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Likely Cessation Of Quotation Of Ordinary Shares

29 March 2006

Likely Cessation Of Quotation Of Ordinary Shares – Consequences For Capital Notes –Change In Listing Status

Capital Properties New Zealand Limited (Capital Properties) wishes to announce changes in the status of its capital notes, and its listing status, arising out of the likely forthcoming cessation of quotation of its ordinary shares on the New Zealand Stock Market (NZSX).

Anticipated Cessation of Quotation of Ordinary Shares

It is anticipated that Capital Properties' ordinary shares will cease to be quoted, now that AMP Property Portfolio Investments Limited (AMP Property Portfolio) has moved to compulsorily acquire the shares in Capital Properties it does not already own.

This move follows from the success of AMP Property Portfolio's takeover offer for Capital Properties, under which AMP Property Portfolio obtained acceptances giving it 90.63% of the voting rights in Capital Properties (as per AMP Property Portfolio's substantial security holder notice of 27 February 2006). Having passed the 90% threshold, AMP Property Portfolio has the right to compulsorily acquire the shares in Capital Properties it does not already own at the offer price of $1.48 per share.

AMP Property Portfolio has indicated that it will be exercising this right, and will be sending an acquisition notice under the Takeovers Code to all outstanding shareholders in Capital Properties.

As a consequence of AMP Property Portfolio's move to compulsory acquisition, Capital Properties expects that New Zealand Exchange Limited (NZX) will suspend quotation of Capital Properties' ordinary shares within 5 business days of AMP Property Portfolio sending its acquisition notice under the Takeovers Code. Formal cessation of quotation of ordinary shares is likely to occur shortly thereafter.

Change in Listing Status

The formal cessation of quotation of Capital Properties' ordinary shares will trigger changes in the terms of the capital notes, as described in further detail below. As a consequence of these changes, and for other reasons, NZX has granted Capital Properties a ruling that the capital notes are classified as debt securities for the purposes of the NZSX and NZDX Listing Rules (Listing Rules). The ruling provides that the notes shall be considered debt securities on the day that Capital Properties' ordinary shares formally cease quotation which, as noted above, is expected to be shortly after AMP Property Portfolio sends its acquisition notice.

Accordingly, upon cessation of quotation of Capital Properties' ordinary shares, Capital Properties will become a debt-only issuer, and will qualify for the exemptions from the governance provisions of the Listing Rules available to debt-only issuers. Capital Properties will still be required to produce annual and half-yearly reports and send them to capital note holders. With the exemptions from governance rules, however, there will be:

- no requirements relating to the constitution of the board (e.g. having independent directors);

- no restrictions on directors voting on transactions in which they are interested;

- no requirement to have an audit committee;

- no restrictions on the issue and buy-back of equity securities;

- no related party transaction approval requirements; and

- no requirement to hold annual meetings, and thus no right for note holders to attend annual meetings.

The NZX ruling also provides that, if Capital Properties' ordinary shares resume quotation, the capital notes shall be considered equity securities from the day that quotation recommences. It is very unlikely that quotation of ordinary shares will recommence while AMP Property Portfolio holds all of the shares in Capital Properties, which will be the position following compulsory acquisition.

Consequences for Capital Notes

Capital Properties has three classes of capital notes on issue, having election dates of 15 April 2007, 2009 and 2010 respectively. The capital notes are quoted on the New Zealand Debt Market (NZDX) operated by NZX. The quotation of the capital notes on NZDX will continue notwithstanding the cessation of quotation of Capital Properties' ordinary shares.

The cessation of quotation of Capital Properties' ordinary shares will, however, have consequences for Capital Properties' capital notes. Under the trust deed for the capital notes, when Capital Properties' ordinary shares are not quoted on NZSX, conversion rights in respect of capital notes are suspended, and a different election procedure will apply in relation to the election dates for the notes, having the following key features:

- Capital note holders will not have the right to convert their capital notes into ordinary shares.

- Capital Properties retains the ability to purchase the capital notes on the election date under its overriding buy-out right.

- The election notice, sent not later than 30 business days before the relevant election date, must specify a new election date, and state that the interest rate applicable to the capital notes from the election date will be determined as set out below.

- The new election date must not be more than two years from the election date at which the capital notes are rolled over.

- The interest payable on any rolled over capital notes from the relevant election date until the new election date will be fixed for the period in accordance with rules set out in the trust deed.

In general terms, the interest rate applicable to the capital notes rolling over is determined by reference to the yield on Government stock of a similar term as at the relevant election date plus a margin, effectively equivalent to the margin by which the interest rate on the notes as at the date of allotment of the note (or, if there has already been an election date, as at that preceding election date), exceeded the yield on Government Stock of a similar term at that date.

In summary, while Capital Properties' ordinary shares remain unquoted, the rights of capital note holders to convert to ordinary shares are suspended and, unless the notes are repurchased by Capital Properties on an election date, they will be rolled over for successive periods not exceeding two years at an interest rate equivalent to the Government stock yield for that term plus a margin.


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