The MFSA has issued details about proposed amendments to the Companies Act in order to allow SICAVS to effect drawdowns.

The purpose of the proposed amendment is to introduce legal provisions to enable
certain types of non-retail collective investment schemes set up as SICAVs to effect
“drawdowns” on investors` committed funds in return for the issue of units at a price
which may be below the net asset value per unit prevailing at the time.

Schemes which adopt this practice usually invest in long–term investments requiring
a substantial capital outlay, such as immovable property and infrastructural projects.
This practice allows the scheme to obtain commitments from investors who will
however only be required to pay the amount committed by way of instalments upon
drawndown requests made by the scheme, against the issue of units in the scheme.
Drawdown requests will ordinarily be made once the scheme has identified an
investment opportunity and the benefit of this practice is to avoid having the scheme
maintain idle liquid funds or low-yield short-term investments until an investment
opportunity is identified. Once an investment opportunity arises for the scheme, it
may call on its investors to pay a part of their committed funds; enabling the scheme
to make an investment at relatively short notice and in the knowledge that the
necessary funds are always available.

The proposed amendment allows SICAVs licensed a professional investor funds the
units of which are held solely by Qualifying investors or Extraordinary investors as
defined in the Investment Services Rules for Professional Investor Funds, to make a
discount to an existing member who has committed by written agreement with the
SICAV to subscribe for any shares in the SICAV, which discount shall be in
consideration for such commitment. This is made subject to a number of conditions:
(a) the discount applies exclusively to any outstanding commitment arising under
the agreement;
(b) granting of the discount must be authorised by the memorandum or articles;
(c) the nature of the discount and related conditions must be disclosed in the
prospectus and any other offering document issued by the SICAV;
(d) the value of shares issued at a discount cannot be reduced to below the net
asset value at the time the member to whom the discount is being granted first
subscribed for shares in terms of the agreement.

Finally the new provision will provide that if shares are issued in contravention of the
regulation, the holder thereof shall be bound to pay the SICAV an amount equal to the
amount of the discount given in excess of that permitted by this regulation, with
interest.