NEW ZEALAND GAZETTE

No. 18

where

a = the market value of the contract as at the end of the year (as calculated in accordance with paragraph 4.10 of this determination);

b = payments made to TradeCo, if any, in relation to that contract during the particular year;

c = the aggregate of:

(A) (i) in the case of a contract which was on hand at the beginning of the year, the market value of the relevant contract at that time (as calculated in accordance with paragraph 4.10 of this determination);

or

(ii) in the case of any other contract, the core acquisition price, if any, in relation to that contract;

and

(B) payments made by TradeCo (other than the core acquisition price, if any, in relation to that contract during the particular year.

The market value of the futures contracts, derivative contracts and foreign exchange contracts will be determined in the manner set out at paragraph 4.10.

Guarantee

6.10 TradeCo will account for expenditure in relation to the guarantee using a straight-line method.

6.11 Guarantee fees paid by TradeCo in any year will be dependent on the aggregate Capital Guaranteed Amounts at any one particular time. The guarantee fee is fixed at 0.5 percent of the aggregate Capital Guaranteed Amounts on a daily basis, and is payable quarterly. TradeCo will be treated as having incurred accrual expenditure in relation to the Guarantee in an income year, on a straight-line basis, equal to the guarantee fees which have accrued on a daily basis during that year.

7. Examples

7.1 Assume:

(a) On 31 March 1997 investor A and investor B enter into FundCo Agreements under which each pay FundCo $5,000 to purchase 50 percent of FundCo’s net assets, with settlement to occur 10 years from the date of entry into the FundCo Agreements (i.e. 31 March 2007). The relevant terms of the FundCo Agreements are:

(i) settlement is to be by way of a cash settlement equal to the value of the assets purchased, as opposed to physical delivery of the assets;

(ii) FundCo agrees to make progress payments in satisfaction of its obligations on settlement. The progress payments are to be made at the end of each year during the term of the FundCo Agreement (on the terms set out at paragraph 3.6 above).

(b) FundCo deposits $6,000 with BNZ on 31 March 1997. The deposit is for 10 years and matures on 31 March 2007 with a repayment of $11,500, i.e. an agreed additional amount of $1,500;

(c) On 31 March 1997, FundCo enters into the TradeCo Agreement with TradeCo under which FundCo pays $4,000 to purchase 100 percent of TradeCo’s net assets, with settlement to occur 10 years from the date of entry into the TradeCo Agreement (i.e. on 31 March 2007). The relevant terms of the TradeCo Agreements are:

(i) settlement is to be by way of a cash settlement equal to the value of the assets purchased, as opposed to physical delivery of the assets;

(ii) TradeCo agrees to make progress payments in satisfaction of its obligations on settlement. The progress payments are to be made at the end of each year during the term of the TradeCo Agreement and equal to 25 percent of the increase in the Market Value of the TradeCo Agreement over the previous 12 months (on the terms set out at paragraph 3.12 above).

(d) Assume Investors A and B, FundCo and TradeCo all have 31 March balance dates for tax purposes.

(e) Investor A does not qualify as a cash basis holder. Investor B is a cash basis holder.

7.2 The Deposit made by FundCo with the BNZ has the following profile:

7.3 The TradeCo Agreement between TradeCo and FundCo has the following profile:

7.4 The Value of each of the FundCo Agreements, being 50 percent of the value of the Deposit and the value of the TradeCo Agreement (after payment of the FundCo Variable Payments), is as follows: