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Summary of

Securities Act (Feltex Carpets Limited) Exemption Notice 2004

2004/103

Gazetted on 29 April 2004
Expires on 30 November 2004

Effects of the exemption
Feltex Carpets Limited (Feltex) is not required to include the following information in the combined prospectus and investment statement for their share offer:

• the price of the shares;
• information on Credit Suisse First Boston Asian Merchant Partners (Credit Suisse First Boston) as issuer.

Feltex is able to include in the offer document a prospective statement of cash flows that is aligned to the company's normal financial year rather than the date of the prospectus.

Background
Feltex manufactures carpets and distributes soft floor coverings. The company is planning an initial public offering of shares, and intends to apply for listing on NZX. The offer will include new shares, an exchange of bonds for shares, and a sale of shares held by Credit Suisse First Boston, which currently holds all of the issued ordinary shares in Feltex.

The final price for the shares will be determined by a book building process.

The exemption
Feltex and Credit Suisse First Boston are exempt, subject to conditions, from:

• regulations 3(1) and 7A(1) of the Securities Regulations 1983 to the extent that these require the offer document to contain information about Credit Suisse First Boston as issuer;
• clauses 1(4), 8(5) and 10(1)(c) of the First Schedule of the Regulations.

Conditions
The exemptions from regulations 3(1) and 7A(1) are subject to the following conditions:

• the offer document contains
  • a description of the effect of these exemptions; and
  • a statement that Credit Suisse First Boston is an issuer of the shares and as such, has obligations under the Securities Act 1978 and the Securities Regulations 1983; and
• Feltex holds all subscription money received from the public in trust until the shares have been allotted.

The exemption from clause 1(4) of the First Schedule is subject to the condition that the offer document:

• describes how the subscription price will be fixed;
• describes the factors that may be taken into account in fixing the subscription price;
• states when the subscription price will be fixed;
• describes how the shares will be allocated;
• states the indicative price range;
• states whether the subscription price may be set outside the indicative range;
• states how an investor may ascertain the subscription price once this has been fixed;
• describes the procedures for holding subscription money;
• describes how over-subscriptions will be treated and the procedures for making refunds;
• states, in terms permitted by regulation 23, that an application has been made for listing on NZX.

The exemption from clause 8(5) of the First Schedule is subject to the condition that the offer document contains the information required by that clause, calculated as if the number of shares on which the assumptions are based is calculated by reference to the maximum number of shares that would be allotted if the subscription price of the shares was at the high point, at the mid-point, and at the low point of the indicative price range stated in the offer document.

The exemption from clause 10(1)(c) of the First Schedule is subject to the conditions that -

• the offer document contains a prospective statement of cash flows for Feltex and its subsidiaries in respect of the financial years from 1 July 2003 to 30 June 2004 and from 1 July 2004 to 30 June 2005; and
• the prospective statements of cash flows comply with clause 10(2) of the First Schedule of the Regulations.

Reasons
The price for the shares is to be determined via a book building process and will not be known at the date the prospectus is to be registered. Similarly, the number of shares that may be allotted will not be known at that time. This means that Feltex and Credit Suisse First Boston cannot comply with clauses 1(4) and 8(5) of the First Schedule of the Securities Regulations 1983. The conditions of the exemption require that investors receive certain relevant information about how the price for the shares is to be set and about the potential net tangible asset backing per share.

The exemption from clause 10(1)(c) of the First Schedule of the Regulations will mean that the prospective statements of cash flows will be aligned to Feltex's normal accounting period. This means that the information will be more easy to compare with the financial statements of Feltex and more useful for investors.

Where Part II of the Securities Act 1978 applies to an offer of previously allotted securities to the public, both the person offering the securities and the original allotter of the securities have a responsibility for the offer as issuers. Information about the offeror as issuer may not be useful to the investor and may be confusing. The exemptions from regulations 3(1) and 7A(1) of the Regulations is consistent with current Commission policy.