NEW ZEALAND GAZETTE

3 JULY

$3.13 market value per share).

Nevertheless, the principal amount of the MCNs will be based on a face value of $2.25 each. In that regard, the face value arose from an early stage of the negotiation process and now bears no relationship to the true worth of the notes at the time the arrangement between the Issuer and the Holder was entered into, except that if the Issuer were to be liquidated in circumstances where there was a shortfall of assets, the Holder would be entitled, as creditor, to a maximum of $2.25 per MCN. There is no present likelihood that a liquidation scenario in respect of the Issuer will arise.

(2) The MCNs will mandatorily convert on 31 March 2002 (unless renewed by agreement), and may be converted earlier, in accordance with the above schedule, at the option of the Holder.

(f) The MCNs will be issued together with a special voting share which will entitle the Holder to exercise 30.35% of the voting rights in the Issuer (based on the number of shares on issue immediately after completion of the transaction). If the MCNs were to be converted immediately after issue, the special voting share would lose its rights and the resulting shares would only carry approximately 27% of the voting rights in the Issuer, as those shares would rank pro rata with all other shares.

(g) In addition to the Increments the MCNs will bear a Cash Interest Component. In calculating these amounts, regard has been had to future profit projections, but nevertheless the amounts have been fixed and will not vary, irrespective of future profitability. The amounts are as follows:

(h) However, where prior to the payment date of any Cash Interest Component the Holder has converted some but not all of the MCNs, then the relevant payment will be reduced as follows:

A = (19,200,000 / B) × C

where

A = the revised Cash Interest Payment to be made;

B = the number of MCNs then held by the Holder; and

C = the Cash Interest Payment determined from the above table.

Provided, where some or all of the MCNs are converted prior to the payment date of any Cash Interest Component then, in respect of those MCNs which have been converted, interest will be paid on the conversion date for those MCNs on a pro-rata basis for each completed quarter they were held since the last cash interest payment date of any Cash Interest Component.

For this purpose, in the case of a partial conversion of the MCNs, the amount of the interest to be pro-rated on the above basis shall be determined by multiplying the Cash Interest Component applicable for the relevant year by the proportion that the converted MCNs bear to 19,200,000.

(i) The MCNs will be non-transferable, except to a 100% Holder owned Local Authority Trading Enterprise.

(2) This Determination does not deal with the attribution or spreading, under the Accruals Rules, of the aggregate income or expenditure to particular income years. Nor does this Determination apply to:

• any subsequent disposal of the MCNs by the Holder; or
• any subsequent holders of the MCNs.

(3) This Determination shall cease to apply in the event that a reduction occurs in the Issuer’s ordinary share capital.

4. Principle

(1) The MCNs have both debt and equity components and comprise a loan by the Holder to the Issuer with repayment in shares (debt component) or alternatively a forward purchase of shares in which case the Holder of the notes is buying shares in a company and has equity in it.

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

(3) This Determination specifies that the Cash Interest Component and Increments relate to the debt component of the MCNs, and that changes in value of the Underlying Shares (except in the case of a consolidation or subdivision of the Underlying Shares) relate to the equity component and will be excluded from the application of the Accruals Rules when calculating income or expenditure for the Holder and the Issuer.

(4) The value of the Increments to be taken into account in calculating income or expenditure will be determined by reference to the market value of the Underlying Shares in the Issuer at the time the MCNs are issued, that being $3.13 (except in the case of a subdivision or consolidation of the Underlying Shares as provided for in subclause 6 (4)).

(5) For the purposes of this Determination any change in the market value of the Underlying Shares between the issue date of the MCNs and the conversion into shares is solely attributable to the equity component of the MCNs. Therefore the difference in share price can be ignored when calculating the aggregate income and expenditure. However, in the event of a subdivision or consolidation, the share price is to be adjusted in terms of the formula in subclause 6 (4).

5. Interpretation

(1) In this Determination, the following expressions (which have not been defined elsewhere within the Determination) have the following meanings:

(a) “Accruals Rules” means the rules referred to in section OZ 1 of the Income Tax Act 1994.

(b) “Base Number of Shares” means 16,300,000 shares into which the MCNs will convert if the Holder converts the MCNs on or before 31 December 1997.

(c) “Cash Interest Component” means the cash interest amounts paid on an annual basis by the Issuer to the Holder pursuant to the MCNs as set out in paragraph (g) of subclause 3 (1).

(d) “Holder” means the person holding the MCNs.

(e) “Increments” or “Increment” means the additional shares accruing each year to the Base Number of Shares in the Issuer into which the MCNs will convert on conversion in accordance with the Table in paragraph (a) of subclause 3 (1), adjusted in the case of a partial conversion as required in terms of the formula in paragraph (c) of subclause 3 (1) and adjusted in the event of a consolidation or subdivision, at the appropriate consolidation or subdivision ratio as provided in the first proviso to paragraph (a) of subclause 3 (1).