ABC scheme (ABC) makes regular investments into an unregistered scheme called XYZ scheme (XYZ).
ABC currently has in-house assets that are valued at $200,000.
ABC is preparing to make another investment in XYZ and intends to rely on regulation 106A. To rely on that regulation, the requirement in this regulation must be satisfied.
After the investment is made, ABC will own 20% of XYZ’s units.
Employer Limited is a contributor to ABC on behalf of its employees. It is a related party of ABC.
XYZ currently holds shares in Employer Limited that have a value of $10 million. Under subclause (3), 20% of this asset is attributed to ABC as if ABC holds the shares (that is, $2 million worth of shares). This asset is treated as an in-house asset because it is an investment in ABC’s related party.
The sum of the in-house assets directly held by ABC and the assets it is treated as holding is $2,200,000 ($200,000 plus $2 million).
The net asset value of ABC’s scheme property is $20 million.
Applying section 176(2) of the Act, the in-house assets ratio of ABC would be 11% (the ratio of $2.2 million to $20 million).
ABC does not satisfy the requirement in this regulation and cannot make a further investment in XYZ in reliance on regulation 106A. (Investments may resume once XYZ divests itself of enough shares in Employer Limited to reduce ABC’s in-house assets ratio below 5%.)