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Whether interest paid on Notes subsequent to an amendment to the Unsecured Note Trust Deed (Trust Deed) to allow Noteholders additional shares on conversion, is deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Yes

The Company issued a prospectus prior to 1 July 2000 to raise funds from the issue of subordinated unsecured redeemable Notes. The Notes were issued subject to the terms and conditions contained in the Trust Deed.

The purpose of the fund raising was to facilitate the restructuring of the Group's debt facility.

Some key characteristics of the Notes are: • There was an issue price per Note • Interest is payable at a specified fixed rate • The Notes are convertible at the option of the Noteholder at certain fixed periods on the basis of one ordinary share in the Company for each Note. • The Notes are unsecured • The Notes will be redeemed at their issue price at a period of less than 10 years from their issue date unless they are converted or redeemed at an earlier date in accordance with the terms of the Trust Deed.

After 1 July 2001 the Company made a return of capital to shareholders.

The Company and Trustee offered Noteholders a new conversion period prior to the return of capital.

The Trustee agreed to adjust the conversion terms in the Trust Deed after the

capital return.

The tests detailed in section 82SA have been passed, therefore section 82R of that Act will not be triggered and the interest will be deductible under section 8-1 of the ITAA 1997.

ATO ID 2001/321 can be distinguished from the current circumstances because in that case the proposed amendment to the conversion formula would also have resulted in the failure of the minimum conversion price test.

Since 1 July 2001, most convertible interests fall within the ambit of Division 974 of ITAA 1997., However Division 3A of ITAA 1936 continues to have application when dealing with Controlled Foreign Companies (CFCs). For interests created prior to 1 July 2001, a transition period of 3 years was allowed, if so elected, to follow Division 3A.