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Summary of

Securities Act (Feltex Carpets Limited) Exemption Notice 2005

2005/10

Gazetted on 10 February 2005
Expires on 30 April 2010

Effects of the exemption
Feltex Carpets Limited (Feltex) is able to offer shares to its New Zealand shareholders without a registered prospectus or investment statement, under a proposed dividend reinvestment plan.

Background
Feltex Carpets Limited is a registered company and is listed on the New Zealand stock market (NZSX).

Under the dividend reinvestment plan, existing Feltex shareholders who are resident in New Zealand will be able to reinvest dividends payable on their fully paid ordinary shares and receive additional Feltex shares instead, without paying brokerage or other charges. These additional shares will be existing shares purchased on-market by a broker appointed by Feltex.

Dividend reinvestment plans which offer new securities to existing shareholders are able to rely on the class exemption contained in the Securities Act (Dividend Reinvestment) Exemption Notice 1998.

The exemption
Feltex and the broker for the plan are exempted, subject to conditions, from:

• sections 37 and 37A of the Securities Act 1978, and
• the Securities Regulations 1983 (except regulation 8)

in respect of previously allotted shares which are allotted to shareholders under the dividend reinvestment plan.

Conditions
The exemptions are subject to the following conditions:

• before a shareholder elects to acquire shares under the plan, they receive a document containing the following information:
  • an offer of shares under the plan;
  • a description of the plan and its terms and conditions;
  • a statement that copies of the company's most recent annual report and financial statements (that comply with the Financial Reporting Act 1993) can be obtained from Feltex on request, and free of charge;
• the dividend reinvestment plan contains the following provisions:
  • the purchase price payable by a shareholder is the average sale price at which the broker acquires the shares in on-market transactions on NZSX within 15 working days of the record date (the date specified by the board of directors for determining dividend entitlements);
  • the broker cannot acquire shares in on-market transactions on NZSX if the market price is above the threshold set by the board of directors by -
    • determining the price per share that is 5 per cent above the volume weighted average sale price at which shares of the same class were traded on NZSX for the five working days prior to the record date, and
    • making a reasonable adjustment for the dividend expectation and any unusual circumstances that the board considers could have affected the volume weighted average sale price over that period;
  • at the time the threshold is set and the shares are acquired by the broker, Feltex and the broker have no information that is not publicly available that would be likely to materially affect the share price if that information was publicly available;
  • every shareholder is given a reasonable opportunity to participate in the plan;
  • the shares transferred to shareholders under the plan all have the same rights attached to them and are transferred for the same purchase price as shares of the same class;
  • if, for any reason, a shareholder does not receive all of the shares to which they are entitled under the plan, Feltex will pay the shareholder the difference between the value of the shares received (if any) and the amount of the dividend entitlement;
  • Feltex must terminate a shareholder's participation in the plan within 28 days of a request to do so;
  • no brokerage or commission costs are payable by participating shareholders for shares received under the plan;
• a description of the plan and its terms and conditions is included in the company's annual report and published on its website, together with a statement that a copy of the terms and conditions of the plan is available from Feltex (or the company's share registrar) on request and free of charge.

Reasons
The Securities Commission considers that it is appropriate to grant the exemptions because, for shareholders participating in a dividend reinvestment plan, there is no difference between a plan that offers new securities (to which the Securities Act (Dividend Reinvestment) Exemption Notice 1998 would apply) and a plan that offers previously allotted securities. The conditions of this exemption are consistent with the conditions of the class notice and require additional disclosure about the method and timing of the pricing of the securities. The conditions include the following:

• every eligible shareholder must be informed about the plan and given a right to participate in it; and
• the documentation for the plan must contain provisions concerning (amongst other things) the manner in which the shares are acquired by the broker, the maximum threshold price that the broker may pay for such shares, the nature of the shares that are to be allotted, the return of dividend payments in certain circumstances, and the rights of participating shareholders; and
• a description of the plan and its terms and conditions must be included in Feltex's annual report and placed on its website.