4776

NEW ZEALAND GAZETTE

No. 147

Determination G5C

(3) Determination G5C prescribes the method to be used when calculating for accrual purposes the income derived or expenditure incurred in respect of MCCNs. It also details which amounts are to be included for this calculation, and which are attributable to an excepted financial arrangement. That Determination applies where, among other requirements, Coupon Interest Payments are of equal amount, or are set in relation to a market interest rate indicator. This Determination applies to Specified Mandatory Conversion Convertible Notes ("Specified MCCNs") which do not meet that requirement of Determination G5C.

Reason For Special Determination

(4) The Specified MCCNs were issued by Amalgamating One Ltd to Holdings Ltd and were within the scope of Determination G5C. The issuer, Amalgamating One Ltd, proposes to enter into an amalgamation. As a consequence of the amalgamation, the MCCNs issued by the issuer are to convert into shares in the amalgamated company, rather than into shares in the issuer. The amalgamated company wishes to avoid having more than one class of shares traded on the stock exchange. The issuer therefore proposes that shares issued on the conversion of its MCCNs will have a full entitlement to dividends from the date of conversion, regardless of the fact that dividends may relate to a period prior to conversion. In return for this entitlement, in the event of an early conversion, the Notes will lose their Coupon Interest entitlement for a period not exceeding two months prior to the date of conversion. The alteration to coupon entitlement takes the Specified MCCNs outside the scope of Determination G5C.

Proposed Transactions In Respect Of Which This Determination Applies

(5) The proposed transactions are part of an amalgamation of Amalgamating One Ltd, ("One Ltd"), Amalgamating Two Ltd, ("Two Ltd"), and Amalgamating Three Ltd, ("Three Ltd"). The amalgamation will be a long form amalgamation under Part VA of the Companies Act 1955. The proposed transactions are as follows:

(i) Pursuant to the amalgamation arrangements, those shareholders in One Ltd who elect to do so ("the Electing Shareholders"), will receive from One Ltd Holdings ("Holdings"), on the day the amalgamation becomes effective, one MCCN for each One Ltd share they hold.

(ii) Holdings’ inducement to transfer its MCCNs to the Electing Shareholders will be that it will have agreed with Two Ltd, by an agreement entitled “Agreement For Transfer Of Mandatory Conversion Capital Notes”, that it will receive x number of shares in Two Ltd for each MCCN transferred. These shares will be issued by Two Ltd the day before the amalgamation is intended to become effective. From the time of issue of the shares Holdings will hold the MCCNs on the basis that it will transfer them to the Electing Shareholders immediately the amalgamation becomes effective.

(iii) The consideration provided by the Electing Shareholders is that they will agree to an amalgamation proposal under which their shares in One Ltd will be cancelled and they will not be issued shares in the amalgamated company.

(iv) Three Ltd will be the surviving or “amalgamated” company. Shareholders in Two Ltd (other than One Ltd whose shares must be cancelled) will receive 1/x number of shares in the amalgamated company for each Two Ltd share held. This means that Holdings will in effect receive one amalgamated company share for each MCCN transferred.

(v) The amalgamated company will succeed to the obligations of the issuer of the MCCNs. The MCCNs will be convertible into shares in the amalgamated company.

(vi) Under the proposed transactions the value of the consideration received by Holdings on its disposal of the MCCNs will be the same in principle as if Holdings had converted the MCCNs in terms of the original issue; and the value of the consideration provided on receipt of the MCCNs, by the Electing Shareholders, will be the same as if they had been issued the MCCNs for a consideration equal at that time to the value of the shares into which they convert.

How This Determination Differs From Determination G5C

(6) Special Determination [S3] differs from Determination G5C by:

(a) having a broader scope so that it applies to Specified MCCNs even though:

(i) Coupon Interest is not always payable in respect of a period not exceeding two months prior to the date of conversion; and

(ii) The Coupon Interest Payment relating to the period during which the issuer amalgamates, and the holder changes as a consequence of the amalgamation arrangements, may be split between the person who was the holder prior to the amalgamation and the person who is the holder after the amalgamation. For the purposes of determining the identity of the holder prior to the amalgamation, it may be necessary to set a record date some number of days before the amalgamation takes place;

(b) having a narrower scope so that it only applies to Specified MCCNs, as defined in clause 5—Interpretation.

2. Reference

This determination is made pursuant to section 90 (1) (c) and (g) of the Tax Administration Act 1994.

3. Scope of Determination

This determination applies to income derived or expenditure incurred after the date this determination is made in respect of every Specified MCCN which:

(1) Is issued subject to The Trust Deed and

(2) Meets the following criteria:

(a) conversion into shares of a company is at a predetermined ratio; and

(b) Coupon Interest Payments are payable at regular intervals of not more than 12 months; and

(c) Either:

(i) Coupon Interest Payments are of equal amount, or are set in relation to a market interest rate indicator: or

(ii) the condition in (i) would be met but for either:

(A) the first or last Coupon Interest Payment being for a period which is shorter than the other periods; or

(B) the terms of the Note providing that if it is converted prior to the maturity date specified, Coupon Interest Payments are not payable in respect of a period prior to conversion not exceeding two months, and that the shares into which the Note converts are entitled to rank uniformly in all respects with other shares of the same class for all dividends or other distributions after the date of conversion, notwithstanding the fact that such dividends or other distributions may relate to a period for which interest has already been paid; and

(d) the constant annual rate R calculated using