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NEW ZEALAND GAZETTE, No. 112

28 SEPTEMBER 2006

(e) the issuer cannot elect whether the convertible note can be cash settled or redeemed for shares; and
(f) the share warrant cannot be separated from the convertible note.

specified rate, for an optional convertible note and a date, means the specified rate given for the optional convertible note
and the date by Determination G23: Specified Rate

share warrant, for an optional convertible note, means the right of the subscriber or holder to elect to settle the optional
convertible note by receiving new shares in the issuer

subscriber, for an optional convertible note, means the person that subscribes for the optional convertible note issued by
the issuer

term, for an optional convertible note and a person, means the period between the date on which the optional convertible
note is issued and the maturity date

voting interests means voting interests as defined in paragraph (a) of the definition in section OB 1 of the Act

3. In this determination, a term not referred to in subclauses (1) and (2) has the meaning given to the term for the purpose of—
   (a) the financial arrangements rules, if the term is defined in the Act for that purpose;
   (b) the Act, if paragraph (a) does not apply.

4. In this determination, a reference to another determination made by the Commissioner includes a reference to a determination
   that, with or without modification, replaces or corresponds to that determination.

5. Method

6. This determination treats an optional convertible note as having both a debt component and an equity component. The
   equity component, being the share warrant, is an excepted financial arrangement.

7. This determination gives the method for determining the amount of consideration paid or received under the optional
   convertible note that is solely attributable to the equity component for the purposes of determining:
   (a) the income or expenditure for an income year that is attributable to the debt component;
   (b) the base price adjustment for the debt component.

Consideration provided by person that is attributable to equity component

3. The amount of the consideration provided by a subscriber or received by an issuer that is solely attributable to the equity
   component of the optional convertible note is nil if:
   (a) the parties to the optional convertible note at the date of issue are members of the same wholly owned group of
   companies; or
   (b) the parties to the optional convertible note at the date of issue are beneficially owned or ultimately controlled by the
   same person; or
   (c) under the arrangement, however structured at the date of issue, there would be no change to either of the voting
   interests or the market value interests in the issuer if the share warrant were exercised at that time.\n4. Subclause (3) does not apply if the subscriber:
   (a) acquired the optional convertible note with the intention of selling it within 93 days to any person whose exercise of
   the share warrant would result in a change to either of the voting interests or the market value interests of the issuer;
   and
   (b) does so sell the optional convertible note.

4. If subclause (3) does not apply, the amount of the consideration provided or received by a person that is attributable to the
   equity component of the optional convertible note is the greater of—
   (a) nil; or
   (b) the amount given by the following formula:

   y – s

5. In subclause (5) (b), y, being the consideration for the optional convertible note, is:
   (a) for the issuer, the amount of consideration that has been paid, and consideration that is or will be payable, to the issuer for
   or under the optional convertible note, ignoring non-contingent fees;
   (b) for the subscriber, the amount of consideration that has been paid, and consideration that is or will be payable, by the
   subscriber for or under the optional convertible note, ignoring non-contingent fees.

6. In subclause (5) (b), s, being the present value of cashflows, is the present value of the amount given by the following
   formula:

   total coupon interest + contingent fees + cash redemption amount

7. In subclause (7), total coupon interest is the total amount of all coupon interest payable or receivable during the term of
   the optional convertible note.

8. In subclause (7), contingent fees and cash redemption amount are as defined in subclause 5 (2) of the interpretation
   section of this determination.

9. In subclause (7), the present value of an amount is determined by applying:
   (a) Method A of Determination G10B: Present Value Calculation Methods; or
   (b) an alternative method that produces a result that is not materially different from the method referred to in paragraph (a).

10. If the amount of a coupon interest payment under an optional convertible note has a fixed relationship to a market or indicator
    interest rate, a person who is required by this determination to estimate the amounts of future coupon interest payments
    under the optional convertible note may assume that the coupon interest rate applicable to the first coupon interest payment
    in the term applies to the remaining coupon interest payments in the term.

Spreading the debt component

12. For the purposes of the financial arrangements rules, the amount of income or expenditure under an optional convertible
    note that a person must attribute to an income year in the term of the optional convertible note is found by using a