ASX Listing Information

In June 2016 shareholders approved a corporate restructure that saw the Group move to Australia and its shares listed on the ASX with a secondary listing on the NZX Main Board. The Special Meeting was held on 23 June 2016 in Auckland.

Directors unanimously supported the change and recommended it to shareholders as being in the company’s best interests. The ASX listing will bring about alignment of all of the company’s reporting and management systems, see the removal of a number of complexities created by operating the business in multiple jurisdictions and will provide the best base for the Group’s future growth. An information pack was sent to all registered shareholders prior to the Special Meeting. The pack included an overview of the transaction, the Scheme Booklet that explains the terms of the Scheme and the Restructure and contained a report by independent adviser, Korda Mentha, an Information Memorandum, the Notice of Meeting, a proxy voting form and a register removal request form.

Tax Position for Shareholders

Australian income tax implications of the Scheme of Arrangement

Following approval of the Michael Hill International Scheme of Arrangement (the Scheme) on 23 June 2016, the Scheme was implemented on 29 June 2016 with Shareholders receiving one Share in Michael Hill International Limited (MHJ – referred to as MHI Australia in the Scheme Booklet) for each share held in the Company (the former New Zealand listed company, previously named Michael Hill International Limited). Subsequently, the shares in MHJ have been listed and commenced trading on the Australian Securities Exchange (ASX), and on the New Zealand Exchange (NZX) as a Dual Listed Issuer.
A guide to the general Australian and New Zealand income tax implications of the Scheme is set out in Section 13 of the Scheme Booklet, which is available to shareholders on the MHJ's website at investor.michaelhill.com. Capitalised terms used in this advice have the same meaning as set out in the glossary of the Scheme Booklet except where otherwise indicated.
This summary provides additional information regarding the Australian capital gains tax (CGT) implications for Shareholders who disposed of their MHI shares under the Scheme and held those shares on capital account. The below does not consider the tax consequences for Shareholders who do not fall into this category.
This summary is based on the Australian tax law and our understanding of the practice of the tax authorities at the time of issue. The following information does not constitute taxation advice and should not be relied upon as such. This summary is general in nature and is not intended to be an authority or complete statement of the applicable law. It does not take into account the tax law of countries other than Australia. Shareholders are advised to consult their own independent tax adviser regarding the consequences of the Implementation of the Scheme in light of the relevant tax law and their own particular circumstances.

Australian Tax Implications

As a result of the implementation of the Scheme on 29 June 2016, a CGT event happened to your Shares in the Company and you received shares in MHJ in exchange.
In this respect, the market value of the MHJ shares as at 29 June 2016 can be taken to be A$1.21, which is the volume weighted average price (VWAP) of MHJ shares over the first five trading days on the ASX and NZX.
Having regard to the above, the Australian CGT consequences of Implementation of the Scheme for Shareholders should be as set out below.

• Non-Australian resident Shareholder

If you are not a resident of Australia for income tax purposes and did not hold your Shares in the Company as part of an Australian permanent establishment, you should not have to pay Australian income tax on any capital gain made when you disposed of your Shares. This is on the basis that the Shares in the Company should not be regarded as 'Taxable Australian Property' (as defined in the Australian income tax law) and any capital gain for non-residents should be disregarded.

• Australian resident Shareholder who chooses to obtain scrip for scrip roll-over relief

Broadly, scrip for scrip CGT roll-over relief will only be available where a Shareholder would have otherwise made a capital gain and the Shareholder chooses to obtain the roll-over, and where other relevant conditions are satisfied. In this respect, the Company has received advice from its Australian tax advisers (supported by advice from senior Australian tax counsel) that the relevant conditions for scrip for scrip CGT roll-over relief to be available should be satisfied.
If you are an Australian resident Shareholder who is eligible to choose, and do choose, to obtain the scrip for scrip CGT roll-over relief:

• the capital gain made as a result of the exchange of Shares in the Company for MHJ shares is disregarded;
• the first element of the cost base of each replacement MHJ share will be equal to the cost base of each original Share in the Company exchanged for the MHJ share; and
• for the purposes of determining if the CGT discount is available for a later disposal of a replacement MHJ share, the date of acquisition of the MHJ share is taken to be the date you acquired the original Share in the Company.

The choice to obtain scrip for scrip CGT roll-over relief is evidenced by the manner in which your tax return for the relevant income year is prepared.

• Australian resident Shareholder who cannot or does not choose to obtain scrip for scrip roll-over relief

If you are an Australian resident Shareholder and cannot choose, or do not choose, to obtain the scrip for scrip CGT roll-over:

• the CGT event in relation to your Shares in the Company happened on 29 June 2016, the date of Implementation of the Scheme;
• the capital proceeds received for the disposal of each Share in the Company is A$1.21, being the market value as at 29 June 2016 of the replacement MHJ share received in exchange;
• you must take into account any capital gain or capital loss from the disposal of your Shares in the Company in working out your net capital gain or net capital loss for the income year when 29 June 2016 occurred (the 2015-2016 income year for most shareholders);
• Shareholders who are individuals, trusts or complying superannuation funds may be eligible for discount capital gains treatment in respect of the Shares if they have held that Share for at least 12 months and certain other requirements have been met. When calculating a discount capital gain, the capital gain should initially be reduced by any other capital losses of the Shareholder.
• the first element of the cost base of each replacement MHJ share is A$1.21; and
• the date of acquisition of each replacement MHJ share for CGT purposes will be 29 June 2016, the date of Implementation of the Scheme.