2082 NEW ZEALAND GAZETTE No. 87

movement on large scale share sales, require that the Noteholder be compensated to ensure the Noteholder is in the same position had it simply received cash equal to the face value of the debt. The 5 percent discount on the market price is to ensure the Noteholder can in essence realise the equivalent of the Face Value of the note on liquidating its position in Parent Co.

(h) The Noteholder also has a right to elect to convert the Notes and receive a maximum of 6 months’ interest (or “Termination Fee”) in the event interest is suspended (as outlined in paragraph (c) above). Additional rights of conversion are available in certain circumstances (such as in certain exceptional default events such as Parent Co delisting, issue of a bonus issue by Parent Co, or on an announcement of a takeover).

(i) At maturity of the Note, rather than requiring the Noteholders to purchase shares in Parent Co, NZ Co may elect to redeem the Notes at their Face Value plus an amount of Additional Interest equal to 5 percent of the Face Value. Under this cash redemption option, NZ Co will pay the Noteholder and the amount of Additional Interest will be reimbursed to NZ Co by Parent Co or one of its Australian subsidiaries.

(j) In the event of a change in control of Parent Co, NZ Co may also elect to redeem the Notes for the Cash Redemption Amount.

4. Principle

5. The Note forms part of a wider financial arrangement which has both a debt component, and equity components that are “excepted financial arrangements” as defined in section OB 1 of the Income Tax Act 1994. The equity components that are excepted financial arrangements are:

• the option for the Noteholder to acquire shares in Parent Co on the happening of a conversion event prior to Maturity by redeeming the Notes and using the Redemption Proceeds to purchase the shares; and

• the shares in Parent Co.

The option that NZ Co has to require the Noteholders to use the Redemption Proceeds to purchase shares in Parent Co does not satisfy the definition of “excepted financial arrangement” because it is not an option to buy shares or an option to acquire or to sell or otherwise dispose of shares.

2. Any income, gain or loss, or expenditure that is solely attributable to an excepted financial arrangement is not included when calculating gross income or expenditure under the qualified accrual rules.

3. This determination specifies that no amounts are attributable to the excepted financial arrangements.

4. Interpretation

5. In this determination, the following expressions (which have not been defined elsewhere within the determination) have the following meanings:

“Additional Interest” means 5 percent of the Face Value of the Note.

“Cash Redemption Amount” means the cash amount expressed in Australian dollars being the amount which the Noteholder would receive upon the exercise by NZ Co of the right to redeem the Notes in cash, being the Face Value plus Additional Interest but excluding any Coupon Interest.

“Coupon Interest” means the cash interest amounts paid on a semi-annual basis by NZ Co to the Noteholder.

“Face Value” means the amount of money provided to NZ Co as evidenced by the Note.

“NZ Co” means NZ Co, a company incorporated in New Zealand.

“Parent Co” means Parent Co Limited, a public company listed on a recognised stock exchange.

“Maturity” means 12 June 2003.

“Note” means a Converting Notes issued by NZ Co pursuant to a Prospectus dated 26 October 1998 for the Issue of Converting Notes.

“Noteholder” means a person or persons investing in the Notes.

“Redemption Proceeds” means the cash amount expressed in Australian dollars, being the amount which the Noteholder receives upon the Notes being redeemed which must then be used to purchase shares in Parent Co.

“Retail Investor” persons who would not qualify as one of the institutional offerees under the Australian Corporations Regulation 7.12.05.

“Termination Fee” means the interest payable (up to a maximum of 6 months) where the Noteholders elect to convert the Notes into shares following an interest suspension.

6. Method

No part of the following amounts are attributable to the excepted financial arrangements:

• Where the Noteholder uses the Redemption Amounts to subscribe for Parent Co shares, the amount by which the aggregate market value of the Parent Co shares (expressed in Australian dollars in which the Notes are denominated) is above the Face Value of the Notes held by that Noteholder and redeemed by NZ Co.

• The Coupon Interest payments.

• The Additional Interest.

• The Termination Fee.

7. Examples

(Any reference to the redemption amount, value of Parent Co shares, or interest calculation is illustrative only.)

Example 1
Investor C has 2000 Notes issued by NZ Co at A$5.00, and on maturity must convert the Notes to shares in Parent Co. NZ Co elects to redeem the Notes for cash at maturity.

The weighted average market price of Parent Co shares for the 5 business days prior to the date of conversion is A$2.63. Investor C receives A$10,500 as the Cash Redemption Amount.

NZ Co pays the Noteholder A$10,500 Cash Redemption Amount and the accrued Coupon Interest of A$360 to the date of maturity. NZ Co is then reimbursed for A$500 from Parent Co or a related subsidiary (being the amount of Additional Interest).

The Face Value of the Notes is A$10,000.

In accordance with the method prescribed in the determination, neither the Coupon Interest nor the Additional Interest is attributable to the excepted financial arrangements.

Example 2
Investor A has acquired 2000 Notes on the stock market for A$4.80 with a face value of A$5.00 for a total consideration of A$9,600. On 12 June 2001, Investor A elects to convert the Notes to shares in Parent Co.