, when it must be the initial price.

  4. (4)
    1. (a)

      In the case of an issue, the manager may require to be paid in addition to the price under (3):

      1. (i)

        For the account of the manager, any preliminary charge permitted under CIS 15.4.5 R;

      2. (ii)

        For the account of the AUT, any SDRT provision required under CIS 15.6.3 R (SDRT provision).

    2. (b)

      In the case of a cancellation, the manager may require to be deducted from the proceeds:

      1. (i)

        For the account of the manager, any redemption charge permitted under CIS 15.4.10 R (Redemption charge);

      2. (ii)

        for the account of the AUT any deduction required under CIS 15.6.3 R.

  5. (5)

    The manager must pay the trustee in accordance with CIS 15.3.5 R (Issue by trustee), the issue price of any units issued under this ruleCIS 15.5.3 R and any payment required under (4)(a)(ii), whether or not the manager has received payment from the investor. However, the manager may defer instructing the trustee to issue the units until full payment for them has been received.

  6. (6)

    Nothing in this rule requires the trustee or the manager to part with money for a cancellation of units in the circumstances described in CIS 15.4.8 R (6) (Payment on redemption).

  7. (7)

    Paragraph (1) does not apply if the issue would breach a restriction on issue applicable to a class of limited issue units.

In specie cancellation

CIS 15.5.4R
  1. (1)

    This applies where a Unitholder:

    1. (a)

      requests redemption, or requests cancellation under CIS 15.5.3 R (Issues and cancellations through the manager), of units representing in value not less than 5% (or any lower percentage stated in the trust deed) of the value of the scheme property of the AUT; and

    2. (b)

      the transfer to him of scheme property, instead of a payment under CIS 15.4.8 R (Payment on redemption) or CIS 15.5.3 R, is either:

      1. (i)

        chosen by the manager by a notice of election on the Unitholder; or

      2. (ii)

        requested by the Unitholder (in a case where he is permitted to do so under the trust deed) at the same time as his request at (a).

  2. (2)

    A notice of election under paragraph (1)(b)(i) is invalid if served later than the close of business on the second business day following the day of receipt of the request in paragraph (1)(a);

  3. (3)

    Where a notice of election is served under paragraph 1b(i), the Unitholder may by a notice served on the manager require the manager, instead of arranging for a transfer of property, to arrange:

    1. (a)

      for a sale of the property; and

    2. (b)

      for payment to the Unitholder of the net proceeds of sale.

  4. (4)

    A manager must comply with the requirement of a valid notice served on it under (3). A notice under (3) is not valid if served later than the close of business on the fourth business day following the day of receipt of the notice under (1)(b)(i).

  5. (5)

    Where there is to be transfer of property, whether by election or by request:

    1. (a)

      the manager must forthwith notify the trustee that redemption (or cancellation under CIS 15.5.3 R) of the units is to be effected by transfer of property; and

    2. (b)

      the trustee must, on receipt of such evidence of title as he may require:

      1. (i)

        cancel the units; and

      2. (ii)

        transfer to the Unitholder his proportionate share of the due property.

  6. (6)

    In (5) in this rule, "proportionate share" means:

    1. (a)

      such part of each description of asset in the scheme property as is proportionate to or as nearly as practicable proportionate to the Unitholder's share; or

    2. (b)

      such selection from the scheme property as the trustee, after consultation with the manager, decides is reasonable;

    having regard to the need to be fair both to the Unitholder and to continuing Unitholders.

  7. (7)

    Where there is to be a sale of property under (3):

    1. (a)

      the manager must immediately notify the trustee of that fact, and must arrange for a sale of the assets that would otherwise have been transferred under (5) (other than any assets which are in cash in the relevant currency for the purposes of the redemption); and

    2. (b)

      the trustee must, on receipt of such evidence of title as it may require:

      1. (i)

        cancel the units; and

      2. (ii)

        pay to the Unitholder the net proceeds of the sale and any relevant amount in cash.

  8. (8)

    The scheme property to be transferred under (6), or the proceeds of sale to be paid under (7), are subject to the retention of scheme property (including cash) of a value or amount equivalent to any deductions permitted by CIS 15.5.3 R (Issues and cancellations through the manager) and which shall be accounted for in the manner provided by that rule. However, those deductions must not be taken into account in the value of units used for the purpose of (1)(a).

  9. (9)

    This rule does not enable units in a relevant pension scheme other than in accordance with that scheme to be redeemed.