Statement of reasons

This notice applies to acts or omissions occurring on or after 15 June 2005.

The Takeovers Panel has granted exemptions to—

• •Mountain Road Investments Limited (Mountain Road) from rules 7(c) and 7(d) of the Takeovers Code (the Code) in respect of the requirements for the notice of meeting under rule 16(b) of the Code; and

• •A2 Corporation (A2 Corporation) from rules 15(b)(iii) and 16(b) of the Code.

A2 Corporation proposes to make a renounceable pro rata 2 for 1 rights issue of approximately 100 725 000 ordinary shares to its existing shareholders. It is proposed that the issue of shares will be underwritten by Mountain Road, which currently holds approximately 16.1% of the voting rights in A2 Corporation, by means of an investment in Machin Investments Limited (Machin). Machin is a 40% shareholder in A2 Corporation. It is likely that Mountain Road's interest in the voting rights in A2 Corporation will increase through underwriting the issue. If Mountain Road was required to take up the maximum number of shares that it could be required to subscribe for under the underwriting agreement, its direct interest in the voting rights in A2 Corporation would increase to 66.67%.

The investors in Machin propose to distribute Machin's shares in A2 Corporation as soon as possible after completion of the rights issue. As a result, in addition to any A2 Corporation shares acquired by Mountain Road under the underwriting agreement, Mountain Road will replace its indirect interest in A2 Corporation shares held by Machin with a direct interest in A2 Corporation shares. This is expected to equate to a further 3.9% of the shares in A2 Corporation after completion of the rights issue.

A2 Corporation intends to obtain shareholder approval, in accordance with the Code, for the potential allotment of shares to Mountain Road under the underwriting agreement and the acquisition of shares by Mountain Road from Machin. However, A2 Corporation cannot comply with rules 15(b)(iii) and 16(b) of the Code before completion of the issue because it cannot state in the notice of meeting—

• •the exact number of shares that would be allotted to Mountain Road; and

• •the exact percentage of voting rights in A2 Corporation that Mountain Road would control after allotment; and

• •the exact percentage of voting rights in A2 Corporation that Mountain Road would control after the acquisition.

These details would be known only after the issue had been completed and all allotments made.

The Takeovers Panel considers that it is appropriate to grant the exemptions because—

• •it is impossible for the actual numbers of shares to be allotted and the relevant percentages required by rules 16(b)(i), (ii), and (iii) to be stated in the notice of meeting, as these numbers and percentages are dependent upon the level of participation by A2 Corporation's shareholders in the company's pro rata rights issue; and

• •it is impossible for the actual percentages required by rules 15(b)(iii) to be stated in the notice of meeting, as these percentages are dependent upon the level of participation by A2 Corporation's shareholders in the company's pro rata rights issue; and

• •if A2 Corporation's shareholders approve the allotment of shares to Mountain Road under the underwriting agreement, which potentially requires Mountain Road to subscribe for all the shares to be issued, and the transfer of shares under the distribution from Machin, and the maximum possible increase in Mountain Road's percentage of voting control, then by implication the shareholders also approve any lesser percentage of control acquired by Mountain Road following the allotment of the shares and the transfer of shares under the distribution from Machin; and

• •pro rata rights issues and shareholder underwriting agreements are accepted means of raising equity capital in New Zealand so the Takeovers Panel should facilitate these arrangements by granting appropriate exemptions where necessary.

The Takeovers Panel considers that the exemptions in this notice are consistent with the objectives of the Code because the non-associated shareholders of A2 Corporation will have an opportunity to vote on the allotment of voting securities to Mountain Road and the acquisition of voting securities by Mountain Road.