23 OCTOBER NEW ZEALAND GAZETTE 3605

(ii) Income Stream payments are payable at regular intervals of not more than 12 months; and

(iii) Income Stream payments are equal to or greater than the amount of all dividends received by the Issuer in respect of the Underlying Shares less all fees, taxes, charges, duties and expenses which are permitted to be deducted under the terms and conditions of the OPALS; and

(iv) Those Income Stream payments are based on amounts which cannot be predicted at the time the financial arrangement is entered into; and

(v) The OPALS are not part of another financial arrangement.

4. Principle

(1) OPALS have both debt and equity components. They can be regarded alternatively as:

(a) a loan to the Issuer with repayment in shares and interest payable at a variable rate (debt component); or

(b) a forward purchase of shares (in which case the holder of the OPALS is buying shares in businesses and has equity in them).

The accruals rules are not intended to deal with equity, and therefore classify a share (equity component) as an excepted financial arrangement (see section OB 1).

(2) As OPALS have this dual character, when calculating income/expenditure in relation to the OPALS it is first necessary to separate the debt and equity components of the OPALS.

(3) This Determination specifies that, apart from the Income Stream and amounts attributed to those payments by this Determination, all amounts relate to the Underlying Shares (equity component), and will not be included when calculating gross income or expenditure under the qualified accruals rules.

(4) Income from OPALS in any income year will be the sum of the Income Stream actually received and the Accrued Income. The Accrued Income is to be ascertained from the relevant Reuters or Bloomberg financial information service page for the balance date of the holder.

(5) For the purposes of this Determination it is assumed that any change in the market value of the shares between the issue date of OPALS and the conversion into shares is due to the equity component. Therefore the difference in share price can be ignored when calculating income and expenditure under the qualified accruals rules.

5. Interpretation

In this Determination, unless the context otherwise requires:

(1) Expressions used, except the expression “Income Year”, have the same meaning as in section OB 1 of the Income Tax Act 1994.

(a) “Accrued Income”, in relation to any date, means the product of (a) the number of OPALS held by the holder and (b) the amount showing on the Reuters Multicontributor page “OPALS” or the Bloomberg Multicontributor page “OPAL” as “coupon” at the close of trading in relation to that date.

(b) the “Act” means the Income Tax Act 1994.

(c) “Income Stream” means any amount payable on the OPALS by the issuer to the holder and includes both cash received and Accrued Income, but does not include payments relating to the redemption or conversion of OPALS.

(d) “Income Year”

(i) when a taxpayer furnishes a return of income under section 38 of the Tax Administration Act 1994 for an accounting year ending with a balance date other than the 31st day of March, “Income Year” means the period of twelve months ending on that balance date;

(ii) for any other person, “Income Year” means the year ending on the 31st day of March in which the income has been derived or expenditure has been incurred by that person.

(e) “OPALS” means the hybrid financial arrangements issued by Morgan Stanley Capital (Cayman Islands) Limited called Optimised Portfolios as Listed Securities.

(f) “Underlying Shares” in relation to an OPALS means the shares or stock into which the OPALS is convertible, or in which it may be redeemed or paid.

(2) A determination to which this Determination refers may be changed or rescinded by a new determination made by the Commissioner. In such a case, a reference to the old determination is taken to be extended to the new determination.

(3) For convenience, words and phrases defined in this Determination are indicated by initial capital letters, but the absence of a capital letter shall not alone imply that the word or phrase is used with a meaning different from that given by its definition.

6. Method

(1) Amounts to be included when calculating income or expenditure with regard to OPALS to which this Determination applies:

(a) in respect of income, gain or loss, or expenditure, and also of any other consideration receivable by the holder or payable by the issuer, the amounts taken into account to calculate income or expenditure consist of:

    (i) Income Stream Payments;

    (ii) Accrued Income:

        (b) in respect of the acquisition price, the amounts to be included when calculating income or expenditure are those attributed to Income Stream Payments as set out in subclause 6 (3).

(2) The income derived or expenditure incurred in any Income Year, in respect of OPALS to which this Determination applies shall be calculated using the formula:

a – b + c where:

a is the amount of cash received in the Income Year;

b is the amount of Accrued Income included as item c in this calculation for the preceding Income Year, if the OPALS in relation to which this calculation is carried out were held at the end of that year, or the amount of Accrued Income as at the date of acquisition of the OPALS, if the OPALS were acquired in that Income Year; and

c is the amount of Accrued Income as at the last day of the Income Year.

(3) For the purposes of the base price adjustment, the amount of the acquisition price of each OPALS shall be determined in accordance with the acquisition price definition as provided in section OB 1 of the Act, with no part of the core acquisition price being attributable to the excepted financial arrangement component of that OPALS.

(4) If the OPALS on which an Income Stream is payable are sold part way through an Income Stream period, then it is necessary to apportion the income amount between the