27 FEBRUARY
NEW ZEALAND GAZETTE
407

(f) Early settlement may also occur on the occurrence of an event of default.

Guarantee

3.13 Parties: BNZ
TradeCo

(a) BNZ will guarantee the repayment of the purchase price paid on subscription for the Notes for Investors plus the fixed additional percentage by FundCo on Settlement Date;

(b) TradeCo will pay to BNZ a fee of 0.5 percent of such guaranteed amounts calculated on a day to day basis from the Issue Date through to the Settlement Date;

(c) The fees payable by TradeCo to BNZ will be payable quarterly.

4. Principle

FundCo Agreements

4.1 FundCo is the issuer and each of the Investors is a holder under the Fundco Agreements.

4.2 The core acquisition price in relation to the Investors who subscribe for the Notes is the amount subscribed for on issue of the Notes. For Investors who do not subscribe for Notes on their issue but acquire Notes from other Investors, the core acquisition price in relation to such Investors shall be the price paid in acquiring the Notes.

4.3 With respect to FundCo and Investors who are not cash basis holders and are subject to the accruals regime, income or expenditure in respect of the FundCo Agreements will be returned for the purposes of section EH 1 of the Act using the method specified in this Determination which has regard to changes in value of the FundCo Agreement at the beginning of the year and the value of the FundCo Agreement at the end of the year, together with payments received by Investors, or made by FundCo, in relation to operation of the Capital Floor, in relation to income derived or expenditure incurred by Investors, as explained below. The value of the FundCo Agreements, at any time, will be the aggregate of the:

(a) the value of the Deposit, being the amount initially paid by FundCo to BNZ in making the deposit and any income which has been derived, up to the relevant point in time, such income being calculated according to the yield to maturity method less the aggregate payments received by FundCo from BNZ in relation to the Deposit on account of early settlement of FundCo Agreements; and

(b) the market value of the TradeCo Agreement, at the relevant time as calculated in accordance with this Determination.

Provided that in relation to the calculation of income or expenditure by an Investor in any income year, where the market value of the FundCo Agreement at the end of any income year has fallen below the Capital Floor for that income year, the market value at the end of that year will be equal to the Capital Floor (as calculated for that income year). Conversely, in relation to the calculation of income or expenditure by that Investor in the immediately subsequent income year, the market value of that FundCo Agreement at the beginning of that immediately subsequent income year will be deemed to be equal to that Capital Floor for the immediately preceding income year.

Deposit

4.4 BNZ is the issuer and FundCo is the holder in relation to the Deposit.

4.5 FundCo will return income or expenditure in respect of the Deposit for the purposes of section EH 1 of the Act using the yield to maturity method.

TradeCo Agreement

4.6 TradeCo is the issuer and FundCo is the holder in relation to the TradeCo Agreement.

4.7 The core acquisition price in relation to the TradeCo Agreement is the amount paid to TradeCo by FundCo on entry into the TradeCo Agreement.

4.8 FundCo and TradeCo will return income or expenditure in respect of the TradeCo Agreement for the purposes of section EH 1 of the Act using the method specified in this Determination which has regard to market valuation. That method will require, in any particular year, that FundCo and TradeCo return as income, or expenditure, the difference between the market value of the TradeCo Agreement at the beginning of the year and the market value of the TradeCo Agreement at the end of the year, together with payments received by FundCo, or paid by TradeCo, in relation to the TradeCo Agreement during that particular year. The market value of the TradeCo Agreement on any particular day will be:

(a) the aggregate of the market value of the futures contracts, derivative contracts and foreign exchange contracts to which TradeCo is a party at the relevant time (the method for determining the market value of those financial arrangements is set out in paragraphs 4.10 below); less

(b) any accrued liabilities or expenses of TradeCo on that particular day.

Futures contracts, derivative contracts and foreign exchange contracts

4.9 Income or expenditure in relation to the futures contracts, derivative contracts and foreign exchange contracts to which TradeCo is a party will be accounted for by TradeCo under the accruals regime using the method specified in this Determination, which has regard to market valuation.

4.10 For the purposes of that method, the market value of those contracts will be determined as follows:

(a) the market value of the underlying investments to which the contracts relate where those investments are quoted, listed, traded or dealt in or on any futures exchange shall be determined by reference to the last quoted price (or, in the absence of any trades, at the average of the last bid and offer prices) on the principal market for such investments or dealt in on any market which is the principal market therefore shall be made by reference to the mean between the latest bid and offer prices quoted thereon. Provided however that:

(i) where the prices ruling on a market other than the principal market provide in all the circumstances a fairer value in relation to any such investment, those other prices may be used;

(ii) an alternative method may be used if it better reflects the fair value of these investments;

(b) foreign exchange contracts will be valued by reference to the price at a particular valuation date at which a new foreign exchange contract of the same type, size and maturity could be undertaken;

(c) in relation to derivatives contracts, and if no price quotations are available as provided above, the value thereof shall be the value which most fairly reflects the market value of the relevant contract as determined by