21Investment limitations

21 Investment limitations

(1) The trustee of a *private ancillary fund must not *borrow money or maintain an existing borrowing of money.

Penalty: 30 penalty units.

(2) However, subsection (1) does not prohibit a trustee from *borrowing money if: (a) the purpose of the borrowing is to enable the trustee to make a distribution, to a *deductible gift recipient, to comply with this instrument; and apart from the borrowing, the trustee would be unable to make the distribution; and (b) the period of the borrowing does not exceed 90 days; and (c) the borrowing, when made, would not result in total borrowings by the fund exceeding 10 per cent of the *market value of the fund’s assets. (3) Subsection (1) also does not apply to the acquisition of a financial instrument excluded by the Commissioner, by written notice, from that subsection in relation to a fund. (4) The trustee of a *private ancillary fund must ensure the fund’s investments are made and maintained on an *arm’s length basis, unless another provision of this instrument allows otherwise.

Penalty: 30 penalty units.

(5) The trustee of a *private ancillary fund must not give a security over, or in relation to, an asset of the fund.

Penalty: 30 penalty units.

(6) However, subsection (5) does not apply to: (a) a financial instrument excluded by the Commissioner from that subsection in relation to a fund; or (b) an agreement to guarantee the repayment of any money lent by an arm’s length creditor (including any related unpaid interest or fees) for the sole benefit of one or more *deductible gift recipients to which the fund may make a distribution. (7) The trustee of a *private ancillary fund: (a) must ensure the fund does not acquire an asset (except by way of gift) from; and (b) must not make a loan or provide any other kind of financial assistance to; a founder of the fund, a *relative of the founder, a donor to the fund, a *relative of the donor, the trustee, a director, officer, agent, *member or employee of the trustee, or an *associate of any of these entities except: (c) by way of an arms’ length commercial transaction; or (d) on terms each of which is more favourable to the fund than would otherwise be expected under an arms’ length transaction.

Penalty: 30 penalty units.

(8) The trustee of a *private ancillary fund must keep the assets of the fund separate from all other assets.

Penalty: 30 penalty units.

(9) However, subsection (8) does not prevent a licensed trustee company (within the meaning of the Corporations Act 2001) or the public trustee of a State or Territory from operating common funds for investment purposes. (10) The trustee of a *private ancillary fund must ensure that the fund does not acquire an asset (except by way of gift) if the asset is a *collectable (or would be a collectable but for the asset not being used or kept mainly for an entity’s personal use or enjoyment). If the fund acquires such an asset by way of gift, it must sell or distribute the asset within 12 months after acquiring it.