Ainsworth Game Technology Limited

Transcription

1 This is a replacement prospectus dated 22 November It replaces a prospectus dated 16 November 2004, relating to a renounceable Rights Issue of Convertible Notes by Ainsworth Game Technology Limited Ainsworth Game Technology Limited ABN Prospectus Renounceable Rights Issue of two Convertible Notes for every 15 Shares held to issue approximately 19.7 million Convertible Notes and a Placement of up to 3.8 million Convertible Notes, each at an application price of $1.30 per Convertible Note to raise up to approximately $30.6 million Five year fixed rate of 8.00% pa Convertible into Shares in December 2007 and December 2009 Redeemable for cash in December 2009 Lead Manager & Joint Underwriter Joint Underwriter The Convertible Notes are classifi ed as unsecured notes for the purposes of section 283BH of the Corporations Act

2 Important Notice General THIS PROSPECTUS IS DATED 22 NOVEMBER 2004 AND WAS LODGED WITH ASIC ON THAT DATE. IT IS A REPLACEMENT OF THE PROSPECTUS LODGED WITH ASIC ON 16 NOVEMBER NEITHER ASIC, ASX, NOR ANY OF THEIR OFFICERS TAKES ANY RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS OR THE MERITS OF THE INVESTMENT TO WHICH THIS PROSPECTUS RELATES. NO SECURITIES WILL BE ALLOTTED OR ISSUED ON THE BASIS OF THIS PROSPECTUS LATER THAN 13 MONTHS AFTER THE DATE OF THIS PROSPECTUS. APPLICATIONS FOR CONVERTIBLE NOTES PURSUANT TO THIS PROSPECTUS MAY ONLY BE MADE DURING THE OFFER PERIOD ON AN APPLICATION FORM ATTACHED TO, OR ACCOMPANYING, THIS PROSPECTUS. THE APPLICATION FORM WILL ONLY BE AVAILABLE WITH PRINTED COPIES OF THIS PROSPECTUS. THE OFFER OF CONVERTIBLE NOTES UNDER THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR INVITATION TO SUBSCRIBE FOR CONVERTIBLE NOTES TO ANY PERSON TO WHOM, OR IN ANY PLACE IN WHICH, IT IS UNLAWFUL TO MAKE SUCH AN OFFER. THE DISTRIBUTION OF THIS PROSPECTUS IN JURISDICTIONS OUTSIDE OF AUSTRALIA OR NEW ZEALAND MAY BE RESTRICTED BY LAW AND PERSONS WHO COME INTO POSSESSION OF THIS PROSPECTUS SHOULD SEEK ADVICE ON AND OBSERVE ANY SUCH RESTRICTIONS. ANY FAILURE TO COMPLY WITH SUCH RESTRICTIONS MAY CONSTITUTE A VIOLATION OF APPLICABLE SECURITIES LAWS. THE PRO FORMA FINANCIAL INFORMATION CONTAINED IN THIS PROSPECTUS IS FOR INFORMATION PURPOSES ONLY AND IS NOT A FORECAST OF OPERATING RESULTS EXPECTED IN FUTURE PERIODS. NO ONE IS AUTHORISED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFER WHICH IS NOT CONTAINED IN THIS PROSPECTUS. ANY INFORMATION OR REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS MAY NOT BE RELIED ON AS HAVING BEEN AUTHORISED BY THE COMPANY OR ITS DIRECTORS. YOU SHOULD READ THIS PROSPECTUS IN ITS ENTIRETY BEFORE DECIDING TO APPLY FOR CONVERTIBLE NOTES, AND PARTICULARLY CONSIDER THE RISK FACTORS THAT MAY BE RELEVANT TO AN INVESTMENT IN CONVERTIBLE NOTES. SOME RISK FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS ARE IN SECTION 6. IF YOU HAVE ANY QUESTIONS ABOUT THIS PROSPECTUS, OR THE DESIRABILITY OF, OR THE PROCEDURE FOR, INVESTING IN AINSWORTH GAME TECHNOLOGY LIMITED, PLEASE CONSULT YOUR STOCKBROKER, ACCOUNTANT OR OTHER PROFESSIONAL ADVISER WITHOUT DELAY. THE NOTE TRUSTEE HAS HAD NO INVOLVEMENT IN THE PREPARATION OF ANY PART OF THIS PROSPECTUS (OTHER THAN PARTICULAR REFERENCES TO THE NOTE TRUSTEE AND THE TRUST DEED). THE NOTE TRUSTEE EXPRESSLY DISCLAIMS AND TAKES NO RESPONSIBILITY FOR ANY OTHER PART OF THIS PROSPECTUS. IT MAKES NO STATEMENT IN THIS PROSPECTUS AND HAS NOT AUTHORISED OR CAUSED THE ISSUE OF IT. THE NOTE TRUSTEE DOES NOT GUARANTEE THE PERFORMANCE OF AINSWORTH GAME TECHNOLOGY LIMITED, THE SUCCESS OF THE CONVERTIBLE NOTES OR PAYMENT OF ANY INTEREST OR OTHER RETURN ON THE CONVERTIBLE NOTES. ASX TAKES NO RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS. Currency ALL CURRENCY IN THIS PROSPECTUS IS DENOMINATED IN AUSTRALIAN DOLLARS UNLESS OTHERWISE STATED. Glossary CERTAIN TERMS AND ABBREVIATIONS IN THIS PROSPECTUS ARE DEFINED IN THE GLOSSARY OF TERMS.

3 Table of Contents Summary of Key Dates...4 Letter From The Chairman Details Of The Offer Answers to Key Questions Action Required By Investors Overview Of The Company Purpose and effect of the Rights Issue Risk Factors Taxation Summary for Investors Additional Information Glossary Appendix A - Terms of Issue

4 Summary of Key Dates Announcement of Offer and lodgment of Prospectus 16 November 2004 Notice sent to Shareholders containing information required by Appendix 3B of Listing Rules 17 November 2004 Shares quoted ex Rights and Rights trading commences 18 November 2004 Record Date - Rights Issue 24 November 2004 Despatch of Prospectus 25 November 2004 Last day of Rights trading on ASX 3 December 2004 Offer closes (Closing Date) 10 December 2004 Allotment Date 20 December 2004 Holding statements despatched 20 December 2004 Convertible Notes expected to commence trading on ASX on a normal settlement basis 21 December 2004 These dates are indicative only and subject to change. The Company reserves the right to change the dates, including to extend the Closing Date for the Offer or to close the Offer early without prior notice. 4

5 Letter from the Chairman 16 November 2004 Dear Shareholder On behalf of the Board of Ainsworth Game Technology, I am pleased to invite you to participate in a Rights Issue of Convertible Notes, which entitles Qualifying Shareholders to subscribe for two Convertible Notes for every 15 shares held in the Company on the Record Date, and a separate Placement of up to 3,846,154 Convertible Notes, both at an application price of $1.30 per Convertible Note. The Rights Issue will raise approximately $25.6 million and the Placement will raise up to $5 million. The Rights Issue is being made to all Qualifying Shareholders in Australia and New Zealand and is jointly underwritten by Pitt Capital Partners and ABN AMRO Morgans. Qualifying Shareholders who take up their full entitlement under the Rights Issue will also have the opportunity to apply for additional Convertible Notes at the application price of $1.30 per Convertible Note ( Additional Notes ). In allocating Additional Notes, priority will be given to Qualifying Shareholders with smaller holdings who are looking to top up their entitlement under the Rights Issue. The Rights issued under the Rights Issue are renounceable, so if you do not wish to take up your Rights you will have an opportunity to sell them on ASX until the close of trading on 3 December The Placement is open to all Eligible Investors who have received a fi rm allocation from one of the Joint Underwriters and will involve the issue of up to 3,846,154 Convertible Notes. The Placement is not underwritten and the proceeds of the Rights Issue will be sufficient to fund the working capital needs of the Company. The Company intends to make an application to ASX for offi cial quotation of the Convertible Notes. The Convertible Notes provide an attractive fi xed interest yield with the possibility of capital gain if the price of Ainsworth Game Technology Shares is greater than $1.30 on conversion. The Convertible Notes offer a fi ve-year fi xed interest rate of 8.00% per annum, with interest payable semi-annually until conversion or redemption. Each Convertible Note may be converted into one Share on 31 December 2007 and on maturity on 31 December 2009 and on the occurrence of specifi ed events. If the Convertible Notes have not been converted by maturity each Convertible Note will be redeemed by the Company for the issue price of $1.30. The Company has undergone rapid growth in the past fi nancial year. In my Executive Chairman s Report for 2004, I referred to two simple indicators of this: the number of Gaming Machines sold and the number of countries in which our products have been installed and accepted. In the past fi nancial year, we sold three times the number of machines than sold in the preceding year and our products are now found in over 35 jurisdictions around the world. The rapid growth in the Company s sales and demand for the Company s products has increased the Company s working capital requirements. The proceeds of the Convertible Notes issue will be used to fund increases in the Company s working capital and provide funds for further business growth, particularly our expansion in international markets. The $30 million secured loan facility from AWI will continue to be available to the Company and may be drawn upon to support interest payments under the Convertible Notes, if required. I have also indicated that an additional $10 million facility would be provided, if required, to further support the current international growth being experienced by the Company. I and members of my immediate family, including specifi ed entities controlled by us, currently hold a total of 59.36% of the issued Shares of the Company. We have each agreed to take up our full entitlement to the Convertible Notes under the Rights Issue. The other Directors also intend taking up their full entitlements under the Rights Issue. This Prospectus outlines the details of the Offer, I urge you to read it carefully for further details of this investment. If you have any questions regarding the Offer, you should consult a person able to give fi nancial product advice, a stockbroker, accountant or other professional adviser. On behalf of the directors, I look forward to your participation in the Offer. Yours sincerely Leonard H Ainsworth Executive Chairman 5

6 1. Details Of The Offer 1.1 Offer Details Ainsworth Game Technology Limited ( Ainsworth Game Technology or the Company ) is offering for subscription 19,714,717 Convertible Notes at a subscription price of $1.30 per Convertible Note by way of a renounceable Rights issue. Persons who are registered as holders of Shares at 5pm Sydney time on 24 November 2004 (the Record Date ) (other than Non- Participating Foreign Holders) ( Qualifying Shareholders ) are being offered Convertible Notes in the ratio of two Convertible Notes for every 15 Shares then held at a price of $1.30 per Convertible Note. The Prospectus also relates to a Placement to Eligible Investors who have received a fi rm allocation from one of the Joint Underwriters and will involve the issue of up to 3,846,154 Convertible Notes, at a price of $1.30 per Convertible Note ( Placement ). There are 147,860,377 Shares on issue at the date of this Prospectus and 19,714,717 Convertible Notes will be offered under the Rights Issue to raise approximately $25.6 million, before the expenses of the Rights Issue. Up to $5 million may also be raised under the offer of up to 3,846,154 Convertible Notes under the Placement. Fractional entitlements to Convertible Notes under the Rights Issue will be rounded up to the nearest whole Convertible Note. The entitlement of Qualifying Shareholders under the Rights Issue is shown on the accompanying Application Form - Rights Issue. The closing time and the fi nal date for applications and acceptances under the Rights Issue and the Placement by lodgement of the Application Form - Rights Issue and Application Form - Placement (respectively) and payment for the Convertible Notes is 5pm Sydney time on 10 December Rights trading The Rights are renounceable. This means that you can sell your Rights on ASX or otherwise transfer them if you do not wish to take up some or all of the Convertible Notes to which you are entitled. See section 3.1(c) for instructions on how to sell your Rights on ASX. Trading of Rights on ASX will commence on 18 November 2004 and will end on 3 December You may sell some or all of your Rights on ASX during this period if you decide not to accept your full entitlement to the Convertible Notes. 1.3 ASX quotation of Convertible Notes Application will be made to ASX for the Convertible Notes to be granted quotation on ASX within 7 days after the date of this Prospectus. If that permission is not granted by ASX within three months after the date of this Prospectus, Ainsworth Game Technology will not issue any Convertible Notes and a full refund of all application moneys received (without interest) will be made as soon as practicable. 1.4 Allotment of Convertible Notes Allotment of Convertible Notes will only be made once the Application Monies have been received and ASX has granted permission for the Convertible Notes to be given offi cial quotation. It is expected that Convertible Notes will be allotted on 20 December 2004 and that noteholder statements for the Convertible Notes will be despatched on the same day. It is the responsibility of Applicants to determine their allocation prior to trading in the Convertible Notes. Applicants who sell Convertible Notes before they receive their statement do so at their own risk. 6

7 1.5 Joint Underwriting of the Issue The Rights Issue has been jointly underwritten by Pitt Capital Partners and ABN AMRO Morgans. Details of the Joint Underwriting Agreement are set out in Section Section provides information on conditions to the underwriting as well as certain circumstances under which the Joint Underwriters may terminate the underwriting of the Issue. 1.6 Top Up Facility Under the Top Up Facility, Qualifying Shareholders may apply for Additional Notes in excess of their entitlement. The price paid by Qualifying Shareholders for Additional Notes will be the issue price of $1.30 per Additional Note. Applications for Additional Notes can only be satisfi ed to the extent to which there is a shortfall in subscriptions under the Rights Issue ( Shortfall ), and no additional Convertible Notes will be made available to satisfy applications for Additional Notes. If the number of Additional Notes applied for is less than that available from the Shortfall, all Qualifying Shareholders will be allocated the number of Additional Notes applied for in full. If more Additional Notes are applied for than are available from the Shortfall, scale back arrangements will apply. The method of scale back will be determined by the Company in consultation with the Joint Underwriters, however priority will be given to Qualifying Shareholders that wish to top up their entitlements to 1,000 Convertible Notes (in aggregate). Excess application money will be refunded without interest. It is possible that there will be few or no Additional Notes for issue in the Top Up Facility. Applicants may be allotted a lesser number of Additional Notes than applied for and will be refunded excess application money without interest. 1.7 Non-Participating Foreign Holders The Offer is not being extended to any Shareholder whose registered address is outside Australia or New Zealand ( Non- Participating Foreign Holders ). ABN AMRO Morgans will sell the Rights of Non-Participating Foreign Holders on ASX provided there is a viable market in the Rights and a premium over the expenses of sale is likely to be obtained. The ability to sell those Rights and the price obtained for those Rights are dependent on market conditions. Neither Ainsworth Game Technology nor ABN AMRO Morgans will be subject to any liability, including liability for negligence, for failure to sell Rights or to sell Rights at any particular price. The net sale proceeds of Rights sold by ABN AMRO Morgans, after deducting brokerage charges, will be distributed in Australian dollars to each of the Non-Participating Foreign Holders for whose benefi t the Rights were sold, in proportion to their respective shareholding. If there is not a viable market for the Rights of the Non-Participating Foreign Holders or a premium over the expenses of sale cannot be obtained, the Rights of the Non-Participating Foreign Holders will be allowed to lapse and the Joint Underwriters will procure that Convertible Notes represented by those Rights are subscribed for in accordance with the Joint Underwriting Agreement. 7

8 1.8 Market price of Shares The lowest and highest closing prices of Shares on ASX during the three months immediately preceding the date of this Prospectus and the respective dates of those sales were $0.56 on 20 August 2004 and $1.38 on 4 November The last closing price of Shares on ASX on the day immediately prior to the date that the Shares traded ex Rights (being 17 November 2004) was $1.09. The latest available closing price of Shares on ASX immediately before the date of this Prospectus (being 19 November 2004) was $1.09. Price ($) 1.60 AGI closing prices on ASX 19 August November /08/ /08/2004 2/09/2004 9/09/ /09/ /09/ /09/2004 7/10/ /10/ /10/ /10/2004 4/11/ /11/ /11/ Ranking of Convertible Notes The Convertible Notes will be unsecured debt obligations of the Company and will rank equally with other ordinary unsecured creditors Position of major shareholders The Company s largest shareholder, being Mr Len Ainsworth, and entities controlled by him and members of his immediate family (the Ainsworth Family Holders ), that currently hold a total of 59.36% of the Company s issued capital, have committed in writing to take up their full entitlement under the Offer Enquiries If you have any questions regarding the Offer, please contact the Share Registry on telephone number or contact your stockbroker or professional advisor. 8

9 1.12 Summary Terms of Issue Set out below is a summary of the key Terms of Issue of the Convertible Notes. This information is summary only and should be read in conjunction with other information contained in this Prospectus including the investment risks in Section 6 and the full Terms of Issue in Appendix A. Issuer Ainsworth Game Technology Limited. Note Trustee Permanent Trustee Company Limited (ACN ). Amount to be raised under the Rights Issue $25,629,132. Amount to be raised under the Placement Up to $5,000,000. Issue Price Shareholders entitlement under the Rights Issue Maturity Date Coupon (interest) $1.30 per Convertible Note. 2 Convertible Notes for every 15 Shares held in Ainsworth Game Technology. 31 December 2009, unless redeemed or converted prior to maturity. 8.00% per annum on the Issue Price payable semi-annually in arrears on each Interest Payment Date until the Maturity Date. Interest Payment Dates Interest to be paid semi-annually on each 30 June and 31 December until the Maturity Date, unless the Convertible Note is earlier redeemed or converted in accordance with the Terms of Issue, in which case interest will be paid up until the date of such conversion or redemption. The fi rst Interest Payment Date will be 30 June 2005 and interest will accrue from the Issue Date. Interest not paid on any Interest Payment Date accrues interest at the Default Rate, which is the Interest Rate plus 2% per annum. Conversion by Noteholder Conversion by the Company On Conversion Dates Noteholders may elect to convert some or all (but not fewer than 1,000, unless the total holding is less than 1,000) of their outstanding Convertible Notes into Shares. Noteholders wishing to convert all of their Convertible Notes may do so regardless of the number of Convertible Notes held. If a Noteholder elects to convert, the principal amount repayable on the Convertible Note will be applied as the subscription price for the Share. Any accrued and unpaid interest up to the Conversion Date will be paid to the Noteholder. Conversion may also occur at the election of Noteholders at other times on the occurrence of a Trigger Event. A Trigger Event is an event of default or a change of control (each described in the Terms of Issue). Each Share issued on conversion will rank equally with all existing Shares then on issue. The Company will issue Shares in respect of converted Convertible Notes within 15 Business Days of the applicable Conversion Date for those Convertible Notes. There is no right for the Company to require conversion of the Convertible Notes into Shares. 9

10 Conversion Number Conversion Dates Redemption Participation Voting Quotation Ranking Structure 1 Convertible Note may be converted to 1 Share (subject to certain adjustments as described in the Terms of Issue). The Conversion Dates will be 31 December 2007 or 31 December 2009, or following the occurrence of a Trigger Event as defi ned in the Terms of Issue. Convertible Notes outstanding at the Maturity Date will be redeemed by Ainsworth Game Technology at $1.30 each on the Maturity Date. Ainsworth Game Technology has the option to redeem all (but not some) of the Convertible Notes prior to the Maturity Date following the occurrence of a Takeover Event (as defi ned in the Terms of Issue). The Convertible Notes will not carry any entitlement to participate in future issues of securities by Ainsworth Game Technology. The conversion ratio or the number of Shares to be issued to a Noteholder will be adjusted for bonus elements of any pro rata issue of Shares, rights issue or for any capital reorganisation prior to the earlier of conversion and the Maturity Date. Except in the circumstances required by the Listing Rules or the Corporations Act, Noteholders will not be entitled to vote at meetings of the Company prior to conversion of Convertible Notes into Shares, other than at a Noteholders meeting convened for the Noteholders. Ainsworth Game Technology will apply for ASX quotation of the Convertible Notes within seven days after the date of this Prospectus. Ainsworth Game Technology will also apply for ASX quotation of the Rights prior to issue of the Convertible Notes. If quotation is not granted, the Convertible Notes will not be issued. Unsecured debt obligations of the Company ranking equally with other ordinary unsecured creditors of the Company. The Convertible Notes are classifi ed as unsecured notes for the purposes of section 283BH of the Corporations Act. The Trust Deed provides for the obligations of the Company and the Note Trustee among themselves and to the Noteholders in relation to the Convertible Notes. A summary of the Trust Deed is found in Section 8.5. Prospective investors can obtain a copy of the Trust Deed free of charge from the Company. 10

11 2. Answers to Key Questions The purpose of this Section is to answer some of the questions which prospective investors may have about the Convertible Notes. These answers are intended as a guide only. Further details are provided elsewhere in this Prospectus, which you should read in its entirety. The Terms of Issue of the Convertible Notes are set out in full in Appendix A. What is the Rights Issue? Can Qualifying Shareholders apply for more Convertible Notes than their entitlement under the Rights Issue? Under the renounceable Rights Issue Ainsworth Game Technology shareholders are entitled to 2 Convertible Notes for each 15 Shares they hold in Ainsworth Game Technology. The Rights are renounceable which means that if you do not wish to take up some or all of the Convertible Notes to which you are entitled you may sell your Rights on ASX or otherwise transfer them. Yes, Qualifying Shareholders may also apply for Additional Notes. Any Shortfall will be allocated to any Additional Notes applied for. If the number of Additional Notes applied for exceeds the Shortfall, scale back arrangements will apply. The method of scale back will be determined by the Company, in consultation with the Joint Underwriters, however priority will be given to Qualifying Shareholders that wish to top up their entitlement to 1,000 Convertible Notes (in aggregate). What are the Convertible Notes? Why is Ainsworth Game Technology issuing Convertible Notes? The Convertible Notes are convertible notes issued under and on the terms set out in the Trust Deed. The Convertible Notes are unsecured debt obligations and, in the event of liquidation, Noteholders will rank equally with other ordinary unsecured creditors of Ainsworth Game Technology. Ainsworth Game Technology is issuing Convertible Notes in order to provide the Company with funds to fi nance business growth and fund increased working capital requirements resulting from growth in the Company s sales and the extended credit terms that are typically provided by Gaming Machine manufacturers, particularly in international markets. What is the Interest Rate? The Interest Rate on the Convertible Notes will be fi xed at 8.00% per annum. When will Interest be paid? What happens if an Interest payment is not made? The fi rst Interest Payment will be payable on 30 June 2005 and will accrue from the Issue Date. Thereafter, interest is payable semi-annually in arrears on 30 June and 31 December each year. Interest will be paid until the Maturity Date for the Convertible Note, unless the Convertible Note is earlier redeemed or converted in accordance with the Terms of Issue, in which case interest will be paid up until the date of conversion or redemption. If the Company does not make an Interest Payment on an Interest Payment Date then the Company will pay interest on the due amount at the Default Rate, which is the Interest Rate payable on the Convertible Notes plus 2% per annum. 11

12 What is a Conversion? When does a Noteholder request Conversion? Can a Noteholder convert part of their Convertible Notes? What are Conversion Dates and when do they occur? Can Ainsworth Game Technology redeem the Convertible Notes? Can Ainsworth Game Technology require me to convert my Convertible Notes into Shares? Will I be able to request repayment of my investment? On Conversion Dates, Noteholders may elect to convert each Convertible Note held into one Share that will rank equally in all respects with Shares from the Conversion Date. However, the number of Shares into which a Convertible Note will convert will be adjusted in accordance with the Terms of Issue for bonus issues and rights issues or any capital reorganisation before that Convertible Note is converted or redeemed. Ainsworth Game Technology will apply for ASX quotation of any Shares issued on conversion of Convertible Notes within 15 Business Days after their issue. To request conversion a Conversion Notice must be delivered to the Company at least 20 Business Days before a Conversion Date or on or up to 20 Business Days after a Trigger Event. Noteholders may convert a portion of their holding of Convertible Notes on a Conversion Date. However, a Noteholder may not convert fewer than 1,000 Convertible Notes unless the Noteholder requests conversion for their entire holding. The Conversion Dates will occur on 31 December 2007 and at the Maturity Date on 31 December Conversion Dates could also occur under the following Trigger Events: certain insolvency events occur in respect of the Company; the Convertible Notes or Shares are suspended from trading on the ASX for a period of 20 consecutive Business Days or are delisted; the Company or a material subsidiary announces its intention to dispose of substantially all of its assets; a Takeover Event occurs; and the Company materially breaches an obligation under the Trust Deed and if the breach is capable of being remedied the Company fails to remedy such breach within the specifi ed time. Ainsworth Game Technology will redeem the Convertible Notes on the Maturity Date unless the Convertible Notes are converted or redeemed earlier. The Convertible Notes will be redeemed for the Issue Price of $1.30 per Convertible Note. Ainsworth Game Technology may also redeem the Convertible Notes prior to the Maturity Date if a Takeover Event (as defi ned in the Terms of Issue) occurs. No. Only Noteholders have the right to elect to convert their Convertible Notes. Noteholders will have a right to be repaid the money originally paid for the Convertible Notes at the Maturity Date if they have not elected to convert the Convertible Notes into Shares. 12

13 Can the Convertible Notes be purchased or sold on ASX? What are the taxation implications of holding or selling Convertible Notes? Do Convertible Notes have voting rights? Is brokerage or stamp duty payable? What are the risks of investing in Convertible Notes? Are there any borrowing limitations in the terms of the Convertible Notes? Ainsworth Game Technology will apply within 7 days after the date of this Prospectus for the Convertible Notes to be quoted on ASX. Once quoted on ASX, the Convertible Notes can be purchased or sold through any stockbroker in Australia. If permission for quotation is not granted, the Convertible Notes will not be issued and Application Monies will be refunded (without interest) as soon as practicable. The price of the Convertible Notes on ASX may be higher or lower than the Face Value and will depend, among other things, on the level of supply and demand for the Convertible Notes. The taxation implications of investing in Convertible Notes will depend on an investor s individual circumstances. Prospective investors should obtain their own taxation advice. A general outline of taxation implications for Australian residents appears in section 7. As they are debt securities, Convertible Notes do not have voting rights in meetings of the Company, except in the limited circumstances specifi ed in the Terms of Issue, when each Convertible Note will carry the same voting rights as one Share. If conversion has occurred the resulting Shares each carry one vote. The key rights attaching to the Shares are described in the Terms of Issue. No brokerage or stamp duty is payable by investors on the issue of Convertible Notes. However, brokerage (but not stamp duty while the Convertible Notes are quoted on ASX) may be payable on any subsequent transfer of Convertible Notes. An investment in Ainsworth Game Technology, through Convertible Notes, will involve certain risks. You should refer to Section 6 for further information. No. However, as at the date of this Prospectus, under the Corporations Act, the Note Trustee is required to exercise reasonable diligence to ascertain whether the property of the Company that is or should be available will be suffi cient to repay the amount borrowed under the Convertible Notes when due. 13

14 3. Action Required By Investors 3.1 Rights Issue to Qualifying Shareholders (a) Details of your entitlement (b) (c) (d) (e) The accompanying Application Form - Rights Issue details the number of Convertible Notes to which Qualifying Shareholders are entitled. Alternative courses of action available to Qualifying Shareholders are set out in the remainder of this section 3.1. If you wish to take up all of your Rights and apply for Convertible Notes Qualifying Shareholders who wish to take up all of their Rights should complete the accompanying personalised Application Form - Rights Issue in accordance with the instructions set out on that form and forward it, together with your payment for the amount due in respect of the Convertible Notes you intend to take up, to reach the Share Registry no later than 5pm Sydney time on 10 December The addresses of the Share Registry are: Postal address Address for hand deliveries Ainsworth Game Technology Limited Ainsworth Game Technology Limited c/- Computershare Investor Services Pty Limited c/- Computershare Investor Services Pty Limited GPO Box 7115 Level 3, 60 Carrington Street Sydney NSW 2001 Sydney NSW 2000 If you wish to sell all of your Rights on ASX If you are a Qualifying Shareholder and you wish to sell all of your Rights on ASX you should complete the section on the back of the accompanying personalised Application Form - Rights Issue marked Instructions to Your Stockbroker and lodge the form with your stockbroker as soon as possible. Trading of Rights on ASX will commence on 18 November 2004 and sale of your Rights must be completed on or before 3 December 2004 when Rights trading ceases. Brokerage may be payable to your stockbroker in connection with the sale of Rights on ASX. If you wish to sell part of your Rights on ASX and take up the balance If you are a Qualifying Shareholder and you wish to sell part of your Rights on ASX and take up the balance you should complete the accompanying personalised Application Form - Rights Issue in accordance with the instructions set out on that form. You should complete the section on the back of the accompanying personalised Application Form - Rights Issue marked Instructions to Your Stockbroker in relation to those Rights you wish to sell and lodge the form, together with your payment for the amount due in respect of the Convertible Notes you intend to take up, with your stockbroker as soon as possible. Trading of Rights on ASX will commence on 18 November 2004 and sale of your Rights must be completed on or before 3 December 2004 when Rights trading ceases. If you wish to transfer all or a part of your Rights to another person other than on ASX If you are a Qualifying Shareholder and you wish to transfer all or part of your Rights to another person other than on ASX you should forward a completed standard renunciation form (which can be obtained from the Share Registry) together with the accompanying personalised Application Form - Rights Issue and the transferee s payment for the amount due in respect of the Convertible Notes to be taken up by the transferee to reach the Share Registry no later than 5pm Sydney time on 10 December The addresses of the Share Registry are: Postal address Address for hand deliveries Ainsworth Game Technology Limited Ainsworth Game Technology Limited c/- Computershare Investor Services Pty Limited c/- Computershare Investor Services Pty Limited GPO Box 7115 Level 3, 60 Carrington Street Sydney NSW 2001 Sydney NSW

15 (f) If you wish to take up part of your Rights without the sale of the balance If you are a Qualifying Shareholder and you wish to take up part of your Rights without the sale of the balance you should complete the accompanying personalised Application Form - Rights Issue for those Rights which you intend to take up and forward the form, together with your payment for the amount due in respect of the Convertible Notes you intend to take up, to reach the Share Registry no later than 5pm Sydney time on 10 December The addresses of the Share Registry are: Postal address Address for hand deliveries Ainsworth Game Technology Limited Ainsworth Game Technology Limited c/- Computershare Investor Services Pty Limited c/- Computershare Investor Services Pty Limited GPO Box 7115 Level 3, 60 Carrington Street Sydney NSW 2001 Sydney NSW 2000 (g) Rights not taken up If you are a Qualifying Shareholder and you decide not to take up all or part of your Rights, you should consider selling your Rights rather than allow them to lapse. You will receive no benefi t for Rights which lapse. Accordingly it is important that you consider taking action either to accept or renounce (sell) your Rights. (h) Applications for Additional Notes Qualifying Shareholders may also apply for Additional Notes by completing the accompanying personalised Application Form - Rights Issue in accordance with the instructions set out on the form and forward it, together with your payment for both Convertible Notes to which you are entitled, as well as for any Additional Notes you are applying for, to reach the Share Registry no later than 5.00 pm Sydney Time on 10 December If more Additional Notes are applied for than are available from the Shortfall, scale back arrangements will apply. The method of scale back will be determined by the Company in consultation with the Lead Manager, however priority will be given to Qualifying Shareholders that wish to top up their entitlement to 1000 Convertible Notes (in aggregate). Excess application money will be refunded without interest. The addresses of the Share Registry are: Postal address Address for hand deliveries Ainsworth Game Technology Limited Ainsworth Game Technology Limited c/- Computershare Investor Services Pty Limited c/- Computershare Investor Services Pty Limited GPO Box 7115 Level 3, 60 Carrington Street Sydney NSW 2001 Sydney NSW Placement - application process for Eligible Investors If you are an Eligible Investor and have received a fi rm allocation from one of the Joint Underwriters you should complete the Application Form - Placement attached to or accompanying this Prospectus in accordance with the instructions set out on the Application Form - Placement. Your completed Application Form - Placement and application cheque(s) must be delivered directly to the Joint Underwriter (not to the Share Registry) from whom you received your fi rm allocation. This requirement, and any other requirements, will be explained to you by the Joint Underwriter who provided the firm allocation to you. If you have a fi rm allocation of Convertible Notes and are in any doubt about what action you should take, you should immediately contact the Joint Underwriter who has made you a fi rm offer. The application process outlined above does not apply to Qualifying Shareholders subscribing for the Rights Issue. Qualifying Shareholders should refer to Section 3.1 of this Prospectus. 3.3 Payment for Convertible Notes Application forms under both the Rights Issue and the Placement must be accompanied by payment in full of $1.30 per Convertible Note. Cheques must be in Australian currency, drawn on an Australian bank, made payable to Ainsworth Game Technology Limited and crossed Not Negotiable. Do not forward cash or money orders. Receipts for payment will not be issued. Application Monies will be held on trust for Applicants until allotment of the Convertible Notes. Interest earned on Application Monies will be for the benefi t of Ainsworth Game Technology and will be retained by it whether or not allotment takes place. 15

16 4. Overview Of The Company Business And Operational Overview Ainsworth Game Technology is involved in the design, development and supply of gaming machines and gaming systems in Australia and internationally. The Ainsworth name is synonymous with innovation in the gaming industry and helped make Australia a world leader in the development and production of gaming products. The Company was founded in 1995 by Mr Len Ainsworth, who is currently the Company s Executive Chairman and its largest shareholder. Having already established the world s second largest casino style gaming machine company, Mr Ainsworth saw an opportunity to provide gaming products to global markets through the development and supply of the innovative Ambassador Gaming Machine. The Company was listed on the Australian Stock Exchange in December The Company has two main products: Ambassador Available in Console and compact bench top model Proven performance in domestic market Games currently available in 9 different languages Linked progressive system performing well across a range of markets Low conversion cost due to intelligent design Celebrity Acquired through the acquisition of VGS in January 2003 Competitively priced product relative to competitors Games available in a range of languages Sold as machines and as kits The Ambassador Gaming Machines are currently produced at the Company s manufacturing facility in Newington, NSW, while the Celebrity Gaming Machines are currently produced in its Huntingdale, VIC, facility. An upgrade and expansion of the Newington manufacturing facility in the past year has enabled the Company to be self suffi cient in various aspects of the manufacturing process and has increased production capacity in anticipation of further growth. Further substantial expansion of productive capacity is possible on this site when required for minimal capital cost. The Company over the last three years has grown signifi cantly with Gaming Machine unit sales in the year ended 30 June 2004 approximately three times that of the previous fi nancial year. This growth has been driven primarily by expansion into international markets. Ainsworth Game Technology currently generates sales in Australia, New Zealand, the Americas, South Africa, Europe and Asia. In the last fi nancial year, international sales represented 64% of the Company s total sales. Active subsidiary companies have been established in Austria, U.S.A., U.K. and New Zealand to support sales in international markets. The company now distributes products in 35 jurisdictions globally, and exhibits at 12 major international and domestic trade shows. 16

17 The Company anticipates further growth in its international operations, as the international gaming industry is vibrant with many opportunities for Ainsworth Game Technology across the globe. The Company continues to receive strong interest from potential customers worldwide, following successful exhibitions at gaming shows including the Australian Gaming Machine Expo as well as the Global Gaming Expo in Las Vegas (the world s largest global gaming trade show). Growth in the international Gaming Machine market has allowed Ainsworth Game Technology to diversify its sales and reduce its reliance on the domestic Australian market, where signifi cant changes have occurred recently as a result of regulatory changes. These changes have included harm minimisation initiatives such as gaming machine number capping and reduced operating hours together with smoking bans at customer venues. Along with these measures are pending increased taxation levels for clubs in the key jurisdiction of New South Wales. These measures have impacted upon the Company s customers ability to maintain existing capital expenditure levels and have temporarily reduced overall demand for gaming machines and related equipment. Notwithstanding regulatory changes affecting the clubs and hotel industry in Australia, the Company is confident of maintaining and possibly increasing market share in the domestic market during the current year. The rapid growth in international sales and the associated extended credit terms within these new markets has led to a requirement for additional funding in order to supplement the Company s expected investment in working capital. This funding is expected to ensure the Company is able to support continued growth and ensure that the Company is able to capitalise on strong international acceptance of its product into export markets. As disclosed in its recent Quarterly Report provided to the ASX, the Company s net operating cash outfl ow for the quarter ended 30 September 2004 was $9.2 million, an increase of $5.4 million compared to the cash outfl ow of $3.8 million for the quarter ended 30 September The increase over the previous corresponding period is primarily due to increased investment in working capital driven by the increase in sales as well as the build up of inventory required to meet an expected increase in orders and deliveries for the 31 December 2004 quarter. Traditionally the second quarter of the fi nancial year is the busiest period of sales activity for the Australian gaming industry. This increased sales activity follows the Australasian Gaming Exhibition held in late August, the Global Gaming Expo in October, and the forthcoming Christmas buying period. As the Company receives an increased level of orders for its products and remains in a growth phase, the requirement for capital is expected to continue and the Company expects to continue to have operational cash outfl ows in the short-to-medium term. The Company currently expects to meet these funding requirements by utilising the proceeds of the Offer as well as making drawdowns against the existing loan facility provided by Associated World Investments Pty Ltd ( AWI ) (the AWI Loan ), a company owned and controlled by Mr Len Ainsworth. Details of the AWI Loan can be found in Section

18 The overall business strategy of the Company is to pursue rapid growth both in Australia and internationally. To date growth has come organically and through the acquisition of the VGS business in January Future growth is expected to come from a combination of organic growth, acquisitions and potential joint ventures. The Company continues to invest in building an international distribution network to support its sales into export markets. The Company has also increased its spending on research and development and games development, the success of which is crucial to maintaining demand for machines. Company s Management and Board To manage future growth a number of new senior executive appointments have recently been made. These senior appointments have been announced to ASX and comprise both experienced gaming executives and qualifi ed technical appointments. The Company continues to build a management team with a blend of youth and experience and considerable gaming industry knowledge. Since 30 June 2004 a total of 1,885,000 share options have been issued to 50 senior managers and key staff as part of the Company s staff retention and motivation program. The Company s Board comprises 5 directors, 2 of which are full-time executives, including the Executive Chairman. As from 1 September 2004, Mr John Cowling, a non-executive director since August 2003, was appointed as an Executive Director with a number of senior executive responsibilities. The role of the Board and the Board s sub-committees are outlined in the Company s 2004 Annual Report which also details the status of the Company s compliance with the corporate governance guidelines issued by ASX. Financial Performance Unaudited results for the fi rst quarter of the 2005 fi nancial year indicate a 53% increase in revenues over the previous corresponding period, driven by an increase in the number of units sold. The number of machines on back order remains high, particularly relating to orders from overseas markets. Gross margins have increased from 37% to 40% due to a change in the mix of sales to higher priced products. The Company continues to maintain a high level of spending on research and development to ensure Ainsworth Game Technology products maintain their premium market position and can be sold into a variety of international markets with different customer and regulatory requirements. Demand for machines is driven by the success of games and spending in this area continues to increase. In addition, the Company continues to spend on building an international distribution network to support sales into international markets. The fi rst quarter s fi nancial performance was in line with the previous corresponding period last year as additional revenue earned was offset by higher expenditure on market development including obtaining licences and establishing distribution networks in the USA and other international markets. Current Developments On 11 November 2004, the Company announced that subject to fi nalisation of contracts and subject to regulatory approval would enter into a strategic alliance with Bytecraft Systems ( Bytecraft ), Australia s largest Gaming Machine service provider. Under this agreement, Bytecraft will transfer its Sydney based gaming venue installation and maintenance business operating in New South Wales to Ainsworth Game Technology in exchange for 1.2 million shares in the Company. The Company and Bytecraft will also explore other cooperative ventures in the gaming industry. The Company and Unicum entered into a strategic alliance in September 2003 for the supply of Gaming Machines kits and specialised games designed for the Russian market. This alliance has proved successful for both parties and has resulted in the placement of further substantial orders for the Company s products and proposals for a closer relationship in the future. Outlook At the Annual General Meeting on 16 November 2004, the Chief Operating Offi cer, Mr Hans Zeidler, reported to shareholders on the Company s fi rst quarter results which are in line with the previous corresponding period. Increased sales revenues were achieved and were offset by further spending on research and development and new market development. The Company has announced its expectation that, subject to the completion and delivery of a number of large orders prior to the end of December, net profi t for the fi rst half of the 2005 fi nancial year, after expensing increased research and development and market development costs, will be in line with that of the corresponding period last fi nancial year. 18

19 5. Purpose and effect of the Rights Issue 5.1 Use of proceeds of the Rights Issue The proceeds raised from the Rights Issue will be used to fi nance business growth and fund increased working capital resulting from growth in the Company s sales and the extended credit terms that are typically provided by Gaming Machine manufacturers particularly in international markets. $ 000 Business growth and working capital 24,429 Estimated costs of the Offer 1,200 Total proceeds 1 25,629 To the extent that the proceeds of the Rights Issue exceed the amount required to fund the immediate working capital requirements of the Company, the residual funds will be used to temporarily reduce existing debt levels from AWI, or be invested in short term investments such as bank bills, similar cash securities or on deposit in the Company s bank accounts. The Company anticipates that any proceeds of the Placement will be used to temporarily reduce existing debt levels from AWI, or be invested in short term investments such as bank bills, similar cash securities or on deposit in the Company s bank accounts. The proceeds (if any) of the Placement will not be required to fund the immediate capital requirements of the Company. Details of the AWI Loan are set out in section of this Prospectus. At the date of this Prospectus the amount owed under the AWI Loan was $30 million. The terms and facility limits of the AWI Loan will be unchanged following the Offer and may be drawn upon from time to time, if required to meet the Company s interest obligations to Noteholders. The issue of Convertible Notes is part of Ainsworth Game Technology s long-term program to increase its capital base to fund growth. The Convertible Notes are the preferred method of funding as it is long term, at competitive rates compared to other sources of unsecured fi nance and have the potential, if the Convertible Notes are converted, to supplement the equity base of the Company. The Rights Issue also gives all Shareholders an opportunity to participate in funding the Company s future growth, with the potential to convert the Convertible Notes into an equity holding. 5.2 Pro forma statement of financial position A pro forma statement of fi nancial position for Ainsworth Game Technology is provided below showing the net effect of the Rights Issue, as if that event had occurred on 30 June The pro forma statement of fi nancial position is based on Ainsworth Game Technology s audited fi nancial statements for the year ended 30 June These fi gures do not include the proceeds (if any) of the Placement. 19

20 AS AT 30 JUNE 2004 Audited Adjustments (Note 2) Pro forma $ 000 $ 000 $ 000 CURRENT ASSETS Cash assets 2,443 24,429 26,872 Receivables 30,496 30,496 Inventories 17,612 17,612 Other TOTAL CURRENT ASSETS 51,239 24,429 75,668 NON CURRENT ASSETS Receivables 2,436 2,436 Property, plant and equipment 18,217 18,217 Intangible assets 2,000 2,000 Other TOTAL NON CURRENT ASSETS 22,743 22,743 TOTAL ASSETS 73,982 24,429 98,411 CURRENT LIABILITIES Payables 15,601 15,601 Interest bearing liabilities 1,702 1,702 Current tax liabilities Provisions TOTAL CURRENT LIABILITIES 18,260 18,260 NON CURRENT LIABILITIES Interest bearing liabilities (Note 1) 15,280 24,429 39,709 Provisions TOTAL NON CURRENT LIABILITIES 15,479 24,429 39,908 TOTAL LIABILITIES 33,739 24,429 58,168 NET ASSETS 40,243 40,243 EQUITY Contributed equity 72,807 72,807 Reserves 7 7 Accumulated losses [32,571] [32,571] TOTAL EQUITY 40,243 40,243 Note 1 - Subsequent to 30 June 2004 the Company funded further investment in working capital driven by the increase in sales as well as the build up of inventory required to meet an expected increase in orders and deliveries for the 31 December 2004 quarter by further draw-downs on the AWI Loan. The amount drawn down pursuant to this facility at the date of this prospectus was $30 million. To the extent that the proceeds of the Offer exceed the amount required to fund the immediate working capital requirements of the Company, the residual funds will be used to temporarily reduce existing debt levels from AWI, or be invested in short term investments such as bank bills, similar cash securities or on deposit in the Company s bank accounts. Note 2 - The pro forma statement of fi nancial position does not refl ect proceeds (if any) that may be received from the Placement detailed in Section 1.1 of this Prospectus. Up to $5 million may be raised by the Placement. 20

21 5.3 Pro forma adjustments underlying the pro forma statement of financial position Adjustments The principal adjustments and assumptions used to derive the pro forma statement of fi nancial position are: (a) Gross proceeds of the Rights Issue The gross proceeds of the Rights Issue of approximately $25.6 million will be received and will be recorded as a non-current interest bearing liability in the statement of fi nancial position. (b) Costs of the Rights Issue Costs of the Rights Issue of approximately $1.2 million (including management and underwriting fees) will be treated as a reduction on the face value of the Convertible Notes and deducted from the proceeds of the Rights Issue. (c) Balance of Net Proceeds The pro forma statement of fi nancial position assumes that the $24.4 million of net proceeds from the Rights Issue will be used to increase cash assets. As noted in Section 4, it is intended that these funds will be used to fund working capital requirements and business growth. (d) Taxes and Trading Activities As the pro forma statement of fi nancial position has been prepared as at 30 June 2004, adjustments have not been made for any movements subsequent to 30 June General Assumptions General assumptions relating to the pro forma statement of fi nancial position are: (a) Compliance with Accounting Standards Ainsworth Game Technology has prepared a pro forma statement of fi nancial position that complies with Accounting Standards in Australia and is consistent with accounting policies adopted by the Company in its fi nancial statements for the year ended 30 June The pro forma statement of fi nancial position is presented in an abbreviated form insofar as it does not comply with all the disclosures required by Australian accounting standards applicable to general purpose fi nancial reports prepared in accordance with the Corporations Act. (b) International Financial Reporting Standards For reporting periods beginning on or after 1 January 2005, Ainsworth Game Technology must comply with the Australian equivalents of International Financial Reporting Standards ( IFRS ) as issued by the Australian Accounting Standards Board ( AASB ). All fi nancial information disclosed in the Prospectus has been prepared in accordance with generally accepted accounting principles in Australia ( Australian GAAP ). For the Company, IFRS will apply for the fi rst time for the year ending 30 June In the fi nancial statements for the year ending 30 June 2006, full IFRS comparatives for the year ending 30 June 2005 will be disclosed (except for AASB 132 Financial Instruments; Disclosure and Presentation, which will be adjusted in retained earnings at 1 July 2005). Consequently the transition date to IFRS for the Company is 1 July 2004, the fi rst day of the fi nancial year ending 30 June The differences between Australian GAAP and IFRS identifi ed by Ainsworth Game Technology to date as potentially having a signifi cant effect on its fi nancial position are summarised below. The summary is based on a current interpretation of IFRS, as issued by the AASB at 30 June 2004, which are expected to apply to the Company from 1 July The summary should not be taken as an exhaustive list of all the differences between Australian GAAP and IFRS. The summary does not identify all disclosure, presentation or classifi cation differences that would affect the manner in which transactions or events are presented. The IFRS and related interpretation may change between the issue date of this Prospectus and 1 July The regulatory bodies that promulgate Australian GAAP and IFRS have significant ongoing projects that could affect the differences between Australian GAAP and IFRS described below and the impact of these differences relative to Ainsworth Game Technology s pro forma statement of fi nancial position may vary materially. Ainsworth Game Technology is not currently in a position to quantify the effects of the differences discussed below. Accordingly, there can be no assurances that the fi nancial position of Ainsworth Game Technology as disclosed in the Prospectus would not be signifi cantly different if determined in accordance with IFRS. 21

22 The most signifi cant potential implications of the conversion to IFRS for Ainsworth Game Technology are: Treatment of purchased goodwill IFRS requires purchased goodwill to be tested annually in accordance with an impairment test, with any decrements expensed in the statement of fi nancial performance. This differs from current practice in that Ainsworth Game Technology currently amortises purchased goodwill on a straight-line basis over its estimated useful life. Taxation Ainsworth Game Technology currently adopts the income statement liability method of tax effect accounting. The conversion to IFRS will require a balance sheet approach to be adopted, which may result in additional deferred tax assets and liabilities being included in the statement of fi nancial position. Under IFRS, the test for recognition of tax losses on the statement of fi nancial position is whether it is more probable than not that the tax losses will be utilised. This is an easier test to meet than the Australian GAAP test of virtual certainty. Accordingly, the Company may be required to recognise a deferred tax asset earlier under IFRS than Australian GAAP. Expensing of issued share options It is proposed under IFRS that share options issued will be expensed through the statement of fi nancial performance. Currently, the values of options issued are disclosed in the Directors report of the annual report and in the notes to the fi nancial statements. Financial instruments All fi nancial instruments must be recognised on the statement of fi nancial position and all derivatives and most fi nancial assets must be carried at fair value. Research and development costs Development costs must be included as an asset on the statement of fi nancial position, to the extent it is probable that future economic benefi ts will be derived whilst research expenses must be expensed under IFRS. Both research and development costs are expensed as incurred under Australian Accounting Standards where their recoverability is not assured beyond a reasonable doubt. 22

23 6. Risk Factors There are a number of factors, both specifi c to Ainsworth Game Technology and of a general nature, which may affect the future operating and fi nancial performance of the Company and the value of Convertible Notes. Some may be mitigated by appropriate action by the Company, however, many are outside of the Company s control. This section is a summary of some of these risk factors and should not be regarded as exhaustive. Investors should carefully consider these risk factors in conjunction with the other information contained in this Prospectus before deciding whether to invest in the Company. They should also consider their personal circumstances, including fi nancial and taxation circumstances, and, if they consider it appropriate, seek appropriate professional advice before deciding whether to invest. 6.1 Risks associated with investing in Convertible Notes Set out below are risks associated with an investment in Convertible Notes. These risks arise from the nature of Convertible Notes and the Terms of Issue. Financial market conditions The market price of Convertible Notes will fl uctuate due to factors such as interest rates, general movements in the Australian and international fi nancial markets, investor sentiment, global and regional economic conditions, movements in the price of Shares and factors which may affect the Company s fi nancial performance and position. Market price of Convertible Notes The Company will apply for quotation of Convertible Notes on ASX. Prospective investors should understand that Convertible Notes may trade on ASX at a price below the Face Value. The market price of Convertible Notes may be affected by the market price of Shares and, as a result, any impact that the operational performance of the Company has on the Shares will also most likely affect the value of the Convertible Notes. Liquidity of Convertible Notes The market on ASX for Convertible Notes will likely be less liquid than the market for Shares given the relative sizes of amounts outstanding. Noteholders who wish to sell their Convertible Notes may be unable to do so at an acceptable price, or at all if insuffi cient liquidity exists in the market for Convertible Notes. Unsecured debt Convertible Notes are an unsecured debt obligation of the Company which ranks equally with other ordinary unsecured creditors of the Company. In any winding up of the Company, Noteholders will rank behind secured creditors including AWI and any future secured lenders to the Company. If the Company is wound up, Noteholders will only have a right to receive a repayment of principal and interest after all secured creditors, and any unsecured creditors preferred by law, have been paid in full. In the event of a shortfall of funds on a winding up of the Company, there is a risk that Noteholders will not receive a full return of principal or any outstanding interest. Fixed Interest Rate Until 31 December 2009 Convertible Notes will pay a fi xed Interest Rate. However, market interest rates may be volatile. Accordingly, there is a risk that the general level of interest rates may increase and the Interest Rate on Convertible Notes may become less attractive when compared to other rates of return available on comparable securities. If interest rates increase, the price of fi xed income securities generally falls. Redemption risk Noteholders may realise their holdings in Convertible Notes by selling their Convertible Notes on ASX. On the occurrence of a Takeover Event, the Company may redeem all (but not some) of the Convertible Notes before the Maturity Date. If a Takeover Event occurs, redemption may occur at a date not previously contemplated by Noteholders, which may be disadvantageous to Noteholders in light of interest rates, market conditions or individual circumstances at the time. Taxation treatment A summary of the potential taxation implications for Noteholders is set out in Section 7. This discussion is in general terms only and is not intended to provide specifi c advice in relation to the circumstances of any individual Noteholder. Accordingly, prospective investors should seek independent advice in relation to their own individual taxation position. 23

24 6.2 Specific risk factors All of the Company s revenue and profi ts are derived from the gaming industry. The Company s continued growth and its successful fi nancial performance is dependent upon many factors beyond its control including: the regulatory environment for gaming in the jurisdictions in which it operates; risks associated with the jurisdictions in which the Company operates; the pace of development, expansion and renovation of clubs, casinos, hotels and other gaming premises; and the continued popularity of gaming as a leisure activity. The continued expansion of the gaming market is dependent on a variety of political, social, legal and other factors beyond the Company s control. As a result of such factors, the Company cannot provide any assurance that it will continue to grow or maintain profi tability. Competition The markets for Gaming Machines and associated products are highly competitive and are diffi cult markets in which to compete. There are a number of established market leaders and other participants competing directly with the Company that are well fi nanced and well known. Existing or new competitors could introduce new products that are attractive to customers, new competitors may emerge in the Gaming Machine market and existing participants may seek to increase market share, all of which could reduce sales volumes and profi ts. Price competition may reduce margins and profi tability. The Company is smaller and has less substantial fi nancial resources than many of its competitors. While the Company believes it has signifi cant strategic advantages through being an innovative competitor to its larger competitors, the Company is exposed to the possibility of larger competitors using their fi nancial resources to pursue strategies that seek to undermine the profi tability of the Company s business. Failure to obtain and retain Licences and Approvals The manufacture and distribution of Gaming Machines and associated products are subject to extensive local and foreign laws, regulations and taxes and the governments of the various gaming jurisdictions amend these laws and regulations from time to time. Many of these jurisdictions require Licences, registrations, fi ndings of suitability, permits, documentation and qualifi cation and other forms of approval for manufacturers, distributors and operators of Gaming Machines, and associated products and for their directors, executives and major shareholders. The Company s growth strategy is dependent on growth in international jurisdictions. If the Company fails to seek or does not receive a necessary Licence, registration, approval or fi nding of suitability, it may be prohibited from selling Gaming Machines for use in the jurisdiction or may be required to sell them through other licensed entities at reduced profit. Obtaining Licences and approvals can be time consuming and costly. The Company is currently in the process of seeking to obtain such Licences in a number of the jurisdictions in which it is targeting growth, particularly in the United States. The failure to obtain such Licences may have a significant negative impact on the Company s objective to achieve its growth targets. The gaming authorities in some jurisdictions may investigate any individual who has a material relationship with the Company or any signifi cant shareholder to determine whether the individual or shareholder is acceptable to those gaming authorities. The Company s Gaming Machines must be approved in many jurisdictions in which it is placed and there can be no assurance that a particular game or system will be approved in any jurisdiction. Licences, registrations, approvals, permits or fi ndings of suitability may be revoked, suspended or conditioned. The revocation or denial of a Licence in a particular jurisdiction could adversely affect the Company s ability to obtain or maintain Licences in other jurisdictions. There can be no assurance that the Company will be able to obtain all necessary Licences, registrations, permits, approvals or fi ndings of suitability in a timely manner or at all. Similarly there can be no assurance that current Licences, registrations, permits, approvals or fi ndings of suitability will not be revoked, suspended or conditioned. There may be delays in obtaining regulatory approvals for new Gaming Machines, including new designs, new technological developments and novel gaming concepts. Signifi cant delays in obtaining the appropriate approvals can have a material adverse effect on the Company s businesses. 24

25 The Company is the subject of an investigation by the Queensland Offi ce of Gaming Regulation ( QOGR ) in relation to the Company s Queensland Licence. The investigation relates to an obligation to notify the QOGR of software faults in certain Gaming Machines in 2003 and the Company s previous management s response to that issue. The Company understands that the QOGR s inquiries are continuing. If the QOGR were to make adverse fi ndings on the Company s conduct in relation to this matter a range of sanctions could be imposed on the Company and certain sanctions could have an adverse impact on the objectives and financial performance of the Company. The Company is co-operating with the QOGR in relation to these matters. As a result of these matters the Company has sought to improve the compliance systems and the culture of compliance within the Company. Changes to government regulation The gaming industry in many jurisdictions, including Australia, is becoming subject to regulation dealing with responsible gaming, being the protection of individuals whose gambling habits cause problems to themselves or others. Many Australian jurisdictions have imposed freezes or caps on machine numbers in venues. There can be no assurance that the caps will not be further reduced or additional jurisdictions will not adopt similar caps or freezes. Changes to government regulation, reductions in the total number of Gaming Machines permitted in a particular market, material increases in taxes and fees on gaming operators and government initiatives to address problem gambling may have a material impact on the profi ts earned by gaming operators, the confi guration of Gaming Machines, the demand for Gaming Machines and the profi tability of Ainsworth Game Technology. Failure to implement strategy and manage growth The Company has developed Gaming Machine operations from start up in The Company s business plan is based upon a strategy of rapid growth, both in Australia and in international markets. Successful execution of this business plan is dependent upon the implementation of a range of initiatives to establish the Company s presence and to develop its brand image. These include strengthening its sales and distribution network both locally and internationally and successfully expanding manufacturing operations. There are signifi cant execution risks inherent in these initiatives and no assurance can be given that the Company will be successful in their implementation. Rapid growth in sales can be expected to impose ongoing needs to access capital and fi nancial resources to support that growth. To achieve its objectives the Company will be required to continuously adopt and implement operational and financial procedures and controls as the scale of the Company s businesses increases. No assurance can be given of the Company s ability to manage future growth. The Company may look to enhance its market position through the acquisition of businesses or holdings in other companies or through joint ventures in Australia and overseas. The success of any future acquisitions and the creation of any strategic joint ventures will depend upon a variety of factors. There can be no certainty that these activities would lead to an immediate positive profi t contribution. Lack of profi t history and rapid growth Ainsworth Game Technology was established in 1995 and listed on ASX in Since commencing its activities in the area of Gaming Machine development in 1999 the Company has undergone rapid growth with its revenue increasing substantially each fi nancial year. The Company has yet to establish a satisfactory record of profi table operation, having only reported its fi rst annual profi t in the 2004 fi nancial year. In the event that revenue falls short of, or costs exceed, expectations, the Company is likely to return to a loss-making position and incur losses for longer than might otherwise be expected. Prior to the Company s initial public offering the Company had funded its growth from approximately $28.8 million advanced by its founder. The Company raised $50 million in its initial public offering in 2001, the proceeds of which were used to repay loans provided by its founder, acquire its current premises and to fund the development of its Gaming Machine products. The Company raised $13.5 million in 2003 from a rights issue of ordinary shares, used to repay loans provided by its founder and to fund working capital following the acquisition of VGS. The current Rights Issue involves the Company raising a further $25.6 million to fund working capital to support further growth. The Placement will raise up to an additional $5 million, the proceeds of which (if any) will not be required to fund the immediate working capital needs of the Company. The rapid growth of the Company has placed demands on the working capital required by the Company. The Company s objective is to fund its working capital requirements from funds received through operating activities. To the extent that the operating performance of the Company does not generate suffi cient funds for this purpose the Company may be required to seek further equity funding to support its growth objectives. 25

26 Ability to Repay or Refi nance Indebtedness The Company is currently in a negative operating cash fl ow position as it progresses through a rapid growth phase. If the Company does not achieve its sales growth expectations it may not be able to generate cash fl ow from operations or from additional fi nancing which may have an adverse effect on its ability to make payments on and refi nance its indebtedness, including the Convertible Notes when they mature on 31 December In addition, during the life of the Convertible Notes, it may be necessary for the Company to redraw under the AWI Loan to fund the Interest Payments under the Convertible Notes. The AWI Loan expires on 13 September This is prior to the Maturity Date of the Convertible Notes. The Company may be required to seek an extension of the AWI Loan with Mr Len Ainsworth or seek other sources of debt or equity funding. The amount currently outstanding under the AWI Loan is $30 million. Further details of the AWI Loan can be found in section Technology and intellectual property risks The market for the Company s products is characterised by rapidly changing technology, evolving industry standards and frequent product innovations and enhancements. Not only must the technology and products be continuously developed and changed, the Company must also protect the technology and intellectual property it develops through a combination of trade secrets, copyright, trademarks, eligible circuit layout rights, designs and patents. New products are subject to regulatory approval before release. As noted in section 4, the Company continues to maintain a high level of spending on research and development to ensure Ainsworth Game Technology s products maintain their premium market position. New technological developments and new designs are an ongoing process for the Company. There is a risk that the technology developed by the Company may fall behind that of competitors, intellectual property developed by the Company may be misappropriated or substantially similar technology or intellectual property to that developed by Ainsworth Game Technology may be legally developed, patented and used by independent third parties. Despite the precautions adopted by the Company it may be possible for unauthorised parties to copy or reverse engineer certain features of its products that it believes are proprietary. The failure or inability of Ainsworth Game Technology to develop new technology and to protect its intellectual property may reduce the Company s competitive position, revenues and profi ts. If a new product does not achieve signifi cant market acceptance, the Company may not recover its development and promotion costs. The Company s competitors and other third parties have been and may be granted patents and trademarks covering various features of Gaming Machines and associated products. If the Company s products were to use processes or other subject matter that are claimed under those patents or trademarks, those third parties may bring infringement actions against the Company. The Company might then be forced to discontinue the use of those products or be required to obtain licences of that intellectual property. The Company might then be limited in its ability to market new products. The Company is a party to a royalty agreement with SilkEarl Pty Limited ( SilkEarl ) dated 27 July 1999, as amended. The royalty agreement contains a licence of certain gaming machine technology for a period of 99 years. The Company has received certain claims from SilkEarl for payments to be made in connection with the licence agreement that are disputed by the Company. The Company has received legal and technical advice on the claims that have been made. A claim for certain immaterial amounts has been provided for by the Company. Additional claims for signifi cant amounts have been made. The total amount of such additional claims are not quantifi ed and are not capable of reliable measurement. The directors are of the opinion that those claims have no foundation and will not succeed. If the company were wrong in that view and the claims were successfully pursued against the Company, the Company may face a liability in an amount that would have a material adverse impact on the Company. Reliance on key personnel To facilitate the achievement of the Company s growth plans a number of new senior executive positions have been created and fi lled. The Company s success depends upon the performance of senior management and the Company s ability to attract, motivate and retain highly qualifi ed executives and gaming programmers and developers. Competition for skilled employees with specialised training is intense. If the Company were to lose the services of any of its key employees or executives its operations could be materially adversely effected. The Company was founded by Mr Len Ainsworth in 1995, who is currently the Executive Chairman of the Company. Mr Ainsworth is well known as a pioneer of the gaming industry having founded Aristocrat Leisure Limited in 1954, now the second largest Gaming Machines manufacturer in the world and one of the 50 largest companies listed on ASX. 26

27 The growth of the Company to date has been dependent on the guidance and experience of Mr Ainsworth. If for any reason the Company was to lose access to that guidance and experience the Company may suffer fi nancially and may be adversely affected in the development of its strategic initiatives. Existence of a signifi cant Shareholder and secured lender Mr Len Ainsworth, and a company controlled by him, controls 52% of the issued Shares and will have significant infl uence over the direction of the Company, including having the capacity to remove and appoint Directors of the Company at shareholder meetings. Mr Len Ainsworth, through AWI, a company controlled by him, is also a secured lender to the Company, currently in the amount of $30 million. Further details of the AWI Loan can be found in Section The interests of Mr Len Ainsworth in his capacity as a Shareholder, Noteholder and secured lender have the potential to confl ict with those of Ainsworth Game Technology or the Company s other Shareholders and Noteholders. Reliance on suppliers As a general rule the Company manufactures Gaming Machines when it is confi dent that it has received a sales order. The Company s ability to satisfy its sales orders is dependent upon its suppliers ability to provide components for the fabrication of the ordered machines. If the supplier were not able to provide componentry as required by the Company that may adversely impact on the Company s ability to achieve its sales expectation and may negatively impact upon the reputation of the Company s products. Malfunctions, unintended operations or design errors Malfunctions, unintended operations or errors in gaming systems, hardware, software documentation or installation procedures have the potential to create fi nancially damaging consequences to the operators of these products and indirectly, to Ainsworth Game Technology. These faults could be the result of poor design, errors in manufacturing, failures in quality control or faulty installations. Each Ainsworth Game Technology machine bears a prominently displayed disclaimer that Malfunction voids all pays and plays. This disclaimer has been held to excuse the Company from liability. However the Company has made payments of compensation without admission of liability in the interest of good customer relations. In cases where product malfunction or error has occurred, Gaming Machine manufacturers have typically repaired or replaced the malfunctioning product or product component. Gaming operators typically have tight procedures to minimise or prevent mistaken jackpot claims, security failures and accounting errors. However there can be no assurance that the Company s Gaming Machines will not malfunction or result in errors and that such consequences would not materially or adversely affect the Company s activities. Foreign Operations Ainsworth Game Technology is adopting a strategy to rapidly grow and develop its businesses in foreign markets. The Gaming Machine market in Australia is mature and relatively stable. On the other hand, the Company sees substantial opportunities in international markets. The conduct of businesses outside Australia are subject to the risks customarily associated with such activities. These risks include fl uctuations in foreign currency exchange rates and controls, potential expropriation or nationalisation of assets and other economic, tax, political and regulatory policies of local governments as well as the laws and policies of Australia affecting trade with and investment in those countries and repatriation of dividends and earnings. The process of selling Gaming Machines to jurisdictions outside Australia is more complex and faces greater risk than the process of selling Gaming Machines in Australia. Import and export requirements must be complied with. Frequently the Company is dependent on the conduct of distributors with whom it has distribution agreements. These considerations mean there are greater risks associated with the realisation and timing of Gaming Machine sales in many international jurisdictions. The Company faces considerable country risk in many of the international markets in which it is seeking to sell Gaming Machines. There can be no assurance that the risks associated with those countries will not adversely effect the activities of the Company. For example, the most signifi cant market that the Company is currently pursuing sales to is Russia. Russia recently moved to a regulated gaming market and rapid growth is expected in the number of Gaming Machines in the Russian market. However, the risks associated with carrying on business in Russia are quite different to the risks in carrying on business in countries such as Australia. Since the Russian Federation was established following the collapse of the USSR in 1991, the Russian Government has strived to build a democratic political system and market economy to replace the prior social, political and economic controls of the communist period. Russia has had to deal with issues of crime and national security in this period. 27

28 The business environment in Russia can be uncertain and signifi cantly affected by social, political and economic events that are occurring in Russia. These considerations may result in circumstances occurring that have an adverse impact on the Company s ability to undertake business activities in the Russian market. Similar considerations apply in varying degrees in various other jurisdictions to which the Company may sell. Concentration of revenues A substantial portion of the Company s revenues for the year ended 30 June 2004 was generated from sales to Unicum Limited ( Unicum ), which distributes the Company s Gaming Machines into the Russian market. The Company sold 2,600 units to Unicum during the 2004 fi nancial year, representing approximately 47% of the Company s total unit sales. An agreement to sell machines to Unicum is in place, however, there can be no assurance that the Company will continue to receive orders from Unicum. While the Company has further diversifi ed its customer base in the current fi nancial year, any signifi cant reduction in orders from Unicum could have a negative effect on the Company s performance. Currency fl uctuations International sales are predominantly denominated in United States dollars, and any appreciation in the Australian dollar against the United States dollar will adversely affect the sales revenue achieved. On the other hand, a large proportion of the cost of Gaming Machines comprises component parts which are primarily purchased in United States dollars. Accordingly, the Company enjoys the benefi ts of partial natural hedges. Whilst the Company has a policy to hedge currency risks, any unprotected exposure could affect the Company s profi tability due to fl uctuations in exchange rates. Credit risks A number of international customers have recently placed large orders and require extended credit terms and usually pay by monthly instalments. The international market for Gaming Machines is characterised by the availability of extended credit terms provided by Gaming Machine manufacturers. In some cases the debts of international customers are not secured, nor is insurance available. The Company faces a risk that some customers may be unable to meet their obligations as and when they become due. The Company has in place controls so that due diligence is performed on new markets and new customers, including probity and credit checks, so as to satisfy itself that the market and credit risks are minimised. Progress payments are monitored and the terms of sale attempt to minimise the associated credit risk. However, it is more diffi cult for the Company to monitor credit extended to international customers as compared to customers located in Australia. In addition, it may be diffi cult to enforce credit terms against delinquent international customers because of diffi culties of enforcement in foreign jurisdictions. Participation sales of Gaming Machines are common in international markets. A participation sale is where a manufacturer or distributor of Gaming Machines participates in the returns generated from a Gaming Machine rather than making an outright sale of the machine. Participation sales place a greater burden on the working capital of the Company as compared to an outright sale. For an entity with limited fi nancial resources such as the Company, participation sales have the possibility of negatively impacting on the funding position of the Company if not strictly monitored and controlled. Changes to gaming taxes, levies and fees In addition to signifi cant government regulation, gaming operators are typically subject to signifi cant gaming taxes, levies and fees in addition to corporate and state taxes. Gaming taxes, levies and fees may increase or new taxes, levies or fees may be introduced at any time, which may materially and adversely affect Ainsworth Game Technology s profi tability, directly or indirectly. Litigation The Company is, from time to time, a party to litigation which may affect its business. Except as set out in the Company Annual Report for the fi nancial year ending 30 June 2004 and in this Prospectus, Ainsworth Game Technology is not aware of any other circumstances that could give rise to additional material legal proceedings. 28

29 7. Taxation Summary for Investors 10 Shelley Street Sydney NSW 2000 P O Box H67 Australia Square 1213 Australia Telephone: Facsimile: DX: 1056 Sydney The Directors Ainsworth Game Technology Limited 10 Holker Street Newington NSW November 2004 Dear Directors Taxation advice - Convertible Notes We have been asked to prepare a report for inclusion in this Prospectus for the Offer of Convertible Notes in Ainsworth Game Technology Limited ( the Company ) by way of a renounceable Rights Issue and a Placement. This report provides a general overview of the income tax issues for Qualifying Shareholders and Eligible Investors (which may be collectively referred to as Investors for the purposes of Section 7 of this Prospectus) and should be read with the remainder of the Prospectus. The terms used in this report are as defined in the Prospectus. References to the Tax Act in this report are references to the Income Tax Assessment Act 1936 and to the Income Tax Assessment Act 1997, collectively. 1 Scope of advice The following is a summary of the Australian income tax implications for Investors in respect of the following: (i) Qualifying Shareholders acquiring, holding and disposing of their right to participate in the Convertible Notes issue under this Prospectus ( the Rights ); and (ii) Investors acquiring, holding and disposing of the Convertible Notes acquired under this Prospectus. The income tax implications of each can vary depending on the nature and characteristics of each particular Investor and their specific circumstances. Each prospective Investor should consult his or her own tax adviser as to the taxation implications of investing in Convertible Notes. This report is intended as a guide only and is not intended to be an authoritative or exhaustive statement of the legislation applicable to all Investors. This summary should not be relied upon by prospective Investors as a substitute for obtaining detailed advice in relation to the Investor s specific circumstances. This report is based on the law as enacted at the date of this letter. During the term of the Convertible Notes, the taxation laws in Australia and/or their interpretation may be subject to change. Except as expressly stated, the report does not describe nor take into account tax reform proposals or legislation that has been introduced but not passed by both Houses of Federal Parliament, nor will it be updated for subsequent changes to case law, rulings and determinations issued by the Australian Commissioner of Taxation or other practices of taxation authorities. 2 Assumptions about Investors This report has been prepared based on the following assumptions: Investors are Australian resident for tax purposes; Investors are not exempt from Australian income tax; Investors do not invest in interest bearing securities as an ordinary part of their business (eg banks, insurance companies) or otherwise as part of a profit-making undertaking or scheme; Investors are individuals, complying superannuation funds or companies; and Investors do not include entities that have purchased Rights or Convertible Notes in the marketplace. 29

30 3 Implications of Rights Issue for Qualifying Shareholders Each Qualifying Shareholder will be offered to subscribe for Convertible Notes at a subscription price of $1.30 per Convertible Note by way of a renounceable entitlement issue. Each Qualifying Shareholder will receive two Rights for every fifteen shares held. A Qualifying Shareholder may sell Rights prior to exercise. Any Rights issued under this Prospectus will constitute an asset in the hands of the Qualifying Shareholder for capital gains tax ( CGT ) purposes. As such, CGT implications may arise for a Qualifying Shareholder on the disposal, exercise or cancellation of the Rights. A capital gain will generally be included in the assessable income of a Qualifying Shareholder and the tax payable by the Qualifying Shareholder in respect of the capital gain will depend on the particular taxation profile of the Qualifying Shareholder. 3.1 Acceptance of the offer of Rights under the Rights Issue The receipt and acceptance by a Qualifying Shareholder of a Right to acquire Convertible Notes issued under this Prospectus should not of itself give rise to income tax or CGT implications for the Qualifying Shareholder. In this regard, the grant of a Right by the Company will not constitute a dividend for income tax purposes. 3.2 Selling the Rights Where a Qualifying Shareholder disposes of its Rights without exercising them to purchase Convertible Notes in the Company, the Qualifying Shareholder may be subject to a CGT liability. Broadly, the Qualifying Shareholder will derive a capital gain equal to the consideration received for the disposal of the Rights. As the period during which the Rights may be traded by a Qualifying Shareholder is relatively short, the Qualifying Shareholder will not hold the Rights for more than 12 months and therefore will not be entitled to utilise the CGT discount in respect of any such capital gain. 3.3 Exercising the Rights Where a Qualifying Shareholder exercises its Rights to acquire the Convertible Notes, a CGT event will arise for the Qualifying Shareholder. However, it appears that any capital gain or loss arising on the exercise of the Rights should be disregarded. 3.4 Allowing the Rights to lapse Where a Qualifying Shareholder allows its Rights to lapse by not exercising or selling their Rights prior to 10 December 2004, the Qualifying Shareholder should not derive a capital gain or incur a capital loss in respect of the lapse of the Rights. 4 Implications of the Convertible Notes issue for Investors 4.1 Characterisation of the Convertible Notes Division 974 of the Tax Act provides a basis to distinguish between debt and equity interests for taxation purposes. On the basis of the Convertible Notes Terms of Issue outlined in this Prospectus, we consider that the Convertible Notes should be classified as a debt interest for income tax purposes at the time of issue because, amongst other things: the issue of the Convertible Notes is a financing arrangement for the Company; and the Company has an effectively non-contingent obligation to provide financial benefits to Investors, including the repayment of the issue price and interest payments; and the total financial benefits to which the Investors are to be entitled under the Convertible Notes Terms of Issue should at least equal the issue price of the Convertible Notes; and the term of the Convertible Notes is less than 10 years. 4.2 Interest payable on the Convertible Notes Individuals Individual Investors should include in their assessable income any interest received in respect of the Convertible Notes. Companies and Superannuation Funds Whether corporate or fund Investors return interest as assessable when it is received or when it is due and receivable will depend on the method of tax accounting used by the relevant Investor in determining its assessable income. Each Investor is required to adopt the most appropriate method of tax accounting in light of the Investor s individual circumstances. 30

31 4.3 Disposal or transfer of the Convertible Notes The Convertible Notes should be traditional securities for the purposes of Sections 26BB and 70B of the Tax Act. Consequently, where an Investor disposes of, or otherwise transfers, Convertible Notes to a third party prior to conversion or redemption, any gain on disposal or transfer will be included in the Investor s assessable income under Section 26BB of the Tax Act, with any capital gain that otherwise would have been derived being disregarded by virtue of Section of the Tax Act. This will mean that an Investor who otherwise would have been eligible to claim the capital gains tax discount in relation to the disposal or transfer of the Convertible Notes will not have access to this benefit. Where an Investor makes a loss on the disposal or transfer of its Convertible Notes, the Investor may be entitled to claim a revenue deduction for that loss under Section 70B of the Tax Act. The profit or loss realised by the Investor on disposal or transfer will be calculated as the difference between the consideration received on disposal or transfer of the Convertible Notes by the Investor and the Face Value of the Convertible Notes at the time of the disposal. 4.4 Conversion of the Convertible Notes As outlined in the Prospectus, an Investor may elect to convert the Convertible Notes into ordinary shares of the Company in the following circumstances: On a Specified Conversion Date being 31 December 2007 and 31 December 2009; and At any time while a Trigger Event is subsisting. Under the conversion mechanism contained in the Convertible Notes Terms of Issue, the Company will redeem the Convertible Notes for an amount equal to the Face Value of the Convertible Notes in addition to any accrued interest as at the date of conversion. The Investor will be taken to have immediately directed the Company to apply the redemption proceeds for the subscription of ordinary shares in the Company. The Company will issue the Investor one ordinary share for each Convertible Note converted, subject to certain adjustments for any future bonus share issues, rights issues or capital reconstructions. Pursuant to Subsection 26BB(4) of the Tax Act, an assessable gain should not arise for an Investor that converts their Convertible Notes under the conversion mechanism detailed in the Prospectus since: (i) the Convertible Notes will be converted into ordinary shares in a company that is the issuer of the traditional security; and (ii) the Convertible Notes will be issued on the basis that they will or may convert into ordinary shares in the company that issued the traditional security. Similarly, an Investor will be precluded from deducting any loss incurred under the conversion mechanism pursuant to Subsection 70B(2B) of the Tax Act. Any accrued interest that is paid by the Company to the Investor in accordance with the conversion mechanism will be included in the assessable income of the Investor as discussed under paragraph 4.2, above. Whilst Investors should not derive a capital gain in respect of the conversion of the Convertible Notes, Investors should be aware that the subsequent transfer or otherwise disposal of the ordinary shares in the Company obtained under the conversion mechanism in this Prospectus may be subject to tax under the capital gains tax provisions. 4.5 Cost base of ordinary shares For the purposes of the CGT provisions, the cost base of any ordinary shares acquired by an Investor from the conversion of the Convertible Notes should equal the sum of the Face Value of the Convertible Note plus any incidental costs payable by the Investor to convert the Convertible Note. 4.6 Redemption of the Convertible Notes As outlined in the Convertible Notes Terms of Issue, the Company will redeem the Convertible Notes at the Maturity Date for the Face Value of the Convertible Notes. The redemption of the Convertible Notes will constitute a disposal of a traditional security for tax purposes. However, as the redemption amount received by the Investor in respect of the redemption mechanism should equal the Face Value of the Convertible Notes, no taxation implications should arise for the Investor under Section 26BB or Section 70B of the Tax Act. 31

32 To the extent that any outstanding interest is received by the Investor when the Convertible Notes are redeemed, the interest will be assessable income of the Investor as discussed in paragraph 4.2, above. 5 Deductibility of borrowing costs In general, Australian resident Investors should be entitled to a deduction for interest incurred on borrowings used to purchase the Convertible Notes. However, in circumstances where the interest cost is disproportionate to the income derived from the Convertible Notes, or where the Investor is in breach of its thin capitalisation limits, the interest costs allowable as a deduction may be reduced, in whole or part. Investors should obtain their own independent professional advice in this regard. 6 Quotation of Tax File Number An Investor need not quote a TFN when applying for Convertible Notes. However, if a TFN is not quoted, or no appropriate TFN exemption information is provided, tax may be required to be deducted by the Company from any interest payment to Investors at the highest marginal rate plus Medicare Levy (currently 48.5%). 7 Disclaimer Persons intending to invest in Convertible Notes should note that: KPMG Tax is not licensed to provide financial product advice under the Corporations Act and taxation is only one of the matters that must be considered when making a decision on a financial product. Investors should consider taking advice from an Australian Financial Services Licence holder before making any decision on a financial product. The involvement of KPMG in the preparation of the Prospectus is limited to the preparation of this report and to providing assistance to the Company with certain due diligence matters in connection with the Convertible Notes issue, for which normal professional fees will be received. KPMG takes no responsibility for any representations made by any person in relation to the Convertible Notes issue. The giving of its consent to the inclusion of this report in the Prospectus should not be taken as an endorsement of the Convertible Notes issue or recommendation by KPMG of participation in the Convertible Notes issue. Neither the undersigned nor any of the employees of KPMG has any interest in the promotion of the Convertible Notes issue. KPMG gives no assurance or guarantee in respect of the successful performance of the Convertible Notes. As stated, this tax advice is based on current taxation law as at the date our advice is provided. Tax law is frequently being changed, both prospectively and retrospectively. A number of key tax reform measures have been implemented, a number of other key reforms have been deferred and the status of some key reforms remains unclear at this stage. We are unable to give any guarantee that our interpretation will ultimately be sustained in the event of challenge by the Australian Commissioner of Taxation. Investors should seek their own independent professional advice. This letter has been provided specifically in response to your request for advice on behalf of the Company. Accordingly, neither the firm nor any member or employee of the firm undertakes responsibility in any way whatsoever to any person or company other than the Company for any errors or omissions in the advice given, however caused. Yours faithfully * * * * * KPMG 32

33 8. Additional Information 8.1 Nature of this Prospectus This Prospectus has been issued pursuant to section 713 of the Corporations Act as a prospectus for the offer of continuously quoted securities because the Convertible Notes are convertible into Shares. 8.2 Regular reporting and disclosure obligations Ainsworth Game Technology is a disclosing entity for the purpose of the Corporations Act and as such it is subject to regular reporting and disclosure obligations under the Corporations Act and Listing Rules. These obligations require Ainsworth Game Technology to notify ASX of information about specifi ed events and matters as they arise for the purpose of ASX making that information available to the stock market conducted by ASX. In particular, Ainsworth Game Technology has an obligation under Listing Rules (subject to certain limited exceptions) to notify ASX immediately once it is or becomes aware of any information concerning Ainsworth Game Technology which a reasonable person would expect to have a material effect on the price or value of Shares or other securities issued by Ainsworth Game Technology. That information is available on the public fi le at ASX. Copies of documents lodged with ASIC in relation to Ainsworth Game Technology may be obtained from, or inspected at, an ASIC offi ce. 8.3 Documents which will be supplied upon request Ainsworth Game Technology will provide a copy of each of the documents listed below, free of charge, to any person who asks for same in the period commencing on the date of this Prospectus and ending on the Closing Date: (a) the annual fi nancial report of Ainsworth Game Technology for the year ended 30 June 2004, being the most recent annual fi nancial report of Ainsworth Game Technology lodged with ASIC before the date of the Prospectus; and (b) all documents used to notify ASX of information concerning Ainsworth Game Technology under the Listing Rules relating to continuous disclosure after lodgement of Ainsworth Game Technology s 30 June 2004 annual fi nancial report with ASIC and before lodgement of this Prospectus with ASIC which are as follows: ASX Announcement Date Profi t Turnaround in August 2004 Investor Presentation 18 August 2004 Change of Directors Interest Notice 19 August 2004 Appointment of Peter Walford 25 August 2004 Change of Directors Interest Notice 9 September 2004 Change of Directors Interest Notice 9 September 2004 Becoming a substantial holder 24 September 2004 Annual Report 15 October 2004 Notice of Annual General Meeting 15 October 2004 Proxy Form 15 October 2004 Commitments Test Entity - First Quarter Report 29 October 2004 Current Developments and Outlook 11 November 2004 Senior Executive Appointments 12 November 2004 Convertible Note Rights Issue & Placement to raise up to $30m 16 November 2004 Chairman s Address to Shareholders 16 November 2004 Results of AGM 16 November 2004 Disclosure Document / Appendix 3B 16 November Rights and liabilities attaching to Shares The rights and liabilities attaching to Shares are prescribed by both the Corporations Act and Ainsworth Game Technology s Constitution. The following is a summary of the key clauses in the Constitution. This summary is not exhaustive nor does it constitute a defi nitive statement of the rights and liabilities of Shareholders. A full copy of the Constitution is available free of charge on request from Ainsworth Game Technology at its registered offi ce. 33

34 Precedence of Listing Rules Despite anything in the Constitution, if there is any inconsistency between the Constitution and the Listing Rules, the Listing Rules will prevail. Probity and membership requirements A person is not eligible to hold a relevant interest in any Shares if a Gaming Authority makes a fi nal determination that as a consequence of that person s shareholding in or association with the Company: (a) any entity in the Group would contravene or continue to contravene a Gaming Law; or (b) a Licence would be revoked, suspended, not granted or made subject to a condition or conditions that would have a material adverse effect on the operation of the relevant licensee. The Company may require that a Shareholder deliver a statutory declaration setting out such information which in the reasonable opinion of the Directors is necessary for the Directors to determine the eligibility of that person to continue to hold Shares. Divestiture of Shares To protect the Licences necessary for the lawful operation of the Company s business, the Directors may in certain circumstances suspend a Shareholder s voting rights and order divestiture of Shares if a fi nal determination by a Gaming Authority so warrants. In particular, the Company acting through the Directors is empowered to: (a) issue a suspension notice where, in the reasonable opinion of the Company based on information available to the Company, that Shareholder is likely to be or become ineligible to hold Shares. The suspension notice has the effect of suspending all voting rights of that Shareholder s Shares; (b) issue a disposal notice to an ineligible Shareholder or a Shareholder who fails to provide a statutory declaration as required by the Company. A disposal notice requires the Shareholder to dispose of Shares held by that Shareholder within 30 days or such longer period as is specifi ed in the disposal notice; and (c) sell or buy-back the Shares of a Shareholder to whom a disposal notice has been given if the Shareholder fails to comply with the disposal notice. The proceeds of the sale or buy-back of the Shares must be applied fi rst in meeting all expenses associated with the sale or buy-back and the balance (if any) must be paid to the Shareholder whose Shares have been sold or bought back. Voting Subject to any suspension of voting rights as set out above, at a general meeting every Shareholder present in person or by proxy, attorney or representative has one vote on a show of hands and on a poll has one vote for each Share held. The number of votes to which a holder of partly paid Shares is entitled on a poll is equivalent to the proportion that the amount paid on the Share is of the issue price of the Share (ignoring amounts paid in advance). Dividends and reserves Subject to any special terms and conditions of issue, the profi ts of the Company which the Board from time to time determines to distribute by way of dividend are divisible amongst the Shareholders in proportion to the amounts paid up on the Shares held by them. The Board is authorised to adopt and amend share-plans such as bonus-share plans, employee share plans, dividend re-investment plans and dividend selection plans. Issue of further Shares The Board may (subject to the Constitution, the Listing Rules and the Corporations Act) allot, grant options in respect of, or otherwise issue further Shares on such terms and conditions as it sees fi t. Transfer of Shares A Shareholder may transfer Shares by a proper transfer effected in accordance with the business rules of the Securities Clearing House and ASX and as otherwise permitted by the Corporations Act. The Board may decline to register a transfer of shares if the transfer is not in registrable form or where the refusal to register the transfer is permitted under the Listing Rules. If the Board declines to register a transfer, the Company must give the party lodging the transfer written notice of the refusal and reason for refusal. General meetings and notices Each Shareholder entitled to vote at a general meeting is entitled to receive notice of and to attend (except in certain circumstances where admission may be refused by the Company s Chairperson) and vote at general meetings of the Company and receive all fi nancial statements, notices and other documents required to be sent to Shareholders under the Constitution or the Corporations Act. 34

35 Winding up Subject to any special or preferential rights attaching to any class or classes of Shares, Shareholders will be entitled on a winding up to participate in any surplus assets of the Company in proportion to the Shares held by them less any amounts which remain unpaid on their Shares at the time of distribution. Variation of rights If the issued shares in the Company are divided into different classes, the rights attaching to a class of shares (unless the terms of issue otherwise provide) may be varied or abrogated only with: (a) the written consent of at least 75% of the holders of the issued shares of that class; or (b) the sanction of a special resolution passed at a separate meeting of the holders of shares of that class. 8.5 Overview of the Trust Deed The Trust Deed is a deed dated 16 November 2004 between the Company and the Note Trustee. The Trust Deed enables the Company to issue Convertible Notes to any person on the terms of the Trust Deed by registering the person as a Noteholder. The Note Trustee agrees, on the terms and conditions contained in the Trust Deed, to act as trustee for the benefit of Noteholders. Instead of setting out information that is contained in the Trust Deed, this Prospectus simply refers to the Trust Deed in accordance with section 712 of the Corporations Act. On this basis, the Trust Deed is taken to be included in this Prospectus. Prospective investors may obtain a copy of the Trust Deed free of charge from the Company. The Trust Deed contains information regarding the following matters: defi ned terms for, and interpretation of, the Trust Deed; Ainsworth Game Technology s ability to issue Convertible Notes on the terms of the Trust Deed; Convertible Notes being unsecured obligations of the Company which rank at least equally with other unsecured creditors; Ainsworth Game Technology s covenants with the Note Trustee, relating to various matters, including to carry on its business in a proper and effi cient manner, notify the Note Trustee of an Event of Default, provide fi nancial reports to the Trustee, comply with its obligations under the Transaction Documents to which it is a party and make all of its fi nancial and other records open for inspection; representations and warranties in favour of the Note Trustee including as to the Company s status and its power to perform its obligations under the Trust Deed; appointment of the Note Trustee, enforcement rights and monies received by the Note Trustee in respect of Convertible Notes being held by the Note Trustee in trust for the benefi t of Noteholders (together with procedures for applying monies so received), and the duration of the Trust; the Note Trustee s powers and duties (including duties under Chapter 2L of the Corporations Act); the Note Trustee s fees and expenses; the limitation of the Note Trustee s liability in various respects; procedures for retirement or removal of the Note Trustee; the establishment and maintenance of the Convertible Note Register; meetings of Noteholders; limited ability to alter the Trust Deed; and the Note Trustee s confi dentiality obligations. The above information about the contents of the Trust Deed is included to allow a prospective investor to decide whether to obtain a copy of the Trust Deed. 35

36 8.6 Material Contracts Joint Underwriting Agreement Ainsworth Game Technology entered into an underwriting agreement ( Joint Underwriting Agreement ) with the Joint Underwriters on 15 November The main terms of the Joint Underwriting Agreement are summarised below: Agreement to Underwrite Under the Joint Underwriting Agreement, the Joint Underwriters have severally agreed (as to 50% each) to underwrite the offer of Convertible Notes to Shareholders under the Rights Issue other than the Ainsworth Family Holders ( Underwritten Convertible Notes ), equating to 8,011,936 Convertible Notes (approximately $10,415,517) at the Offer Price. Each Joint Underwriter s obligation to subscribe for its proportion of the Underwritten Convertible Notes is conditional on: (a) the lodgement of the Prospectus with ASIC in a form and substance acceptable to the Joint Underwriter; (b) approval being obtained from ASX for the Convertible Notes to be quoted on the ASX by certain dates; (c) the Company receiving valid applications from the Ainsworth Family Holders for 11,702,781 Convertible Notes, being all of the Convertible Notes that the Ainsworth Family Holders are entitled to apply for under the Offer. Representations and Warranties Under the Joint Underwriting Agreement, the Company represents and warrants to the Joint Underwriters a number of customary and usual warranties generally given by an issuer of convertible notes. These relate to matters such as the Company s compliance with all applicable laws and obligations that apply to this Prospectus, its conduct in relation to this Prospectus and the Offer and its solvency. The Company also represents and warrants that it and its subsidiaries will not issue any shares, options or other interests except as permitted under the moratorium, details of which are described below Fees, Expenses and Indemnities The Company will pay an underwriting commission to the Joint Underwriters of 4% of the number of Underwritten Convertible Notes multiplied by the Face Value, which equates to approximately $416,621 split 50/50 between the Joint Underwriters. In addition, the Company will pay Pitt Capital Partners a management fee of 1% of the number of the Convertible Notes offered pursuant to the Rights Issue multiplied by the Face Value, which equates to approximately $256,291 and the Company will pay ABN AMRO Morgans a management fee of 1% of the proceeds of any subscriptions in excess of $25,629,132. The Company will pay any GST incurred by the Joint Underwriters in respect of their fees. The Company will also pay each Joint Underwriter all costs and expenses incurred by them in relation to the Offer or the Prospectus. The Company gives certain indemnities to the Joint Underwriters and their related parties in relation to losses suffered by, or claims made against, the Joint Underwriters or their related parties in connection with the Offer, the Prospectus, any non-compliance with applicable laws or the Listing Rules and any breach by the Company of its obligations under the Joint Underwriting Agreement. Moratorium on further issues Ainsworth Game Technology must not, without the consent of the Joint Underwriters, within the six month period after the Convertible Notes are quoted on ASX, take certain actions including: (a) reducing its share capital or otherwise altering its capital structure other than as disclosed in this Prospectus; (b) disposing or agreeing to dispose the whole or a substantial part of its business or property; (c) charging or agreeing to charge the whole or a substantial part of its business or property; and (d) issuing or agreeing to issue an invitation or offer to issue any shares, options or any other securities (except, amongst other things under any issue referred to, or contemplated in, the Prospectus). 36

37 Termination The Joint Underwriters may, by notice to the Company at any time prior to the issue of all of the Underwritten Convertible Notes, terminate its obligations under the Joint Underwriting Agreement if one or more of the following events occur: (a) (S&P/ASX 200 Industrial Index fall): the S&P/ASX 200 Industrial Index published by ASX at the close of business on any 2 consecutive days after the date of the Joint Underwriting Agreement is 10% or more below its level as at the close of business on the date of the Joint Underwriting Agreement; (b) (Bond indices fall): the UBS Composite (All Maturities) Bond Index closes on two consecutive Business Days at a level that is 2% or more below its closing level on the last market close prior to the execution of the Joint Underwriting Agreement; (c) (restriction on issue of Convertible Notes): the Company being prevented from issuing the Convertible Notes within the time required by the Listing Rules, by ASX, any statute, regulation or order of a court of competent jurisdiction or by any governmental or semi-governmental agency or authority; (d) (deficiencies in Prospectus): (i) the Prospectus does not comply with the applicable provisions of sections 710 to 716 of the Corporations Act (subject to any modifi cations), the Listing Rules (subject to any waivers) or any other applicable laws or regulations; or (ii) there is a statement in the Prospectus that is misleading or deceptive or likely to mislead or deceive, or that there is an omission from the Prospectus (having regard to the applicable provisions of sections 710 to 716 of the Corporations Act) or if any statement in the Prospectus becomes misleading or deceptive or likely to mislead or deceive or if the issue of the Prospectus becomes misleading or deceptive or likely to mislead or deceive; or (e) (New circumstance or supplementary prospectus): a new circumstance as referred to in section 719(1) of the Corporations Act arises and the Company fails to lodge a supplementary or replacement prospectus in such form and content and within such time as a Joint Underwriter may reasonably require; (f) (stop order or repayment rights): ASIC makes an interim or fi nal stop order in relation to the Prospectus under section 739 of the Corporations Act (except an interim stop order that is not discharged within the earlier of 2 Business Days after the day the interim stop order is given and the Closing Date) or gives notice of its intention to hold a hearing under section 739 of the Corporations Act in relation to the Prospectus to determine if it should make a stop order in relation to the Prospectus or makes an application under section 1324B of the Corporations Act, or the Company repays any application monies or gives applicants rights to withdraw their Applications under section 724(2) of the Corporations Act; (g) (withdrawal of consent to Prospectus): any person (other than the Joint Underwriters) who has previously consented to the inclusion of its, his or her name in the Prospectus or to be named in the Prospectus, withdraws that consent; (h) (Prescribed Occurrence): a Prescribed Occurrence occurs in relation to the Company or its subsidiaries, other than as disclosed in the Prospectus or in accordance with the moratorium; (i) (Event of Insolvency): an Event of Insolvency occurs in respect of the Company or its subsidiaries; (j) (litigation): litigation, arbitration, administrative or industrial proceedings are after the date of the Joint Underwriting Agreement commenced or threatened against the Company or its subsidiaries or a director of the Company or its subsidiaries is charged with an indictable offence; (k) (Board and senior management composition): there is a change in the composition of the board of directors of the Company or a change in the senior management of the Company before completion of the Offer without the prior written consent of the Joint Underwriters; (l) (contravention of constitution or law): a contravention by the Company of any provision of its constitution, the Corporations Act or any other applicable legislation or any rules or any requirement of ASIC or ASX; (m) (material adverse change): any material adverse change or any development including a prospective material adverse change after the date of the Joint Underwriting Agreement in the assets, liabilities, fi nancial position, trading results, profi ts, forecasts, losses, prospects, business or operations of the Company or its subsidiaries; (n) (Authorisation): any authorisation required to be obtained by the Company which is material to anything referred to in the Prospectus is repealed, revoked or terminated or expires, or is modifi ed or amended in a manner unacceptable to the Joint Underwriters or is breached in a material respect; 37

38 (o) (contracts): after the date of the Joint Underwriting Agreement, any material contract to which the Company is a party (including those referred to in sections 8.6.2, 8.7.2, and of the Prospectus) is, without the prior written consent of the Joint Underwriters, breached by the Company; terminated (whether by breach or otherwise); altered or amended in any way; or found to be void or voidable; (p) (disposal): the Company disposes or agrees to dispose of a signifi cant part of its business or property or acquires major assets or enters into major expenditure commitments other than in accordance with the Prospectus or any due diligence performed prior to the issue; (q) (Force Majeure Event): a Force Majeure Event occurs that delays in excess of 1 week an event set out in the timetable agreed between the Company and the Joint Underwriters in respect of certain events such as the lodgment of the Prospectus, application for quotation, trading of the Convertible Notes and settlement of any shortfalls in the take-up of the Underwritten Convertible Notes; (r) (default): default by the Company under the Joint Underwriting Agreement or any representation or warranty given by the Company in the Joint Underwriting Agreement is or becomes untrue or incorrect; (s) (misleading information): any information supplied at any time by the Company or any person on its behalf to the Joint Underwriters in respect of any aspect of the Offer or the affairs of the Company or its subsidiaries is or becomes misleading or deceptive or likely to mislead or deceive; (t) (general suspension): there is a suspension or material limitation in trading in securities generally on ASX, the New York Stock Exchange and/or the London Stock Exchange; or a general moratorium on commercial banking activities in Australia, the United States or the United Kingdom is declared by the relevant authorities, or there is a material disruption in commercial banking or securities settlement or clearance services in those places; (u) (change in law or policy): any of the following occurs which does or is likely to prohibit, restrict or regulate the Offer, capital issues or stock markets: the introduction of legislation into the parliament of the Commonwealth of Australia or of any State or Territory of Australia; the public announcement of prospective legislation or policy by the Federal Government or the Government of any State or Territory; or the adoption by ASIC or its delegates or the Reserve Bank of Australia of any regulations or policy, other than any law, regulation or policy which has been announced before the date of the Joint Underwriting Agreement; (v) (outbreak of hostilities): there is an outbreak or major escalation of hostilities involving any one or more of Australia, New Zealand, the United States, or the United Kingdom, any member of the European Union, Indonesia, China or Japan or the declaration by any of these countries of a national emergency or war, or a major terrorist attack is perpetrated on any of those countries or any diplomatic, military, commercial or political establishment of any of those countries elsewhere in the world or there is a substantial adverse change in the scale, nature or expected duration of the hostilities involving the Iraqi confl ict ongoing at the date of the Joint Underwriting Agreement; or (w) (Certificate): the contents of the certifi cate from the Company to the Joint Underwriters confi rming that, to the best of the Company s knowledge after due inquiry: (i) no termination event of the Joint Underwriting Agreement has occurred or has been otherwise disclosed to the Joint Underwriters; (i) the Company has complied with all of its applicable obligations in respect of the Offer; (ii) the Company is not in default under the Joint Underwriting Agreement and has not breached any terms, conditions and warranties given under the Joint Underwriting Agreement; and (iii) the representations and warranties given by the Company under the Joint Underwriting Agreement are true and correct, becomes incorrect prior to 5.00pm on the date in which any shortfalls in the take-up of the Underwritten Convertible Notes are to be settled between the Company and the Joint Underwriters (being 17 December 2004). The events listed paragraphs (d), (e), (h), (j), (l), (m), (n), (o), (p), (q), (r), (s), (t), (u), (v) and (w) above do not entitle a Joint Underwriter to exercise its rights to terminate unless, in the reasonable opinion of the Joint Underwriter reached in good faith, it has or is likely to have, or those events together have or are likely to have, a Material Adverse Effect or could give rise to a liability of the Joint Underwriter under the Corporations Act. 38

39 8.6.2 Pre-lodgement Agreements Several of the Company s largest shareholders, being Mr Len Ainsworth, Creative Magic (A/Asia) Pty Ltd, Votraint No 1019 Pty Ltd and CJHA Pty Ltd, currently holding a total of 59.36% of the Company s issued capital, have committed in writing to take up their full entitlement under the Offer. Shareholders should be aware that the Joint Underwriters may terminate the Joint Underwriting Agreement if Mr Len Ainsworth, Creative Magic (A/Asia) Pty Ltd, Votraint No 1019 Pty Ltd and CJHA Pty Ltd do not take up their full entitlement to the Convertible Notes (refer to section 8.6.1). 8.7 Interests of Directors Other than as described below or elsewhere in this Prospectus, no Director and no fi rm in which a Director is a partner: (a) has, or had at any time during the two years preceding the date of this Prospectus, an interest in the formation or promotion of the Company, the Offer or in any property acquired or proposed to be acquired by the Company in connection with the Company s formation or promotion or the Offer; and (b) has been paid or agreed to be paid any amount, or has been given or agreed to be given any other benefit, either to induce that person to become, or to qualify that person as, a Director or otherwise for services rendered by that person or firm in connection with the promotion or formation of the Company or the Offer. (c) has holdings in Ainsworth Game Technology There are no shareholding requirements for Directors under the Constitution. At the date of this Prospectus, the numbers of securities in the Company which are held by or on behalf of each Director and their relevant interests are as follows: Holdings in Ainsworth Game Technology There are no shareholding requirements for Directors under the Constitution. At the date of this Prospectus, the numbers of securities in the Company which are held by or on behalf of each Director and their relevant interests are as follows: Director Shares Options over Shares Mr L H Ainsworth 76,892,858 - Mr A R Amer 49,000 - Mr J M Cowling 2 314,286 - Mr V B Matthews 71,430 - Mr S L Wallis 158, ,000 Each of the Ainsworth Family Holders are associates of Mr Ainsworth. The Ainsworth Family Holders have each undertaken to the Company to subscribe for their entitlement to Convertible Notes Offered under this Prospectus. Each Director will be entitled to participate in the Offer to the extent that he holds Shares at the Record Date or acquires Rights from other Shareholders Directors Remuneration The Constitution of the Company provides that: (a) each Director is entitled to the remuneration out of the funds of the Company that the Directors determine. However, the aggregate remuneration must not exceed $500,000 per annum or such other sum as the Company in general meeting approves. This limitation does not apply to remuneration to which a Director is entitled in a capacity other than as a Director (i.e. such as an employee or consultant), remuneration payable to a Director for an extra service to the Company, or any benefi t payable to a Director, legal personal representative, relative or spouse of a Director consequent upon the death or retirement of the Director; and (b) each Director is entitled to be paid all travelling and other expenses properly incurred by that Director for the Company. At present, the Executive Chairman receives $230,000 per annum under an employment agreement. Mr John Cowling was recently appointed to the position of Executive Director on a remuneration of $225,000 per annum (excluding superannuation and other non-cash benefi ts). Performance related bonuses may also be paid to Mr Cowling on the achievement of certain agreed performance objectives. 2 Creative Magic (A/Asia) Pty Ltd has issued Mr Cowling a call option to acquire 250,000 Shares that it currently holds in the Company. 39

40 The three non-executive Directors each receive $50,000 per annum. These fees exclude superannuation and the reimbursement of expenses such as travelling expenses Directors indemnity, insurance and access The Company has executed Directors Confi dentiality, Indemnity, Insurance and Access Deeds in favour of each Director. Pursuant to these Deeds, the Company: indemnifi es the Directors, to the fullest extent permitted by the Corporations Act, against any liability incurred by the Director by reason of being a director of the Company or any closely held subsidiary of the Company (the Relevant Company ) or in carrying out the business, or exercising the powers, of the Relevant Company; must maintain directors and offi cers liability and company reimbursement insurance (or similar), to the fullest extent permitted by law, against any liability which the Director may incur by reason of being a director of the Relevant Company, for seven years after the Director ceases to be a director on terms which are not materially less favourable to the Director than the policy operating at the time the Director ceases to be a Director; and must give the Directors access to documents of the Relevant Company that relate to the Director s period in offi ce as a director AWI Loan As referred to in section 5.1, a large amount of the working capital required by the Company has been funded by the AWI Loan. At the date of this Prospectus, the facility limit under the AWI Loan is $30 million and the full limit has been advanced by AWI to the Company under the AWI Loan. The AWI Loan has been secured by a mortgage over the Company s property at 10 Holker Street Newington and a fi xed and fl oating charge over the assets of the Company. Interest on drawings under the AWI Loan is payable every 30 days, although it may be payable slightly earlier or later if the interest payment date does not fall on a Business Day. As at the date of this Prospectus, the interest rate on drawings under this facility is: for interest periods commencing before 13 December 2004, the rate of interest expressed as a percentage per annum offered on 13 September 2004 by the National Australia Bank Limited for three month term deposits of amounts equal to the facility limit; for interest periods commencing on or after 13 December 2004 but before 13 September 2007, the rate of interest expressed as a percentage per annum offered on the fi rst day of each calendar quarter in which the interest period commences (or if that day is not a business day, the following business day) by the National Australia Bank Limited for three month term deposits of amounts equal to the facility limit; and for interest periods commencing on or after 13 September 2007, the rate of interest expressed as a percentage per annum offered on the fi rst day of that interest period by the National Australia Bank Limited for three month term deposits of amounts equal to the facility limit. An additional 2% per annum is payable on demand if the Company does not pay any amounts under this agreement, any drawdown notice, the mortgage or the fi xed and fl oating charge referred to above ( AWI Transaction Documents ) on the due date. A number of events constitute an event of default under the AWI Loan, including: failure to pay on time any amounts payable by the Company under the AWI Transaction Documents; failure to satisfy on time any present or future monetary obligations of the Company or its subsidiaries in connection with money borrowed or raised, hiring arrangements, redeemable preference shares, letters of credit, financial market transactions, performance bonds or guarantee facilities or any guarantee or indemnity in connection with those obligations for amounts totalling more than $100,000; insolvency of the Company or any of its subsidiaries or if the Company or its subsidiaries cease to carry on its business; any changes in control of the Company or the group structure of the Company; and any other default or non-compliance of any obligations under the AWI Transaction Documents. If an event of default occurs, AWI may declare that all of the amounts owing under the AWI Transaction Documents are payable, appoint a receiver and do anything else the law allows a mortgagee or chargee to do on default. 40

41 8.7.5 Equipment Lease Pursuant to a Lease of Chattels dated 3 October 2003 (the Chattels Lease ), AWI agrees to lease to the Company plant and equipment (the Chattels ). The Chattels Lease commenced on 1 October 2003 and will continue, subject to any Events of Default or Casualty Events (as those terms are defi ned in the Chattels Lease), until the earlier of: subject to the renewal provision (discussed below), 30 September 2005; and the date the Chattels are sold to the Company in accordance with the exercise of the call option (discussed below). Provided that the Company has not breached any term of the Chattels Lease, on the Company s written request made not less than two nor more than four weeks before: 30 September 2005, AWI will grant a renewal of the Chattels Lease until 30 September 2006; and 30 September 2006, AWI will grant a renewal until 30 September The Company must pay to AWI rent for the Chattels of $62,404 (exclusive of GST) per annum by equal monthly instalments payable on the last day of each month commencing on 31 October 2004 and all GST payable in relation to the Chattels Lease. In addition to the payment of various costs incurred by AWI in relation to the Chattels Lease, the Company must pay or reimburse AWI on demand for all taxes, duties and fees which may be payable in connection with the Chattels Lease. Pursuant to the Chattels Lease, AWI grants to the Company a call option over the Chattels, which may be exercised by the Company at any time during the term of the Chattels Lease by delivering to AWI a written notice exercising the option. If this option is not exercised, it will automatically lapse immediately after the term of the Chattels Lease. Service of the written exercise notice will create a contract between AWI and the Company, pursuant to which AWI agrees to sell, and the Company agrees to purchase, the Chattels for the lower of $891,488 (being the cost of the Chattels) and the continuing use replacement value of the Chattels as at the date the option is exercised as determined by an independent valuer appointed by the Company Lease of Premises at Labrador Queensland Pursuant to a lease dated 4 October 2001 (the QLD Lease ), AWI leases to the Company the premises located at Unit 1, Ereton Drive Labrador Queensland. The QLD Lease commenced on 1 October 2001 and will continue until 30 September The Company must pay to AWI rent of $50,000 (exclusive of GST) per annum by equal monthly instalments and all GST payable in relation to the QLD Lease. The Company must also pay outgoings, charges levied on premises, utility costs, cleaning costs and legal and other costs as required under the QLD Lease. After 30 September 2005, AWI agrees to offer the Company a fi rst option to lease the premises, on the same terms and conditions as the QLD Lease, but subject to rent being reviewed to an amount agreed between the parties. 8.8 Interests of experts and advisers Other than as set out below or elsewhere in this Prospectus, no person named in this Prospectus as providing professional or advisory services in connection with the preparation of this Prospectus or any fi rm in which such person is a partner: (a) has or had during the two years preceding the date of this Prospectus, an interest in the formation or promotion of the Company, the Offer or in any property acquired or proposed to be acquired by the Company in connection with the Company s formation or promotion or the Offer; and (b) has been paid or agreed to be paid any amount or given or agreed to be given any other benefi t for services rendered by them in connection with the promotion or formation of the Company or the Offer. Mallesons Stephen Jaques has acted as solicitors to the Company in relation to the Offer. In respect of this work, the Company estimates that it will pay approximately $150,000 (excluding disbursements and GST) to Mallesons Stephen Jaques. Further amounts may be paid to Mallesons Stephen Jaques in accordance with its normal time based charges. KPMG has prepared the Taxation Summary for Investors set out in Section 7 of this prospectus and has performed professional services to assist in due diligence inquiries on fi nancial matters. The Company estimates that it will pay approximately $65,000 (excluding disbursements and GST) to KPMG. Further amounts may be paid to KPMG in accordance with its normal time based charges. KPMG has performed professional services as auditor and tax adviser for which it received fees based on its normal time based charges. 41

42 Pitt Capital Partners and ABN AMRO Morgans have acted as Joint Underwriters for the Offer, in respect of which they will receive the fees outlined in Section above. Pitt Capital Partners acted as underwriter to the renounceable rights issue undertaken by the Company in December Pitt Capital Partners received fees in its capacity as underwriter as disclosed in the prospectus accompanying that renounceable rights issue. 8.9 Consents None of the parties referred to below has authorised or caused the issue of the Prospectus or made any statement that is included in this Prospectus or any statement on which a statement made in this Prospectus is based, other than as specifi ed below. Each of these parties, to the maximum extent permitted by law, expressly disclaims all liabilities in respect of, makes no representations regarding and takes no responsibility for, any statements in or omissions from this Prospectus, other than in the cases specifi ed below, the reference to its name and a statement or report included in this Prospectus with the consent of that party as specifi ed below. Written consents to the issue of this Prospectus have been given, and at the time of this Prospectus have not been withdrawn, by each of the following parties: Mallesons Stephen Jaques has given and has not, before the lodgement of this Prospectus with ASIC, withdrawn its written consent to be named in this Prospectus in the form and context in which it is named. KPMG has given and has not, before the lodgement of this Prospectus with ASIC, withdrawn its written consent to be named in this Prospectus in the form and context in which it is named. Pitt Capital Partners has given and has not, before the lodgement of this Prospectus with ASIC, withdrawn its written consent to be named in this Prospectus in the form and context in which it is named. ABN AMRO Morgans has given and has not, before the lodgement of this Prospectus with ASIC, withdrawn its written consent to be named in this Prospectus in the form and context in which it is named. Permanent Trustee Company Limited has given and has not, before the lodgement of this Prospectus with ASIC, withdrawn its written consent to be named in this Prospectus in the form and context in which it is named. Computershare Investor Services Pty Limited has given and has not, before the lodgement of this Prospectus with ASIC, withdrawn its written consent to be named in this Prospectus in the form and context in which it is named Governing law This Prospectus and the contracts which arise on the acceptance of Applications are governed by the laws applicable in New South Wales and each Applicant submits to the non-exclusive jurisdiction of the courts of New South Wales Directors Authorisation Each Director of Ainsworth Game Technology has given and has not withdrawn his consent to the lodgement of this Prospectus with ASIC. 42

43 9. Glossary The following is a glossary of the terms used in the Prospectus. Term/Abbreviation Meaning $, A$ or dollars Australian dollars. ABN AMRO Morgans Ainsworth Family Holders Ainsworth Game Technology or the Company ABN AMRO Morgans Corporate Limited ABN , one of the Joint Underwriters. Refers to Mr Len Ainsworth and entities controlled by him and members of his family, who together hold 59.36% of the issued Shares of the Company. These holdings are held as follows: Holder Shares Held % of Issued Shares LH Ainsworth 60,000, % Creative Magic (A/Asia) Pty Ltd 16,892, % Votraint No Pty Ltd (Braesyde Super Fund A/C) 7,663, % CJHA Pty Ltd (CJHA Family A/C) 3,214, % Ainsworth Game Technology Limited ABN Allotment Date 20 December Applicant Application Application Form - Placement Application Form - Qualifying Shareholders Applications Monies Approval ASIC A person who submits an Application. A valid application to subscribe for Convertible Notes under the Offer. The application form to be used by Eligible Investors in connection with the Offer. The personalised entitlement and acceptance form to be used by Qualifying Shareholders in connection with the Offer. Monies received from Applicants in respect of their Applications. A regulatory approval issued or given by a Gaming Authority in regard to the operation of a Gaming Machine or regulated product. Australian Securities and Investments Commission. ASX Australian Stock Exchange Limited ABN Australia GAAP AWI AWI Loan Generally accepted accounting principles in Australia. Associated World Investments Pty Ltd ABN , a company owned and controlled by Mr Len Ainsworth. The loan facility provided by AWI to the Company pursuant to an A$ Loan Agreement dated 13 September AWI Transaction Documents Has the meaning given to it in section Business Day Closing Date Constitution Controller Has the meaning given to it in the Terms of Issue. The date on which the Offer closes, being 10 December 2004 or such other date as the Directors determine in accordance with this Prospectus. The constitution of Ainsworth Game Technology, as varied from time to time. means any person described in section 419(1) of the Corporations Act. 43

44 Convertible Note Register Convertible Notes Conversion Date Conversion Notice Corporations Act Directors Eligible Investor Event of Insolvency Means the register of Noteholders established and maintained by the Registrar. Convertible notes offered pursuant to this Prospectus, being in total up to 23,560,871 million convertible notes at an issue price of $1.30 per convertible note. Means 31 December 2007 and the Maturity Date or the date on which a Note is converted into Shares following a Trigger Event. Has the meaning given to it in the Term of Issue. The Corporations Act 2001 (Cth). The directors of Ainsworth Game Technology. Means an Australian retail client of ABN AMRO Morgans or sub-underwriters of Pitt Capital Partners. Means in respect of any person: (a) a receiver, manager, receiver and manager, trustee, administrator, Controller or similar offi cer is appointed in respect of a person or any asset of a person; (b) a liquidator or provisional liquidator is appointed in respect of a corporation; (c) any application (not being an application withdrawn or dismissed within 7 days) is made to a court for an order, or an order is made, or a meeting is convened, or a resolution is passed, for the purpose of: (i) appointing a person referred to in paragraphs (a) or (b); (ii) winding up a corporation; or (iii) proposing or implementing a scheme of arrangement; (d) any event or conduct occurs which would enable a court to grant a petition, or an order is made, for the bankruptcy of an individual or his estate under any Insolvency Provision; (e) a moratorium of any debts of a person, or an offi cial assignment, or a composition, or an arrangement (formal or informal) with a persons creditors, or any similar proceeding or arrangement by which the assets of a person are subjected conditionally or unconditionally to the control of that persons creditors or a trustee, is ordered, declared, or agreed to, or is applied for and the application is not withdrawn or dismissed within 7 days; (f) a person becomes, or admits in writing that it is, is declared to be, or is deemed under any applicable law to be, insolvent or unable to pay its debts; or (g) any writ of execution, garnishee order, mareva injunction or similar order, attachment, distress or other process is made, levied or issued against or in relation to any asset of a person. Face Value Means, in relation to a Convertible Note, the principal amount of $1.30. Force Majeure Event Gaming Authority Gaming Machine GST IFRS Means any act of God, war, revolution, or any other unlawful act against public order or authority, an industrial dispute, a governmental restraint, or any other event which is not within the control of the Company or the Joint Underwriters. Any government authority which issues or grants any Licence or Approval necessary or appropriate for the lawful operation of a gaming related business in a jurisdiction. An electronically controlled casino-style gaming machine utilising a video screen, commonly referred to as a poker machine, but excluding wall-mounted machines in Europe, approved amusement devices in the United Kingdom and Pachislo and Pachinko machines in Japan Goods and Services Tax. Australian equivalent of International Financial Reporting Standards. 44

45 Insolvency Provision Interest Payment Date Interest Rate Issue Price Issue Date Joint Underwriters Joint Underwriting Agreement KPMG Lead Manager Licence Listing Rules Material Adverse Effect Means any law relating to insolvency, sequestration, liquidation or bankruptcy (including any law relating to the avoidance of conveyances in fraud of creditors or of preferences, and any law under which a liquidator or trustee in bankruptcy may set aside or avoid transactions), and any provision of any agreement, arrangement or scheme, formal or informal, relating to the administration of any of the assets of any person. 30 June and 31 December in each year commencing on (and including) 30 June 2005 and ending on (and including) the Maturity Date or if the Notes are converted, the applicable Conversion Date. Means 8.00 per cent per annum. $1.30 per Convertible Note. Has the meaning given to it in the Terms of Issue. ABN AMRO Morgans and Pitt Capital Partners. An agreement dated on or about the date of this Prospectus between the Company and the Joint Underwriters, the provisions of which are summarised in Section of this Prospectus. KPMG ABN , the Company s auditor and tax adviser. Pitt Capital Partners. A licence issued or given by a Gaming Authority necessary or appropriate for the lawful manufacturing or selling of Gaming Machines or other regulated products. The offi cial Listing Rules of ASX as varied from time to time. Means: (a) a material adverse effect on the outcome of the Offer or on the subsequent market for the Convertible Notes (including, without limitation, matters likely to have a material adverse effect on a decision of an investor to invest in the Convertible Notes); or (b) a material adverse effect on the income tax position of the Company and its subsidiaries taken as a whole, or the tax position of an Australian resident Shareholder. Maturity Date 31 December Non-Participating Foreign Holders Shareholders with a registered address not in either Australia or New Zealand. Note Trustee Permanent Trustee Company Limited (ACN ). Noteholder Offer Pitt Capital Partners Placement Prescribed Occurrence Means in relation to any Convertible Note each person whose name is registered in the Convertible Note Register as the holder of that Convertible Note. The offer of Convertible Notes pursuant to this Prospectus. Pitt Capital Partners Limited ABN , one of the Joint Underwriters. The fi rm allocation of up to $5 million of Convertible Notes for allocation to Eligible Investors. Means: (a) the Company or its subsidiaries converting all or any of its shares into a larger or smaller number of shares; (b) the Company or its subsidiaries resolving to reduce its share capital in any way; (c) the Company or its subsidiaries: (i) (ii) entering into a buy-back agreement or; resolving to approve the terms of a buy-back agreement under section 257C or 257D of the Corporations Act; 45

46 (d) (e) (f) (g) (h) (i) (j) (k) (l) (m) the Company or its subsidiaries making an issue of, or granting an option to subscribe for, any of its shares, or agreeing to make such an issue or grant such an option; the Company or its subsidiaries issuing, or agreeing to issue, convertible notes; the Company or its subsidiaries disposing, or agreeing to dispose, of the whole, or a substantial part, of its business or property; the Company or its subsidiaries charging, agreeing to charge, the whole, or a substantial part, of its business or property after the date of the Joint Underwriting Agreement; the Company or its subsidiaries resolving that it be wound up; the appointment of a liquidator or provisional liquidator to the Company or its subsidiaries; the making of an order by a court for the winding up of the Company or its subsidiaries; an administrator of the Company or its subsidiaries, being appointed under section 436A, 436B or 436C of the Corporations Act; the Company or its subsidiaries executing a deed of company arrangement; or the appointment of a receiver, or a receiver and manager, in relation to the whole, or a substantial part, of the property of the Company or its subsidiaries. Prospectus This prospectus dated 22 November Qualifying Shareholder Means a Shareholder, other than a Non-Participating Foreign Holder, as at the Record Date. Record Date 5pm Sydney time on 24 November Registrar Rights Rights Issue SCH SCH Business Rules Share Shareholder Share Registry Shortfall Takeover Event Tax Act Means the Company and any other person acting as registrar for the Company. The rights to subscribe for Convertible Notes pursuant to the Offer. The renouncable offer of Convertible Notes pursuant to this Prospectus to Qualifying Shareholders. Means ASX Settlement and Transfer Corporation Pty Limited as operator of a prescribed CS Facility and, where the case requires, includes an agent appointed by SCH. Means the business rules of SCH as amended or replaced from time to time. An ordinary share issued in the capital of Ainsworth Game Technology. A registered holder of a Share. The Company s share registry, being Computershare Investor Services Pty Limited ABN Has the meaning given to that term in Section 1.6 of this Prospectus. Has the meaning given to it in the Terms of Issue. Income Tax Assessment Act 1997 (Cwlth) and Income Tax Assessment Act 1936 (Cwlth). Terms of Issue Means the terms and conditions of issue set out in Appendix A. Top Up Facility Trust Deed Means the facility described in Section 1.6 of this Prospectus. means the deed entitled Convertible Note Trust Deed dated 16 November 2004 between the Company and the Note Trustee. Underwritten Convertible Notes Has the meaning given to it in section VGS Victorian Gaming Systems Manufacturing Pty Ltd (ACN ). 46

47 10. Appendix A - Terms of Issue 1 The Notes 1.1 Creation of Notes The obligations of the Company under the Notes are constituted by, and owing under, the Trust Deed. 1.2 Appointment of Registrar Subject to Condition 5.2 ( Location of Register ), the Company agrees to appoint a Registrar and to ensure that the Registrar establishes and maintains during its term of appointment a Register. 1.3 No dealing by Company The Company may not assign or otherwise deal with its rights under these Conditions except as expressly contemplated by the Conditions. 2 Rights and obligations of Noteholders The Notes are issued on the condition that each Noteholder (and any person claiming through or under a Noteholder) is taken to have notice of, and be bound by the Trust Deed. 3 Nature and status of Notes 3.1 Face Value The Face Value of each Note is $ Term The Notes will, unless redeemed or converted earlier in accordance with these Conditions, redeem or convert, as the case may be, on the Maturity Date. 3.3 Clearing Systems Notes may be held in a Clearing System, in which case the rights of a person holding an interest in the Notes lodged in the Clearing System are subject to the rules and regulations of the Clearing System. 4 Title and transfer of Notes 4.1 Title Title to Notes passes when details of the transfer are entered in the Register. 4.2 Effect of entries in Register Each entry in the Register in respect of a Note constitutes: (a) an unconditional and irrevocable undertaking by the Company to the Note Trustee (on behalf of the Noteholder) to pay principal and (if applicable) interest and any other amount in accordance with these Conditions; and (b) an entitlement to the other benefi ts given to Noteholders under these Conditions in respect of the Notes. 4.3 Register conclusive as to ownership Entries in the Register in relation to a Note constitute conclusive evidence that the person so entered is the absolute owner of the Note subject to correction for fraud or error. 4.4 Non-recognition of interests Except as required by law, the Company and the Registrar must treat the person whose name is entered in the Register as the holder of a Note as the absolute owner of that Note. This Condition applies whether or not a Note is overdue and despite any notice of ownership, trust or interest in the Note. 4.5 Transfers in whole Notes may be transferred in whole but not in part. 4.6 Compliance with laws Notes may only be transferred if the transfer complies with all applicable laws. 47

48 4.7 Form of transfer (a) All transfers of Notes must be in the form of a Transfer Form. (b) Transfer Forms are available from the Company (or, if it has appointed a Registrar, the Registrar). 4.8 Execution of Transfer Form (a) Every Transfer Form must be duly completed, stamped (if applicable) and executed by the transferor and the transferee, and delivered to the Company. (b) The transferor is taken to remain the owner of the Notes for all purposes until the name of the transferee is entered into the Register. 4.9 Restrictions on transfer A Noteholder may only transfer Notes in accordance with this Condition 4 ( Title and transfer of Notes ) Registration of transfer Subject to Conditions 4.11 ( No registrations while Register closed ) and 4.12 ( Company may refuse to register ), the Company will, upon receipt of a Transfer Form, register the transferee in the Register No registrations while Register closed The Company will not register any Transfer Forms while the Register is closed Company may refuse to register The Company may refuse to register any Transfer Form if: (a) it is not duly completed, executed and stamped (if necessary); (b) it does not comply with the terms of this deed; or (c) the transfer would result in non-compliance with any applicable law. The Company is not bound to give any reason for refusing to register any Transfer Form and its decision is fi nal, conclusive and binding. If the Company refuses to register a Transfer Form, it must, as soon as practicable following that refusal, send notice of the refusal to the Noteholder and the parties seeking to take the transfer of the Notes Rights and obligations of transferee A transferee of Notes transferred in accordance with this Condition 4 ( Title and transfer of Notes ) has the following rights and obligations from the time of registration: (a) all those rights which the transferor previously had; and (b) all those obligations of a Noteholder as provided by this deed as if the transferee was originally a party to it Payments to transferee Subject to the Trust Deed and these Conditions, on entry of a transferee in the Register, the transferee may receive any payments then due or which become due to the Noteholder, whether or not the entitlement to payment wholly or partly arose or accrued prior to the registration Reliance on documents (a) The Company is entitled to accept and assume the authenticity and genuineness of any Transfer Form, that it has been duly executed and that the transferee has power and capacity to acquire (whether by subscription or transfer) and hold the Notes, unless the Company has reasonable grounds to believe otherwise. (b) The Company is not obliged to make any enquiry and does not incur any liability: (i) for registering any Transfer Form which is subsequently discovered to be a forgery, otherwise defective or to not have been duly executed; or (ii) if it is subsequently discovered that the transferee did not have power or capacity to acquire (whether by subscription or transfer) and hold the Note. 48

49 4.16 Transfer on death, insolvency etc The Company must register a transfer of a Note to or by a person who is entitled to do so as a result of: (a) the death or bankruptcy (in the case of the natural person) or the liquidation or winding up (in the case of a corporation) of a Noteholder; or (b) the making of vesting orders by a court or other judicial or quasi judicial body or authority, in accordance with any applicable laws and on providing such evidence of entitlement as the Company may require Transfers of less than a Noteholder s holding Where the transferor transfers less than all of its Notes, and the specifi c Notes to be transferred are not identifi ed, the Company may, subject to this Condition 4 ( Title and transfer of Notes ), register the Transfer Form in respect of such of the Notes as the Company thinks fi t, provided that the aggregate amount of the Notes registered as having been transferred equals the aggregate Face Value of the Notes expressed to be transferred in the relevant Transfer Form Clearing Systems Notes or interests in the Notes held through a Clearing System will be transferable only in accordance with the rules and regulations of that Clearing System. The rules and regulations of that Clearing System, prevail over this Condition 4 ( Title and transfer of Notes ) with respect to those Notes or interests in Notes, to the extent of any inconsistency. Neither the Company nor the Note Trustee is responsible for the operation of any Clearing System. 5 Register of Noteholders 5.1 Register The Company must keep an up-to-date Register. The Company must enter into the Register: (a) the names of the fi rst two Noteholders of each Note on the application form or Transfer Form; (b) the address of the Noteholder of each Note whose name fi rst appears on the application form or Transfer Form; (c) the number and amount of Notes held by each Noteholder; (d) the dates on which each Noteholder is registered in the Register in respect of the Notes; (e) the date on which any person ceases to be a Noteholder; (f) details of all transfers of the Notes including the date of registration of a transfer; (g) the date on which a Note is repaid; and (h) any other particulars the Company considers desirable or are required under this deed or by law. 5.2 Location of Register The Register will be kept at: (a) the Company s registered offi ce or principal place of business in Australia; (b) a place in Australia (whether of the Company or someone else) where the work involved in maintaining the Register is done; or (c) another place in Australia approved by ASIC. 5.3 Joint Noteholders (a) If there is more than one name on an application form or a Transfer Form, only the names of the fi rst two persons on the application form or Transfer Form will be entered in the Register. (b) A Note registered in the name of more than one person is held by those persons as joint tenants. (c) If a Note is registered in the name of more than one person, the receipt by any one of them of any amount payable under this deed discharges the Company s obligations to all of them in respect of that amount. (d) If more than one address is notifi ed to the Company, only the address of the Noteholder whose name fi rst appears in the Register will be recorded in the Register. (e) In the case of the death of any joint Noteholder, the survivors will be the only persons recognised by the Company as having any title to or interest in the Notes registered in their names jointly. 49

50 5.4 Company not liable for mistakes The Company is not liable for any mistake in the Register or in any purported copy except to the extent that the mistake is attributable to the Company s own fraud, gross negligence or wilful default. 5.5 Note Trustee may accept correctness The Note Trustee is entitled to accept the correctness of all information contained in the Register and is not liable to any person for any error in it. 5.6 Inspection Subject to any Instrument of Exemption: (a) the Register will be available for inspection by the Note Trustee and the Noteholders during normal business hours; (b) Noteholders and the Note Trustee may inspect the Register free of charge; (c) the Company must give a copy of the Register or part of it to the Noteholder or Note Trustee within 7 days of receipt of a request from the Noteholder or Note Trustee; (d) the Company must give a Noteholder a document which sets out the Noteholder s entry in the Register of Noteholders, within 3 Business Days of receipt of a request from the Noteholder; and (e) the Noteholder must pay the Company s reasonable costs of making the copy or providing the document, when it receives it. 5.7 Change in information A Noteholder must advise the Company of any change to the information noted in the Register in respect of that Noteholder. On receipt of such advice, the Company must promptly update the information contained in the Register. The Company is not however obliged to change the information contained in the Register while it is closed. 5.8 Ownership of Notes (a) The persons whose names are registered as the Noteholder of a Note in the Register will be treated by the Company, the Note Trustee and all other persons as the absolute owner, and the only absolute owner, of that Note. (b) No person who has previously been registered as the owner of a Note has or is entitled to assert against the Company, the Note Trustee or the registered owner of that Note for the time being and from time to time any rights, benefi ts or entitlements in respect of that Note. 5.9 Register paramount (a) None of the Company, the Note Trustee or any other person is bound to recognise (whether or not it has notice of the interest or the right) any interest or any other right in any Note (except as required by law) except an absolute right of ownership in the registered Noteholder. (b) No notice of any interest or any other right will be entered in the Register (except as required by law). (c) Each inscription in the Register in respect of a Note constitutes suffi cient and conclusive evidence to all persons that the persons whose names are inscribed are the registered owner of the Note, subject to rectifi cation in accordance with Condition 5.11 ( Rectifi cation of Register ) Statements of Holding not certifi cates of title A Statement of Holding is not a certifi cate of title as to Notes. The Register is the only conclusive evidence of title to Notes Rectifi cation of Register If: (a) (b) (c) (d) (e) an entry is omitted from the Register; an entry is made in the Register otherwise than in accordance with this deed; an entry wrongly exists in the Register; there is an error or defect in any entry in the Register; or a default is made or an unnecessary delay takes place in entering into the Register that any person has ceased to be the holder of a Note or any other information, the Company may rectify the same. None of the Company or the Note Trustee is liable for any loss, Costs or liability incurred as a result of any of the above occurring. 50

51 5.12 Appointment of Registrar (a) The Company may cause the Register to be maintained by a third party on its behalf and require that person to: (i) discharge the Company s obligations under this deed in connection with the Register; and (ii) assist it in the supply and delivery of the information, records, reports etc required by law. (b) None of the Company or the Note Trustee is liable for any act or omission of any person appointed by the Company under this Condition 5.12 ( Appointment of Registrar ), provided that the Company will be liable unless it has taken reasonable steps to select a person competent to perform the intended functions Property in Notes situated where Register is The property in the Notes will for all purposes be regarded as situated at the place where the Register is for the time being situated and not elsewhere Clearing System Sub-register If the Notes are lodged or approved for entry on a Clearing System which involves the maintenance of a sub-register, then the rules and regulations of that Clearing System with respect to that sub-register prevail to the extent of any inconsistency with this Condition 5 ( Register of Noteholders ) in connection with the Notes. 6 Interest 6.1 Interest Each Note bears interest on its Face Value from (and including) the Issue Date to (but excluding) its Maturity Date at the Interest Rate. Interest: (a) is payable in arrear on each Interest Payment Date; (b) accrues daily during each Interest Period; (c) is calculated at the Interest Rate; and (d) is calculated on the actual days elapsed and a year of 365 days. The person entitled to receive an interest payment in respect of a Note is the Noteholder of that Note on the relevant Record Date. 6.2 No dividends If interest is not paid on an Interest Payment Date, the Company must not, until that interest and any interest on that overdue amount determined in accordance with clause 17 ( Interest on overdue amounts ) is paid in full: (a) pay any dividend on any class of its issued shares (including the Shares); (b) make any distribution to its members; (c) return any capital in cash or in kind; (d) redeem, cancel or buy back any of its issued shares (including the Shares) (other than in terms of contractual or constitutional obligations incurred prior to the Issue Date); or (e) create, allot or issue any equity or debt instrument (other than any Notes) which ranks equally with or in priority to the Notes upon a liquidation or winding-up, unless approved by an Extraordinary Resolution. 6.3 No Event of Default Apart from the rights of the Noteholders set out in these Conditions, Noteholders shall not, until the Maturity Date, have any remedy in law or equity against the Company, the Trustee or any other person in respect of the non-payment (in whole or in part) of interest. Accordingly, notwithstanding anything to the contrary in these Conditions, the non-payment by the Company of interest on an Interest Payment Date (other than the Maturity Date) does not constitute an Event of Default under these Conditions. 51

52 7 Conversion 7.1 Conversion The Noteholder has the right to require conversion of the Notes into Shares in the circumstances described below. For the purposes of these Conditions, a conversion of Notes will be effected by redemption of the Notes by the Company at their Face Value on the basis that the consideration payable on redemption is discharged in full by way of the allotment and issue of fully paid Shares. For the avoidance of doubt, the Company has no right to elect to convert the Notes at any time. 7.2 Conversion Notice Any Noteholder may, by delivery of a Conversion Notice to the Company, require that the Noteholder s Notes be converted: (a) on a Specifi ed Conversion Date. In this case, the Company will, to the extent required by Appendix 6A to the Listing Rules, notify Noteholders of their right to require conversion not more than 30 Business Days prior to the Specifi ed Conversion Date. The Noteholders must, in turn, give notice requiring conversion at least 20 Business Days prior to the Specifi ed Conversion Date. If no notice is given in terms of this Condition 7 ( Conversion ), the Notes will be redeemed for cash automatically on the Maturity Date in accordance with Condition 10 ( Redemption ); (b) at any time while a Trigger Event is subsisting. In this case, the Company must give a notice to the Noteholders of the occurrence of a Trigger Event, within 5 Business Days after it fi rst becomes aware of the Trigger Event. Whether or not such a notice is given by the Company, the Noteholders may on or up to 20 Business Days following the Trigger Event: (i) after a Takeover Event occurs, give a notice requiring conversion within 10 Business Days after such notice is given by the Noteholder; (ii) while any other Trigger Event is subsisting, give a notice requiring conversion within 20 Business Days after the notice is given by the Noteholder. 7.3 Minimum conversion amount A Noteholder may not require conversion of fewer than 1000 Notes unless the relevant Noteholder s total holding of Notes is less than 1000 in which case the Noteholder may not require conversion of fewer than that Noteholder s entire holding. 8 Allotment of Shares on Conversion 8.1 Notice irrevocable A notice given under Condition 7.2 ( Conversion Notice ) is irrevocable unless the Company otherwise determines. 8.2 Time of allotment The Shares to which a Noteholder is entitled in the case of Conversion of Notes under Condition 7.2 ( Conversion Notice ) must be allotted within 15 Business Days of the Conversion Date and any such allotment will have effect and be deemed to have been made on that Conversion Date. 8.3 Rights of new Shares Shares allotted on Conversion of Notes under Conditions 7.2 ( Conversion Notice ) will be fully paid and will participate in full for all Dividends which relate to a period commencing after the end of the Interest Period during which the Conversion Date occurs. 8.4 Ranking of new Shares Subject to Conditions 8.3 ( Rights of new Shares ) and 8.6 ( Auditor s Certifi cate ), Shares allotted on Conversion of Notes will rank equal in all respects and form one class with the Shares already issued at the Conversion Date. 8.5 Application of funds by the Company On Conversion of a Note: (a) the Company must redeem the Note for an amount equal to its Face Value and in addition, pay in full all accrued interest up to the date of redemption; and (b) the Noteholder of that Note, by operation of this Condition irrevocably directs the Company to apply the whole of the moneys payable to it on redemption in subscribing for one Share (subject to adjustment in accordance with Condition 9 ( Adjustments ) in accordance with the Company s constitution. 52

53 8.6 Auditor s certifi cate If any doubt arises in relation to the appropriate application to be made under Condition 8.5 ( Application of funds by the Company ), the Company must, at its own expense and acting reasonably, request the Auditors to determine as soon as practicable what adjustment (if any) to the Conversion Number is fair and reasonable and the date on which such adjustment (if any) is to be made. Subject to the Listing Rules, a certifi cate of the Company on advice of the Auditor as to the required adjustment will be conclusive and binding on all concerned. 8.7 Conversion Number Subject to the adjustments provided for in Condition 9 ( Adjustments ), the Conversion Number for each Note is Fractional entitlements Where the number of Shares to which a Noteholder is entitled is a number which includes a fraction of a Share, that fraction must be rounded up to one Share. 8.9 Conversion of Voting Shares precluded Notwithstanding any other term of the Trust Deed or these Conditions a Noteholder is not entitled to Convert (and the Company is entitled to refuse to Convert) such number of Notes that would result in: (a) a person acquiring Shares in the Company in breach of section 615 of the Corporations Act (or any equivalent provision); (b) a foreign person (within the meaning given to that expression in the Foreign Acquisitions and Takeovers Act 1975) acquiring more than 15% (in the case of a single foreign holding) or 40% (in the case of aggregate foreign holdings) of the Shares in the Company in breach of the Foreign Acquisitions and Takeovers Act 1975; or (c) a person acquiring Shares where a notifi cation being required to be sent to, or consent is required under, any legislation by which the Company and its Related Bodies Corporate are bound Statutory declaration The Company may in its discretion require a Noteholder to provide a statutory declaration confi rming that the circumstances referred to in Condition 8.9 ( Conversion of Voting Shares precluded ) do not exist in respect of any Conversion by that Noteholder. 9 Adjustments 9.1 Adjustments to be effected The announcement by the Company that it proposes: (a) to make to the holders of Shares an offer or invitation to subscribe for or purchase, on a pro rata basis, Marketable Securities of the Company (whether by way of renouncable or non-renounceable rights or otherwise) (other than any Shares or other securities which are issued in lieu of distributions or by way of distribution reinvestment or under a scheme for the benefi t of employees of the Company or its Related Entities or under a Share purchase plan); or; (b) to issue Bonus Shares; or (c) to effect a consolidation or subdivision of the capital of the Company, will result in application of the following applicable paragraphs of this Condition 9 ( Adjustments ). 9.2 Bonus issues If, whilst any Note remains capable of being Converted, the Company makes any issue of Bonus Shares, then the number of Shares to be issued on any subsequent Conversion of Notes shall be increased so that, on Conversion of the Notes, the Noteholder will be entitled, without any change to the Conversion Number, to receive additional Shares equal to the number of Bonus Shares that would have been issued as if the Notes had been Converted on the day prior to the record date of the Bonus Shares issue. 9.3 Capital reconstructions If, whilst any Note remains capable of being Converted, there is a reconstruction, consolidation or sub-division of the capital of the Company, the Shares to be issued on any subsequent Conversion of Notes shall, subject to and in accordance with the Listing Rules, be reconstructed, consolidated or subdivided on the same basis so that Noteholders are treated in the same manner as holders of Shares. 53

54 9.4 Rights issues If, whilst any Note remains capable of being Converted, the Company makes any offer or invitation of Bonus Shares to the holders of Shares by way of rights (not being an offer of Shares or other securities which are issued in lieu of distributions or by way of distribution reinvestment or under a scheme for the benefi t of employees of the Company or its Related Entities or under a Share purchase plan), then the Company will procure that there is extended to each Noteholder the same offer that the Noteholder would have received if, immediately before the date of that offer (or if the offer was made the shareholders of the Company registered on a particular date), the Noteholder had Converted all of the Noteholder s Notes to Shares. 9.5 Cumulation of adjustments The effect of successive applications of Conditions 9.2 ( Bonus issues ) to 9.4 ( Rights issue ) is cumulative. 9.6 Auditor s certifi cate If any doubt arises in relation to the adjustments required by Conditions 9.2 ( Bonus issues ) to 9.4 ( Rights issue ), the Company must, at its own expense and acting reasonably, request the Auditors to determine as soon as practicable what adjustment (if any) to the Conversion Number or the number of Shares to be issued to a Noteholder is fair and reasonable and the date on which such adjustment (if any) shall be made. Subject to the Corporations Act, the Listing Rules and the SCH Business Rules, a certificate of the Company on advice of the Auditor as to the required adjustment shall be conclusive and binding on all concerned. 10 Redemption Each Note is redeemable by the Company on the Maturity Date or following a Takeover Event, provided the Company has given at least 20 Business Days notice to the Note Trustee, at its Redemption Amount unless: (a) the Note has been previously redeemed; or (b) the Note has been purchased and cancelled. 11 Taxation - No set-off, counterclaim or deductions All payments in respect of the Notes must be made in full without set-off or counterclaim, and without any withholding or deduction in respect of Taxes, unless prohibited by law. 12 Non-participation in issues and limited voting rights 12.1 No participation Except as set out in these Conditions, the Notes carry no right to participate in any offering of Marketable Securities by the Company. The Company reserves the right at all times to issue Marketable Securities to shareholders or to any other person, whether for cash, as a bonus distribution or any other way Voting rights Except as required by applicable law, Noteholders have no right to vote at general meetings of the Company. 13 Events of Default 13.1 Event of Default An Event of Default occurs in relation to the Notes if: (a) (payment default) the Company does not pay within 5 Business Days of the due date for payment any amount payable by it in respect of any Notes in the manner required; or (b) (other default) the Company does not comply with any other obligations in connection with the Notes and, if the noncompliance can be remedied, does not remedy the non-compliance within 5 days after written notice requiring that default to be remedied has been delivered to the Company by a Noteholder; or (c) (cross default) any present or future monetary obligation of the Company (in connection with money borrowed or raised) for amounts totalling more than A$10,000,000 (or its equivalent in any other currency): (i) are not satisfi ed within 5 Business Days of the later of their due date or the end of any applicable period of grace; or (ii) become prematurely payable as a result of default by the Company; or (d) (insolvency) the Company becomes Insolvent; or (e) (obligations unenforceable) any Note is or becomes (or is claimed to be by the Company, or anyone on its behalf) wholly or partly void, voidable or unenforceable. 54

55 13.2 Consequences of an Event of Default If an Event of Default occurs and continues unremedied in relation to the Notes, then the Note Trustee must (if it is directed to do so by an Extraordinary Resolution of Noteholders) declare by notice to the Company (with a copy to the Registrar) that the Amount Owing in respect of each Note is immediately due and payable (together with any accrued interest) in accordance with the Trust Deed in which case those amounts become immediately due and payable Notifi cation If an Event of Default occurs, the Company must promptly after becoming aware of it notify the Note Trustee and the Registrar of the occurrence of the Event of Default (specifying details of it) and use its reasonable endeavours to ensure that the Note Trustee and the Registrar promptly notifi es Noteholders and any stock exchange or other relevant authority on which the Notes are listed of the occurrence of the Event of Default. 14 Further issues The Company may from time to time, without the consent of the Noteholders, issue further Notes having the same Conditions as the Notes. 15 Provision of information Subject to the Corporations Act and the Listing Rules, each Noteholder (if requested by that Noteholder), the Trustee and the Registrar is entitled to be provided with copies of: (a) all notices of general meeting of the Company; (b) all other documents (including annual reports and fi nancial statements) given by the Company to the holders of Shares, at the same time as, or as soon as reasonably practicable after, the holders of Shares. 16 Governing law 16.1 Governing law The Notes are governed by the law in force in New South Wales Jurisdiction The Company submits, and each Noteholder is taken to have submitted, to the non-exclusive jurisdiction of the courts of New South Wales and courts of appeal from them. The Company waives any right it has to object to an action being brought in those courts including by claiming that the action has been brought in an inconvenient forum or that those courts do not have jurisdiction Serving documents Without preventing any other method of service, any document in any action may be served on the Company or a Noteholder by being delivered or left at their registered offi ce or principal place of business. 17 Interpretation 17.1 Trust Deed Terms defi ned in the Trust Deed have same meanings when used in the Conditions unless the contrary intention applies Defi nitions In these Conditions the following expressions have the following meanings: ASIC means the Australian Securities and Investments Commission. ASX means the Australian Stock Exchange Limited or the market operated by it, as the context requires. Auditors means KPMG. Bonus Shares means Shares or other securities which are issued pro rata to holders of Shares (and any other person entitled to participate), and for which no consideration is payable by the holders of the Shares or any other person (but does not include Shares or other securities which are issued in lieu of distributions or by way of distribution reinvestment or under a scheme for the benefi t of employees of the Company or its Related Entities or under a Share purchase plan). Business Day means a day on which banks are open for general banking business in Sydney (not being a Saturday, Sunday or public holiday in that place) and, if a Note is to be issued or paid on that day, a day on which each Clearing System is operating. 55

56 Conversion means the redemption of the Notes and the simultaneous issue, in consideration, of Shares in accordance with Condition 7 ( Conversion ). Conversion Date means the date on which a Note is converted into Shares in accordance with the Conditions. Conversion Notice means a notice given in accordance with Condition 7 ( Conversion ) in which the Noteholder notifi es the Company that it requires the number of Notes specifi ed in the Conversion Notice to be converted into Shares. Conversion Number means the number of Shares received on Conversion of a Note, which is 1, subject to adjustment in accordance with clause 9 ( Adjustments ). Corporations Act means the Corporations Act 2001 of Australia. Default Rate means the Interest Rate plus 2 per cent. per annum. Dividends any dividend per Share announced and payable by the Company. Event of Default means an event so described in Condition 13 ( Events of Default ). Face Value means $1.30 for each Note. Interest Payment Date means 30 June and 31 December in each year commencing on (and including) 30 June 2005 and ending on (and including) the Maturity Date or if the Notes are Converted, the applicable Conversion Date. Interest Period means each period beginning on (and including) an Interest Payment Date and ending on (but excluding) the next Interest Payment Date. However: (a) the fi rst Interest Period commences on (and includes) the Issue Date; and (b) the fi nal Interest Period ends on (but excludes) the Maturity Date or if the Notes are Converted, the applicable Conversion Date. Instrument of Exemption means the terms on which ASIC: (a) exempts the Company from compliance with the provisions of the Corporations Act; or (b) declares that provisions of the Corporations Act apply to the Company if specifi ed provisions were omitted, modifi ed or varied as specifi ed in the declaration. Interest Rate means 8.00 per cent per annum. Issue Date means the date the Convertible Notes are issued (anticipated to be 20 December 2004). Listing Rules means the Listing Rules of the ASX. Maturity Date means 31 December Marketable Securities has the meaning given to it in the Corporations Act. Payment Date means an Interest Payment Date and the Maturity Date. Record Date means, the close of business in the place where the Register is maintained on the seventh calendar day before the payment date. Redemption Amount means the Face Value of each Note as at the date of redemption. Related Entity has the meaning it has in the Corporations Act. Shares means the ordinary shares of the Company. Specified Conversion Date means 31 December 2007 and the Maturity Date. Statement of Holding means a statement of holding (in the form determined by the Company from time to time) which sets out details of the number of Notes inscribed in the Register in a Noteholder s name as at the date specifi ed in the statement. Takeover Event means: (a) a takeover bid (as defi ned in the Corporations Act) to acquire all or some of the Company s Shares and the offers under such takeover bids ( Offers ) are, or become, unconditional and: (i) the bidder acquires at any time during the period of the Offers a relevant interest in more than 50% of the Shares in issue; or (ii) the directors of the Company issue a statement recommending the acceptance of the Offers; or 56

57 (b) the Company lodges with ASIC a draft explanatory statement for a scheme of arrangement that the Company proposes to enter into in terms of Part 5.1 of the Corporations Act which, if approved and implemented, will result in a person having a relevant interest in more than 50% of the Shares that will be in issue after the scheme is implemented, and either the Company releases to the market an opinion from an independent expert that the proposed scheme is fair and reasonable or the scheme is subsequently approved by shareholders and the Court. Notwithstanding the foregoing, if after a Takeover Event occurs, the scheme is not approved by shareholders and the Court, the Takeover Event shall be deemed never to have occurred and in order to ensure that action is not taken prematurely in terms of Condition 7.2(b) the time period referred to in this Condition 7.2(b) will be extended if necessary so that it expires on the date of such approval. Transfer Form means a form in the form determined by the Company or its appointed registrar from time to time. Trigger Event means any of the following: (a) the Company or a material subsidiary resolves in general meeting that it be wound up other than to effect a solvent reconstruction; (b) a provisional liquidator is appointed to the Company or a material subsidiary other than to effect a solvent reconstruction; (c) an order is made by a court for the winding up of the Company or a material subsidiary (other than to effect a solvent reconstruction); (d) an administrator of the Company or a material subsidiary is appointed under section 436A, 436B or 436C of the Corporations Act; (e) the Company or a material subsidiary executes a deed of company arrangement (as defi ned in the Corporations Act); (f) the Notes (after they commence trading on the ASX) or Shares are suspended from trading on ASX for more than 20 consecutive Business Days or are delisted; (g) the Company or a material subsidiary announces its intention to sell, dispose or distribute all or substantially all of its business undertakings or assets (other than to effect a solvent reconstruction) other than, in the case of a material subsidiary, for fair market value and otherwise on arm s length terms; (h) a Takeover Event occurs; (i) the Company materially breaches an obligation under the Trust Deed or these Conditions and, if the breach is capable of remedy, the Company fails to remedy such breach within twenty one days of written notice by the Trustee requiring such remedy. A subsidiary worth 5% or more of the consolidated net assets or cashfl ow of the Company is deemed to be a material subsidiary for the purposes of this defi nition. Trust Deed means the deed entitled Convertible Note Trust Deed dated 16 November 2004 between the Company and the Note Trustee. 57

58 58