1568

NEW ZEALAND GAZETTE

No. 66

(f) “Issuer” means the issuer of the MCNs.

(g) “Local Authority Trading Enterprise” means a local authority trading enterprise as defined by section 594B of the Local Government Act 1974.

(h) “Market Value” means the quoted price of listed shares on the New Zealand Stock Exchange or any other unofficial market for shares.

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

(j) “Underlying Shares” in relation to the MCNs means the shares into which the MCNs are convertible from time to time.

6. Method

(1) Amounts to be included when calculating the aggregate income or expenditure with regard to the MCNs:

(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 the:

    (i) Cash Interest Component; and

    (ii) Increments.

(b) the amount to be attributed to the Increments for the purpose of determining the aggregate income or expenditure shall be $3.13 per share, provided that this amount will be adjusted for the purposes of the aggregate expenditure or income calculations in the case of a subdivision or consolidation of the Underlying Shares, in terms of the formula set out in subclause 6 (4).

(2) The income, gain or loss, or expenditure, that is solely attributable to the excepted financial arrangement component of the MCNs equals the amount by which market value of the share price fluctuates above or below the amount of $3.13 (or the adjusted amount in terms of the formula in subclause 6 (4), as the case may be), that is attributed to the Increments.

(3) For the purposes of the base price adjustment, the amount of the acquisition price (based on the definitions in section OB 1 of the Income Tax Act 1994 of “acquisition price” and paragraph (e) of the definition of “core acquisition price”) of the MCNs is $51 million with no part of the core acquisition price being attributable to the excepted financial arrangement component of the MCNs.

(4) The amount to be attributed to each share comprised in Increments following a consolidation or subdivision shall be item “a” calculated by reference to the following formula:

a = b × c/d where

a = Amount to be attributed to the shares following a consolidation or subdivision;

b = $3.13 (or the adjusted amount as a result of an earlier subdivision or consolidation and the application of this subclause);

c = The next Increment which would have been delivered but for the subdivision or consolidation; and

d = The next Increment that will be delivered following the consolidation or subdivision.

7. Example A

(1) This example illustrates the application of the method (set out in the Determination) for determining the amounts attributable to both the debt and equity components of the MCNs issued by the Issuer to the Holder.

(2) The example proceeds on the basis that the Holder will continue to hold the MCNs until 31 March 2002 when the MCNs will mandatorily convert into 19,200,000 shares in the Issuer.

(3) The following table sets out:

(a) The Cash Interest Component;

(b) The number of shares in the Issuer into which the MCNs would convert (following a 1 January allotment of Increments) in a particular year, if the election was made to convert them;

(c) The Increment;

(d) The amount of the Increment;

(e) The aggregate income or expenditure for the Holder and the Issuer respectively (comprising the Cash Interest Component together with the Increment).

| Year ending | A = Cash Interest Component | The number of shares in the Issuer into which the MCNs would convert | Increment | B = Increment × $3.13 | A + B = Aggregate income or expenditure |
|-------------|---------------------------|---------------------------------------------------------------|---------|-------------------|-------------------------------------|
| 31 March 1997 | Nil                       | 16,300,000                                                    | Nil     | Nil               | Nil                                 |
| 31 March 1998 | 2,624,400                 | 16,880,000                                                    | 580,000 | 1,815,400         | 4,439,800                           |
| 31 March 1999 | 2,797,200                 | 17,460,000                                                    | 580,000 | 1,815,400         | 4,612,600                           |
| 31 March 2000 | 3,078,000                 | 18,040,000                                                    | 580,000 | 1,815,400         | 4,893,400                           |
| 31 March 2001 | 3,294,000                 | 18,620,000                                                    | 580,000 | 1,815,400         | 5,109,400                           |
| 31 March 2002 | 3,456,000                 | 19,200,000                                                    | 580,000 | 1,815,400         | 5,271,400                           |

(4) The aggregate amount, if the MCNs run full term, attributable to the debt component of the MCNs, and therefore to be taken into account under the Accruals Rules is $24,326,600 (4,439,800 + 4,612,600 + 4,893,400 + 5,109,400 + 5,271,400), comprised of the Cash Interest Component together with the Increment. This amount constitutes aggregate income/expenditure, in terms of the Accruals Rules. All fluctuations in value of the Underlying Shares relate to the equity component of the MCNs and should not be taken into account in calculating income or expenditure.

(5) It should be noted that the example only deals with the amounts attributable to the debt and equity components of the MCNs. It does not deal with the attribution or spreading, under the Accruals Rules, of income or expenditure to particular income years.

Example B

(1) This example proceeds on the basis that the Holder will continue to hold all the MCNs until 31 March 2002. However, following its 31 March 1999 year end, the Issuer undertakes a subdivision on a two for one basis.

(2) The following table sets out:

(a) The Cash Interest Component;

(b) The number of shares in the Issuer into which the MCNs would convert (following a 1 January allotment of Increments) in a particular year, if the election was made to convert them;

(c) The Increment;

(d) The amount of the Increment;

(e) The aggregate income or expenditure for the Holder