CIS 2.6 Units and classes of units in AUTs
- (1)
The interests of the Unitholders in an AUT consist of units (including fractions of a unit), each representing one undivided share in the AUT's scheme property.
- (2)
This system of single undivided shares is modified where both income units and accumulation units are in existence, because:
- (a)
when income is accumulated and capitalised under CIS 9.2.4 R (Annual allocation to accumulation shares or accumulation units), that accumulation is achieved by increasing the number of undivided shares (including fractions) which together constitute the accumulation units then in existence; and
- (b)
any accumulation units issued subsequently must represent when issued the same number (including fractions) of undivided shares in the capital property of the AUT as each other accumulation unit then in existence.
- (a)
- (3)
Every unit must be either:
- (a)
an income unit; or
- (b)
an accumulation unit; or
- (c)
a limited issue unit that is also an income unit; or
- (d)
a limited issue unit that is also an accumulation unit.1
- (a)
- (4)
The AUT will consist of income units only unless the trust deed provides, or the manager decides, under a power contained in the trust deed, that the AUT will consist of another class, or other classes, of unit.1
What are limited issue units?
- (1)
Limited issue units are a class of unit that is permitted in an AUT. Limited issue units may only be issued if permitted by the trust deed. Sales by the manager will also need to be restricted by the trust deed, although there need be no restriction on the manager's sale of units held in its "box" (see CIS 4.1.4 G (3)) as a result of a previous redemption or an issue to the manager when units were available for issue. The issue and sale of limited issue units may be confined to the occasion or occasions or up to the amount or value provided for by the prospectus.
- (2)
AUTs that are umbrella schemes are reminded of the requirements under section 235(4) of the Act when setting up sub-funds with limited issue units. Accordingly, when an umbrella scheme is considering setting up one or more sub-funds to issue limited issue units then it will also need to have in addition two or more sub-funds issuing units which are not limited issue units to enable holders to exchange rights between the latter sub-funds. It is, therefore, not possible for an umbrella scheme to consist of only two sub-funds in circumstances where, one or more of those sub-funds issues limited issue units. These requirements should be provided for in the trust deed of the AUT.1
Limited issue units: requirements
- (1)
The manager must ensure that limited issue units are not in issue at the same time as any units in the same AUT or (if the AUT is an umbrella scheme) sub-fund that are not limited issue units.
- (2)
After any initial offer of a class of limited issue units or, if there is no initial offer, the time at which units of that class are first issued, a subsequent issue of units of that class must not be made unless:
- (a)
the manager is satisfied on reasonable grounds that the proceeds of that subsequent issue can be invested without compromising the AUT's or sub-fund's investment objective or adversely affecting its future investment performance; and
- (b)
that subsequent issue will not materially prejudice the existing holders of that class of units.
- (a)
- (3)
The restrictions relating to any class of limited issue units in a sub-fund must not prevent the holder of units in that or holders of units in any other sub-fund from exchanging those units for units in at least one other sub-fund of the umbrella scheme.1