3366 NEW ZEALAND GAZETTE, No. 116 20 SEPTEMBER 2012

the Notes, and there is no fixed intention to convert the Notes before maturity. It is yet to be determined whether Holdings will treat the Notes, in part, as an equity instrument under IFRS.

• Investment support by the Deferred Investors under the Investment Commitment Deed to provide and maintain investment support in the form of a stand-by letter of credit (LC) and/or cash collateral to be held in equity collateral accounts of Holdings (ECA) (for each Deferred Investor). Interest received by Holdings on amounts in the ECA representing a Deferred Investor’s cash collateral is, in turn, payable by Holdings to that Deferred Investor (subject to certain criteria). Holdings will pay each Deferred Investor a quarterly fee in arrears (“Investment Support Fee”) for the period from Financial Close to the Deferred Equity Subscription Date.

(2) This determination is made subject to the following conditions:

• The agreed rate of interest payable on the Notes (including the inflation adjustment) will not exceed a rate that would be agreed between wholly unrelated parties having regard to the terms of the Notes and applying orthodox pricing methodologies.

• The Notes will be converted only in circumstances in which the Company and/or Holdings experiences a material cash flow deficit because of events not taken into account in cash-flow projections prepared before completion, and where conversion of the Notes would assist the Company and/or Holdings to manage its liabilities and solvency.

• The Company will recognise income derived from the Crown during the Construction Phase of the Project Agreement and the Services Phase of the Project Agreement, and will deduct expenditure incurred in relation to the Lease, Construction Agreement, Operation and Maintenance Contract, and Asset Management Agreement, in each case, under the relevant provisions of the Income Tax Act 2007 (outside of the financial arrangement rules).

• The method applied to determine the income derived and the method applied to determine the expenditure incurred in respect of the investment support represented by cash collateral in each ECA will be the same.

• The continued application of private ruling Br Prv 12/33 (under section 91EB of the Tax Administration Act 1994).

4. Principle

(1) The Lease in respect of the prison is an excepted financial arrangement under section EW 5(9). Any amount that is solely attributable to an excepted financial arrangement described in section EW 5(2) to (16) is not an amount that is taken into account under the financial arrangement rules (section EW 6(2)). This determination specifies the amounts that are solely attributable to the Lease that are not taken into account under the financial arrangement rules.

(2) The Services Phase of the Project Agreement, Construction Agreement, Operation and Maintenance Contract, and Asset Management Agreement are “short-term agreements for sale and purchase”, and are excepted financial arrangements under section EW 5(22). Any amount that is solely attributable to an excepted financial arrangement described in section EW 5(17) to (25) that is part of a financial arrangement is an amount that is taken into account under the financial arrangements rules (section EW 6(3)). This determination specifies that no amounts payable to or by the Company in respect of the Services Phase of the Project Agreement, Construction Agreement, Operation and Maintenance Contract, or Asset Management Agreement are required to be spread under the financial arrangements rules.

(3) The Construction Phase of the Project Agreement, Senior Debt, Swaps, Shareholder Pre-subscription Loan, Notes, and investment support in the form of LCs and/or cash collateral in the ECAs are “financial arrangements” under section EW 3. This determination specifies that no amounts payable to or by the Company in respect of the Construction Phase of the Project Agreement are required to be spread under the financial arrangements rules, and that the payments made to or by the Company under the Senior Debt, Swaps, Shareholder Pre-subscription Loan and Notes must be spread under the financial arrangements rules in accordance with this determination.

5. Interpretation

In this determination, unless the context otherwise requires:

“IFRS” means International Financial Reporting Standards.

6. Method

(1) The prepaid rental the Company will pay in respect of the Lease and the leasehold property interest granted to the Company under the Lease are solely attributable to the Lease, and are not taken into account under the financial arrangement rules.

(2) The Company is not required to spread any amounts under the financial arrangements rules in respect of the:

• Construction Phase of the Project Agreement;
• Services Phase of the Project Agreement;
• Construction Agreement;
• Operation and Maintenance Contract; or
• Asset Management Agreement.

(3) The IFRS financial reporting method in section EW 15D may be used to allocate income and expenditure (other than “non-integral fees” as defined in section YA 1) over the term of the Senior Debt. None of the restrictions for application of this reporting method in section EW 15D(2B) applies.

(4) The IFRS financial reporting method in section EW 15D may be used to allocate income and expenditure (other than “non-integral fees” as defined in section YA 1) in respect of any subsequent refinancings of the Senior Debt over the term of the relevant refinancing, provided that the terms of any such refinancings are materially similar to the terms of the Senior Debt. This determination paragraph does not affect the Company’s obligation to perform a base price adjustment under section EW 31 at the time of each refinancing.

(5) Determination G3: Yield to maturity may be used to allocate the income and expenditure (other than “non-contingent fees” as defined in section YA 1) of the Shareholder Pre-subscription Loan (under section EW 15I if Holdings treats the Shareholder Pre-subscription Loan, in part, as an equity instrument under IFRS, or under section EW 15E if not).