Accountant Non Disclosure Agreement by sne72168

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									           PULSE UTILITIES NEW ZEALAND LIMITED


                     DISCLOSURE DOCUMENT
                               FOR
                    NZAX COMPLIANCE LISTING

                          16 November 2007




NZX Sponsor
Quigg Partners
Level 7
28 Brandon Street
PO Box 3035
Wellington
                                                                                                 2


1.      Description of Securities to be Quoted
Quotation of 12,192,852 ordinary shares (Shares) of Pulse Utilities New Zealand Limited (Pulse)
is sought. Each Share gives the holder the right to:

(a)     attend and vote at a meeting of Pulse, including the right to cast
        one vote per Share on a poll (subject to any voting prohibitions under the
        NZAX Listing Rules);

(b)     an equal share with other Shares in any dividends authorised by the board;

(c)     an equal share with the other Shares in the distribution of surplus assets in
        any liquidation of Pulse;

(d)     be sent certain information by Pulse; and

(e)     the other rights as a shareholder conferred by the Companies Act 1993 and Pulse’s
        Constitution.

No new Shares are being issued as part of Pulse’s application to list on the NZAX. Pulse will
however be undertaking a non-renounceable entitlement offer to its shareholders shortly following
listing under an investment statement and short-form prospectus (Entitlement Offer). Under the
Entitlement Offer, each shareholder as at the record date will have an entitlement to subscribe for
up to 2,500 new Shares in Pulse at $2.00 per Share and, where a full entitlement is subscribed
for, such shareholders will also have an opportunity to apply for any shortfall that may arise from
the offer. The timetable for the Entitlement Offer is:

                             Event                                             Date
Pulse Shares commence quotation on the NZAX                          Monday, 26 November 2007
Record Date for Entitlements (5:00 pm)                                Friday, 30 November 2007
Investment Statement and Entitlement and Acceptance                  Saturday, 1 December 2007
Forms sent to Shareholders
Closing Date for receipt of acceptances with payment due               Friday, 28 December 2007
Allotment of New Shares                                                Thursday, 3 January 2008
Expected quotation date of New Shares                                      Friday, 4 January 2008
Despatch of statement of holdings for New Shares                           Friday, 4 January 2008

Options

Pulse also has options on issue for which quotation is not sought. At the date of this Disclosure
Document there are 1,510,000 options on issue. Under their terms of issue, the options may be
exercised at the discretion of the holder into listed, ordinary shares of Pulse on a 1:1 basis. The
options were issued for a grant price of 20 cents each and have an exercise price of $1.80. The
options must be exercised by 31 August 2008 or will lapse and be of no effect (Options).

Convertible Notes

Prior to listing on the NZAX Pulse had 510,357 convertible notes on issue with a face value of $1
each (Notes). Three Note holders (who held 440,000 Notes in aggregate) and Pulse agreed to
cancel the Notes and enter a loan agreement. Pulse now owes these shareholders $440,000 (in
aggregate) which is repayable to them on 31 March 2008. Pulse intends to fund repayment of
these loans with proceeds from the Entitlement Offer. Interest is payable by Pulse on the loans at
a rate of 11.5% per annum and the loans are unsecured. None of these shareholders is a
“Related Party” (as that term is defined in the NZAX Listing Rules) of Pulse.
                                                                                                3

70,357 Notes remain on issue to four Note holders, none of whom is a “Related Party” (as that
term is defined in the NZAX Listing Rules) to Pulse. Under the terms of the Notes, they convert to
Shares at the lesser of either $1.50 or 90% of the price at which Pulse issues Shares in
accordance with a registered prospectus. Accordingly, when the prospectus is registered for the
Entitlement Offer (at $2 per Share), the Notes will convert into 46,903 Shares at a price of $1.50
per Share and there will be no remaining Notes on issue.

A copy of the terms of the Notes has been lodged with NZX as a material contract and is
available upon request by contacting Pulse per the contact details in section 11. below.

2.      Details of the Issue
The NZAX Issuer:        Pulse Utilities New Zealand Limited (Company No. 1484483), a company
                        registered under the Companies Act 1993 and having its registered office
                        at 403a Richmond Road, Grey Lynn, Auckland.

The NZX Sponsor:        Quigg Partners, Barristers and Solicitors, Level 7, 28 Brandon Street,
                        Wellington.

3.      Directorate and Advisers
Directors
The following are the directors of Pulse. None of the directors have been adjudged bankrupt.

Full Name:         James Lee Allworthy Martin

Address:           8 Tarata Street, Mt. Eden, Auckland

Technical          MBA
Qualifications:
Biography:         Mr Martin is the founder and CEO of Pulse. He has over 20 years experience
                   in business development roles in the United Kingdom and New Zealand, most
                   notably with Sky Network Television when it launched in 1990. As a
                   communicator he received recognition from Auckland Institute of Technology
                   receiving an Honorary Degree for his contribution to International Advertising
                   and Communications. For the past eight years he has focused on developing
                   energy efficient technologies to the consumer as an active market participant
                   and inventor. He gained a Master of Business Administration from The
                   University of Auckland in 1995. He has a passion for energy and the
                   environment.


Full Name:         Donald Gerard Purdon
Address:           19 A Ngapuhi Rd, Remuera, Auckland

Technical          MA (Hons)
Qualifications:
Biography:         Mr Purdon is the Chairman of Pulse. He has over 25 years experience in
                   General Management, Marketing and Human Resources. He has held
                   executive roles in the Management Consultancy, Building Products,
                   Infrastructure and Dairy industries working in New Zealand and the United
                   Kingdom. He has extensive experience in establishing companies both large
                   and small, and in putting in place the corporate infrastructure needed to
                   create and sustain business growth. He has a Master of Arts with honours
                                                                                             4

                  degree from the University of Canterbury.


Full Name:        Joseph van Wijk
Address:          220 Thomas Road, Hamilton

Technical         BBus, MBA, CA
Qualifications:
Biography:        Mr van Wijk is a New Zealand qualified Chartered Accountant and has a
                  diverse range of international experience in accounting, taxation, investment
                  and financial roles including mergers and acquisitions in the United Kingdom
                  and the United States of America. He is currently the Managing Director of
                  Tasman Capital Limited and also a financial advisor to the Waikato District
                  Health Board, a director of publicly listed TRS Investments Ltd and manages
                  his own investment company – Tasman Portfolio Limited. He has a Bachelor
                  of Business from New Zealand and a Master of Business Administration from
                  the United Kingdom.


Auditors
O’Halloran HMT Limited
Level 8
203 Queen Street
Auckland
Telephone: 09 366 5089
Website: www.ohalloran.co.nz

Bankers
Bank of New Zealand
123 Broadway
Newmarket
AUCKLAND

Solicitors
Hesketh Henry
Level 11
41 Shortland Street
Private Bag 92093
Auckland
Telephone: 09 375 8700
Website: www.heskethhenry.co.nz

Financial Advisers
Staples Rodway Corporate Finance Limited
Level 9
45 Queen Street
PO Box 3899
Auckland
Telephone: 09 303 1384
Website: www.staplesrodway.com
                                                                                                     5




Securities Registrar
Link Market Services Limited, who may be contacted at:

Physical Address:                Postal Address:           Contact:

138 Tancred Street               PO Box 384                Telephone: 03 308 8887
Ashburton                        Ashburton 8300            Email: lmsenquiries@linkmarketservices.com



4.       Directors Interests
Other than as mentioned below, none of the directors are remunerated (or proposed to be
remunerated) by Pulse other than by means of director’s fees:

     James Martin is an executive director and is employed by Pulse as its Chief Executive Officer
     and receives remuneration in respect of this employment; and
     Don Purdon is Chairman of Pulse and is also currently contracted by Pulse to assist with the
     NZAX listing of Pulse and raising capital. Mr. Purdon receives remuneration for these
     services. This contract expires on 14 December 2007 (unless extended by mutual
     agreement) and is otherwise terminable on 30 days notice by either party and without cause.
     Mr Purdon is also a trustee of the Crewkerne Family Trust.

A Director’s incentive scheme is also in place where the Board receives and allocates between
the Directors a payment of 5% of the annual increase in share price (on a weighted average basis
over the previous 12 month period) calculated on each anniversary of the listing date multiplied
by the total number of shares on issue at that date for Directors with 12 months or more tenure.

Pulse pays directors fees to each director of $2,000 per month. It should be noted that these fees
have accrued for the past 12 months and have not been paid to the directors.

There are no existing or proposed arrangements between Pulse and the existing or proposed
directors in respect of retirement benefits or other compensation for loss of office.

Material Transactions with James Martin

In addition to being a director of Pulse, Mr Martin is also a director of Pulse Utilities Limited (PUL)
and a trustee of the Allworthy Trust. The Allworthy Trust owns 74.9% of Pulse Utilities Limited.

PUL previously licensed to Pulse all of the material intellectual property that is used in the Pulse
smart meters, as well as other intellectual property which included certain registered and
unregistered trade marks and the right to exclusively use a patent owned by PUL. On 16
November 2007, Pulse and PUL entered a Deed which provided that:

     All right, title and interest in and to the intellectual property that was previously licensed in
     New Zealand is assigned to Pulse for $1.
     The assignments were in respect of the New Zealand and Australian intellectual property
     rights only, with PUL retaining the intellectual property rights for exploitation elsewhere in the
     world.
     The Australian intellectual Property rights (that were assigned by this Deed) were acquired by
     Pulse for consideration of 2,000,000 Shares being issued to PUL. The nature of this
     transaction is discussed in section 5 below.
                                                                                               6

     Both Pulse and PUL will share their enhancements to the intellectual property with each
     having the exclusive right to exploit any such enhancements according to their respective
     jurisdictions.

Accordingly Pulse now owns all material intellectual property that is used in the Pulse smart
meter device in the New Zealand and Australian markets. A copy of this Deed has been lodged
with NZX as a material contract and is available upon request by contacting Pulse per the contact
details in section 11. below.

Material Transactions with Joseph Van Wijk

Mr van Wijk is a director and shareholder of Tasman Capital Limited (Tasman). He is also a
director and the sole shareholder of Tasman Portfolio Limited (TPL). TPL, Tasman and Pulse
entered a Memorandum of Understanding dated 9 October 2007 which provided that:

     Tasman would lend to Pulse $200,000 with repayment of $100,000 being committed to
     subscribing for shares in the Entitlement Offer. The remaining $100,000 was also committed
     to subscribing for shares in the Entitlement Offer where less than $1 million is raised.
     Otherwise the $100,000 is to be repaid by Pulse by 28 February 2008.
     TPL also lent Pulse $155,000 with repayment being fully committed to subscribing for shares
     in the Entitlement Offer.
     Tasman would receive 260,000 shares in Pulse as part of an amalgamation. The
     amalgamation was a long-form amalgamation under Part XIII of the Companies Act 1993
     where a wholly owned subsidiary of Tasman (Tasman Electricity Shell Limited) amalgamated
     with a wholly owned subsidiary of Pulse (Pulse Capital Limited). Pulse Capital Limited
     continued as the amalgamated company and the 260,000 Pulse shares were issued to
     Tasman (and 113,750 shares were subsequently distributed to Tasman’s shareholders) as
     consideration for the cancellation of the Tasman Electricity Shell Limited shares.
     Interest applies to the above loans at a rate of 10 % per annum. The loans are unsecured.

A copy of this Memorandum of Understanding has been lodged with NZX as a material contract
and is available upon request by contacting Pulse per the contact details in section 11. below.

5.      Substantial Security Holders
As at 16 November 2007, Pulse has 548 shareholders in total. The table below identifies the
substantial security holders of Pulse as at 16 November 2007:

                        Name                  No. of Securities     Percentage of
                                                                        Class
            James Lee Allworthy Martin         2,735,630 Shares        22.44%
            Donna Marie Martin
            Richard Beca

            Stephen Frewen                       972,202 Shares          7.97%

            Mark Gray                            619,181 Shares          5.08%
            Mark Edgar Wilson

            Pulse Utilities Limited (PUL)      1,200,000 Shares          9.84%


The 1.2 million Shares recorded above as held by PUL are not beneficially owned by PUL. At an
extraordinary general meeting of shareholders held on 9 November 2007, the shareholders of
Pulse approved the issue of 2 million Shares to 42 different persons. This issue was
                                                                                                      7

consideration for the transfer to Pulse of the Australian intellectual property rights to the Pulse
technology. The Shares were issued to PUL to distribute to these persons due to the previous
ownership structure of the Australian intellectual property rights. The terms of issue of these
Shares provide that:

   All economic and voting rights attached to the Shares are suspended whilst PUL holds them;
   They will be ordinary shares and rank pari passu in all respects with all other Shares when
   they are transferred from PUL to the appropriate beneficial owners, being persons that are
   not associated with James Martin for the purposes of the Takeovers Code; and
   Any Shares that are not transferred from PUL to their appropriate beneficial owner within six
   months of their date of issue will be cancelled.
Accordingly PUL is effectively holding these shares on trust for 39 persons and will be
endeavoring to transfer all of these Shares to the appropriate beneficial holders as soon as
possible.

6.      Activities & Risks
Summary of the Pulse Business

Pulse seeks to replace the electricity meter on the wall of homes and businesses by installing its
own intelligent metering device. It will achieve this by being both an electricity retailer and broker
offering the consumer improved choice in electricity retail services and supply. Pulse’s entry
strategy into the retail electricity market will be to supply electricity at lower prices than are
currently available to consumers. This can be achieved by Pulse significantly reducing the usual
retail margin charged by electricity retailers. It will be Pulse’s policy to avoid price risk by hedging
its energy purchases to the fullest extent possible.

The key objective is to get Pulse’s smart metering device installed and reading electricity in New
Zealand homes and businesses with an accumulative target of 8,000 installations in the first 2
years and 60,000 by year 5 in New Zealand. Also, Pulse is actively investigating opportunities to
enter the Australian market. Most of Pulse’s profit will come from its metering device and not
through being an electricity retailer.

Retailing electricity is essentially viewed by Pulse as a method for obtaining customers and
therefore installations of the metering device. Pulse intends in the future to up sell a range of
value added services (such as gas and water meter reading, alarm monitoring, appliance
automation and pre-payment) which can be delivered through the smart metering device.
Achieving installations of the Pulse meters is accordingly essential to the prospects of Pulse. Of
the 2.8 million electricity meters currently installed across 1.9 million premises in New Zealand,
nearly all are open to competition from Pulse.

A central feature of the Pulse smart meters is that they have the ability to communicate and
collect data from consumers remotely over a number of communication paths including radio
frequency, internet, general packet radio spectrum (e.g. the GPRS mobile technology used by
Vodafone), telephone lines and power line carrier (existing transmission lines and copper wire).
There are currently no other known platforms in New Zealand or Australia that have this range of
communication paths offered by Pulse. Pulse can currently commercially offer X1 residential
power line carrier, radio frequency and internet paths and intends to obtain the requisite
approvals under the Electricity Governance Rules to commercially offer the remaining paths
shortly.

History of Pulse

Pulse was incorporated in 2004 with the purpose of marketing and distributing advanced
intelligent meter reading and event management technologies in the New Zealand electricity
                                                                                                   8

market. Pulse now owns unique technology for the New Zealand and Australian markets. The
Directors believe that Pulse is well positioned to commercially exploit the capability it has
developed for both the Australian and New Zealand markets.

Pulse previously licensed all material intellectual property associated with its business, however
prior to listing this intellectual property was assigned to it as discussed above in section 4.

The New Zealand Electricity Market

Up to 1994, New Zealand had a system of monopoly providers of generation, transmission,
distribution and retailing. Since then, a step-by-step process of industry reform has led to the
separation of the monopoly elements from the contestable elements to create competition in
energy generation and electricity retailing.

The wholesale market for electricity is administered by M-co on behalf of the market regulator, the
Electricity Commission. The main participants are seven generator/retailers who trade at 244
nodes across the transmission grid. The generators offer their plant at grid injection points and
retailers bid for electricity offtake at grid exit points. There is a Reconciliation Manager who
reconciles all metered quantities, a Pricing Manager (M-co) who determines the prices at each
node, a Clearing and Settlement Manager (M-co) who pays generators for their generation at the
market clearing price and invoices all retailers for their off-take. Prices and quantities are
determined half-hourly at each node. The transmission system is owned and operated by a state-
owned enterprise, Transpower which performs the functions of Grid Owner, Grid Operator,
Scheduler and Dispatcher for the wholesale market.

Distribution of electricity from the grid exit points to the end consumers' premises is the
responsibility of 28 distributors who have monopoly control of the lines services on their networks.
Ownership of distributors, also known as lines companies, is through Trust Owned Companies or
Public Companies. Consumers can choose from up to seven electricity retailers, who are also
generators, for their energy supply. Competition for retail customers varies across the country but
since 1999, when full retail competition was introduced, customers have switched at a rate of
about 12% per annum.

Reconciliation between retailers and the reconciliation manager depends on meters being read
for each consumption point of connection. These reads are validated and submitted to the
reconciliation manager by the fourth business day of the month following consumption. Volumes
are allocated to each participant for each point of connection to the grid, multiplied by the spot
price, then credited to generators and invoiced to purchasers.

Pulse intends to participate on two levels in the contestable components of the electricity industry:

    With electricity retailers, as a retailer of energy focussed on customer service, providing
    energy options and wholesale prices; and
    With contract service providers, as a technology platform from the smart meter for data
    logging, monitoring and control based features and benefits.

In the future Pulse may also invest in electricity generation.

The Opportunity for Pulse Smart Meter Technology

Pulse is aware that many smart meter systems have been trialed with limited success in New
Zealand. Pulse believes full commercial roll-out of smart meters has not yet occurred for various
reasons including that smart meters have been too expensive (and consequently seen as being
suitable only for large industrial consumers), retailers are protective of their data, lack of
standards from regulatory authorities, the risk of ‘stranded assets’ and historically there has been
a "hidden" level of profit from the inefficiencies inherent in reading “dumb meters”.
                                                                                                  9


Pulse believes that it is the consumer that has suffered the most from the lack of commitment to
smart metering in the New Zealand energy market. By offering a service directly to consumers,
we believe that we can aid them to get the best deal for their electricity and fundamentally change
the way consumers will interact with their energy provider. Pulse has a price advantage in offering
its smart meters to consumers as it owns all of the intellectual property that is intrinsic to the
operation of its smart meters. The principal activities of Pulse to date have been research and
development of the smart meters with a view to rolling out the smart meters at a price that can
compete.

A feature of the Pulse smart meter is the relay component that can facilitate demand side
management during peak price periods. Consumers have property rights over the load that can
be controlled in their home or business. Currently some of these rights are offered to lines
companies for the control of hot water cylinders in your home and businesses for control of plant
and equipment. Pulse technology offers consumers the opportunity to maximize the value
inherent in load control and Pulse can achieve this as a load aggregator. During peak periods of
demand the value of load control goes up exponentially. The demonstrable benefits of this feature
may have a value to both lines companies and retailers. The relay feature is similar for home
automation and business automation.

Pulse has engaged in discussion with the industry over the past three years as a potential
supplier of metering technology. Consequently, Pulse currently believes that the industry will seek
consolidation of technology providers and not be tolerant of a number of different metering
platforms. With this in mind Pulse intends, by default, to secure its place as an accepted meter
service provider. Should a customer switch to another energy retailer the metering and data
collection service could continue to be provided as Pulse intends to offer a standard meter
services agreement to participants in the energy industry.

The Pulse Target Market

Pulse intends to initially focus its marketing effort on:

    Premises with a single phase meter (homeowners and small businesses); and
    Premises with a three phase meter (small to medium sized enterprises).

The next phase of our marketing effort will have particular emphasis on:

    Areas serviced by companies partnering with Pulse;
    SMEs in regional communities;
    Areas where the fixed daily fee is high due to lack of competition;
    Areas where new energy sources can be embedded in local distribution networks;
    Embedded network owners and property developers;
    Billing on behalf of private generators and network managers; and
    Gated communities.

                                      newsworthiness'of the electricity industry and will aim to
Pulse intends to make the most of the '
ensure its successes in the market are promoted professionally and in line with statutory
requirements. Given we will be empowering consumers to use less power we intend to promote
ourselves as a “green” company and will seek to make the most of this in our branding and
promotions.

The Pulse Strategy

Pulse will be unbundling electricity pricing to identify both the variable and fixed components that
                                                    s
make up a consumers electricity bill. It is Pulse' strategic intent to secure customer loyalty by
                                                                                                       10

positioning itself on the side of consumers as an energy broker and retailer. By way of example,
there are three main components that presently make up a consumers electricity bill:

    The variable cost of electricity consumed; this is the price for electricity supplied from a
    electricity retailer;
    The distribution lines charges; this covers the monopoly component for delivering the
    electricity to your home or business by a local lines company; and
    A fixed daily fee; this is the catch all component of the bill and includes metering, billing,
    administration, Electricity Commission and industry levies, call centre, data administration,
    prudential securities and the costs of any other services required to deliver electricity to a
                s
    consumer' premises.

As a Pulse consumer, the distribution lines charges will not change. Pulse also intends to charge
a fixed daily fee and this is where it intends to earn its profits. For the majority of customers, the
fixed daily fee will be similar to what they pay today.

Where consumers may benefit from switching to Pulse is in the variable cost of supply. Pulse
does not intend to charge a margin of any significance on this variable cost of supply of electricity
as other retailers do. It will endeavour to provide electricity to consumers at as close to Pulse’s
cost of supply as possible. For example the variable cost of electricity supply for Pulse consumers
will likely only consist of charges such as the spot price for the electricity, the administrative costs
associated with facilitating supply, Electricity Commission levies and other taxes or charges
levied by Governmental or regulatory authorities (e.g. possible future taxes such as carbon
taxes).

Pulse is entering the retail market so that it can have a direct relationship with electricity
consumers. In securing this direct relationship, Pulse also secures the right to attach and replace
metering equipment at the premises of the consumer. The meters, once installed, remain assets
of Pulse and can provide steady revenue streams and options for future additional revenue
streams.

Another key strategy is to establish as an independent billing bureau. It is Pulse’s intention to
retail electricity on behalf of private generators giving them the ability to sell retail services and for
Pulse to install more of its meter assets. Pulse intends to offer private generators the scope to
enhance returns through direct access to the consumer. Pulse believes that the enhanced
economic benefits for generators will help to bring more investment in environmentally
responsible renewables-based generation. Another potential market for Pulse is to offer retailing
and billing services to property developers or those persons that have an embedded network.
This may include future investment in private generation on site. We may also enter the retail
market for the supply and metering of gas.

The Directors believe that Pulse has an exciting strategy in a market where the needs of
consumers have been neglected and that listing on the NZAX is a first step towards
commercialising this strategy.

Revenue and Customer Targets for Pulse

Pulse plans to derive most of its profit from the rental of its smart meter device which it will attach
to the consumer’s premises. Pulse anticipates gaining long-term rental from each installed asset.
This rental is similar to what consumers already pay for their electricity connection while we
intend to offer savings in respect of their consumption.

  The key success driver for Pulse is the number of consumer installations of the smart
                          meter device that Pulse can achieve
                                                                                                   11

Once Pulse signs up a consumer they will be able to switch electricity provider if another
electricity retailer has a better price. Pulse’s revenue will not be unduly affected by any change in
electricity retailer because of the continued rental it receives on its smart meter device which will
likely remain installed. In the event the consumer chooses another electricity retailer, Pulse could
still offer additional services to these consumers and use its technology to monitor, manage and
bill these services.

In the first 12 months we will focus our marketing on New Zealand Small-to-Medium Enterprises
where we will aim to collect a daily fee for our services. Pulse also intends to collect revenue from
the lines and retail charges, which we envisage will provide valuable cashflows although investors
should note that the cost of delivery (prudential securities, billing, cost of sales and installation,
product cost and supply) will be deducted from this revenue. In addition, Pulse intends to offer a
range of additional services through its smart meter technology which, if taken up by consumers,
will be another source of revenue for Pulse. These services will be progressively introduced.

The targeted, cumulative installations in New Zealand for Pulse from 2008/2009 for five years
are:
               Year 1 : 1,800 installations
               Year 2: 8,550 installations
               Year 3: 23,350 installations
               Year 4: 42,350 installations
               Year 5: 61,500 installations

Pulse has a current customer base of approximately 140 customers which is used to test
processes and systems in preparation for market roll out of the Pulse technology in 2008.

Pulse Technology and Certifications

Pulse has jointly developed a series of electricity meters and meter data loggers approved to
international standards and obtained certification to some of the highest requirements for data
accuracy. The Pulse intelligent devices are fully certified to all local (EGR Part D Code of Practice
D4 “Data Logger Minimum Requirements”) (IEC 62052-11-2003); (CISPR 22-206); (AS/NZS 609-
50-1); (IEC 61000) and some international standards.

Pulse is also a registered electricity retailer (Approved Data Administrator issued under code of
practice G1 of schedule G8 of part G of the Electricity Commission Rules 2003). Pulse is one of
only seven electricity retailers in New Zealand that can offer time of use metering.

Pulse Benefits to Consumers

There are a number of benefits that a consumer will immediately gain from adopting the Pulse
technology for electricity supply to their business or home. These include:

    Lower pricing opportunities for electricity.
    Greater accuracy for energy consumption data and no estimated energy readings.
    Access to consumption data empowering consumers with energy management.
    Consumers may elect to participate in a load management programme (known as demand
    side response).
    Two-way metering which can facilitate exporting of electricity back into the grid where the
    consumer has small-scale generation assets such as solar panels, wind mills or similar.
    No need for an electricity retailer to hold a key for access to your home.
    The ability to monitor specific appliances in the home such as life support equipment for at-
    risk customers.
                                                                                                    12

In the future we hope to use our smart meters as a platform for offering new and exciting
technologies to our consumers, such as the ability to remotely control automated aspects of their
homes.

Risks to the Business of Pulse

Set out below are some specific risks to the Pulse business. The list is not exhaustive. Also
discussed below is how Pulse seeks to mitigate these specific risks. Although all efforts are made
to mitigate these risks, investors need to be aware that these risks could still have a detrimental
effect on Pulse’s business notwithstanding the mitigation strategies employed.

    Meter asset removal and stranded meter assets: Asset removal can occur when a
    customer changes its energy supplier and replaces their Pulse smart meter. Some of these
    meter assets may be re-deployed by Pulse. Meter assets may become stranded where they
    remain attached to a person’s wall but it is not commercially viable to retrieve and redeploy
    the meter asset. Pulse is reliant on providing a service to a customer to retain the right to
    have its assets attached to that consumers home or business. We believe the risk of removal
    is mitigated because the consumer will have the ability to get a number of services provided
    by Pulse in the future and we can also redeploy the meter.

    Pulse and Pulse’s consumers can be exposed to spot price fluctuations on the
    wholesale electricity market: There is a risk that the wholesale market may have a
    prolonged period of high prices (e.g. dry years limiting hydro station electricity generation).
    Pulse intends to offer customers a range of pricing and risk options. One option for Pulse is to
    simply sell electricity to customers at cost and therefore pass both market fluctuation savings
    and risk onto the customer. Pulse may alternatively be able to offer a fixed price to
    consumers so that they are not exposed to fluctuations in their monthly bill. This would leave
    Pulse exposed to the fluctuations and Pulse would seek to mitigate this exposure through
    hedge agreements in the retail market and with bilateral agreements with private generators.

    Pulse is a capital intensive business: The manufacture, supply and installation of smart-
    meter assets for Pulse has a long-term value. Therefore these assets need to be capitalised
    upfront and have a payback, under Pulse’s business plan, over a two year period following
    installation. If Pulse cannot attract the initial, upfront funding, then it may not be able to fund
    the implementation of its business plan, which relies on the manufacture, supply and
    installation of smart-meter assets. Pulse is seeking a listing to help mitigate this risk as it
    expects that a listing will provide it with greater access and flexibility to raise capital to
    support its business plan. Without access to capital Pulse may have to cease trading.

    The wholesale electricity market price that Pulse may offer could be above what other
    retailers are offering: Electricity retailers with generation capability could in some
    circumstances enter a direct relationship with customers separate from the wholesale market
    on terms that are more favourable than Pulse can offer. Pulse risks losing customers or being
    unable to attract new customers should this occur. The Pulse directors presently assess this
    risk to be limited to high consumption users, which is not presently Pulse’s target market.

    Pulse may be adversely affected by regulatory changes: The electricity industry is a
    dynamic industry that has already undergone significant regulatory changes over the past 20
    years. There is a risk that further changes to the regulatory environment in which Pulse
    operates could occur and have a detrimental effect on Pulse’s business. For example, new
    regulation could be put in place that may cover the technology selection process. The
    Board’s assessment is that any regulatory changes are more likely to be in favour of Pulse
    and smart metering.

    Pulse carries manufacturing and technology risks: These risks include failure of a
    component from a third party supplier, failure in data storage and warehousing,
                                                                                               13

communication failure to a home, and other various risks inherent in a computer based
technology. To mitigate these risks we will use ISO accredited processes and procedures
and maintain quality control dialogue with our suppliers.

Pulse has risks associated with installation of its meter assets: With widespread
adoption of time of use metering in New Zealand and/or Australia there may be a shortage of
installers which could limit our ability to meet demand and could increase the installation
costs.

Pulse has key personnel that it needs to retain: The prospects of Pulse depend in part on
the intellectual property, experience and business acumen of a small number of key
personnel at this time. There is a risk that the loss of any key personnel without replacement
by persons of similar skills may have an adverse effect on the business. We will develop a
culture and remuneration framework which attracts and retains employees. We currently
have key man insurance on critical employees.

As an electricity retailer, Pulse may supply and have obligations to ‘at-risk’ customers:
Pulse has risk management procedures in place to deal with at-risk customers to help ensure
the continuity of their electricity supply.

Pulse’s business relies on valuable Intellectual Property: The patents, trade marks and
other intellectual property of Pulse may be regarded as critical to its success. Accordingly,
Pulse is reliant on laws and regulations regarding patents, copyright and trade marks and
confidentiality restrictions with staff, contractors and others to safeguard its intellectual
property rights. Pulse may have to rely on the Courts in taking any enforcement action
against a person or entity that infringes its intellectual property. Pulse has made reasonable
efforts to protect its intellectual property. However unauthorised and illegal use or exploitation
of its intellectual property may occur and result in an adverse effect on the operating and
financial performance of Pulse.

Pulse does not own a registered trade mark for the Pulse name: Pulse has applied for
trade mark protection of the Pulse name however it does not at present have registered trade
mark protection. It is aware of another company owning a registered trade mark for Pulse in
respect of similar services to those that Pulse provides which could potentially take
infringement action against Pulse under the Trade Marks Act 2002. The likelihood of any
infringement action being taken against Pulse is considered to be low as following market
investigations, Pulse has found no evidence of any persons using the Pulse name in New
Zealand in respect of similar or identical services to those of Pulse.

Pulse has a risk of competition in the energy sector: Pulse faces competition on two
levels, as a retailer and as a provider of smart meters. The roll-out of smart meters in
Australia is likely to be highly competitive and also could be in New Zealand which could
introduce more competitive pricing for these services. Another company could commence a
service offering to consumers similar to ours. Pulse believes these competitive risks are
mitigated as barriers to entry are relatively high in the energy sector notwithstanding that
various certifications from regulatory authorities are required to operate a business like that of
Pulse. Accordingly Pulse believes that the main competitive risk arises from the large,
existing businesses in the New Zealand and Australian energy sector adopting a business
strategy similar to our own. Pulse believes this is mitigated through its adoption of a
conservative business plan. Also, Pulse has registered intellectual property protection for its
technology which confers exclusive use rights. We believe the key challenge for Pulse is
getting sufficient smart meters installed, so that economies of scale can be harnessed to
reduce costs.

Existing participants in the electricity sector with whom Pulse will compete are large
businesses: Other participants in the electricity sector tend to have significant sized
                                                                                                14

     businesses that Pulse believes have not faced true competition in the electricity sector which
     the Pulse strategy could introduce. The reaction of existing players to the introduction of
     competition is unknown.

                                      Speculative Investment
  The above list of risk factors ought not to be taken as an exhaustive list of the risks faced by
Pulse or by investors in Pulse. The above factors, and others not specifically referred to above,
may in the future materially affect the financial performance of Pulse and the value of its Shares.
 Potential investors should consider that the investment in Pulse is speculative. The proposed
gains projected may not be achieved, or they may be exceeded. Success will be determined by
 how well the business strategy above is implemented and how well the risks set out above are
 mitigated. We suggest investors consult their professional adviser before deciding whether to
 invest in Pulse. The future performance of Pulse is not warranted or guaranteed by Pulse, the
                       Directors, any shareholders or any of their advisers.

General Market Risks

       s
Pulse' investments are concentrated in technology in the energy sector. An adverse change in
the value of technology assets impacted on by the factors noted above could have an adverse
                                                                       s
effect on the value of the Shares. The value and profitability of Pulse' investments in technology
and electricity supply in the energy sector are also dependent on, or may be affected by
management performance and decision making at Pulse. The maintenance and acquisition of key
contracts and certifications by Pulse with third parties (such as electricity grid owners and
operators), specific natural disasters (e.g. earthquakes), adverse world events, macro-economic
factors affecting general trading circumstances (e.g. local or global recessions), regulatory risk
(e.g. adverse changes in government regulation), the impact on wholesale energy prices from
carbon emissions trading, changes to taxation regimes and financial market risk (e.g. rising
interest rates and/or an increase in the value of the New Zealand dollar against, principally, the
Australian and the United States currencies or other changes that adversely affect asset values).
The value of equity investments can also be more volatile when an issuer has higher debt levels,
so should Pulse incur high debt levels this may be an additional investment risk.

7.       Returns to Investors
Capital Growth

Assuming a scenario where Pulse is successful, the directors would like to see Pulse migrate to
the NZSX market and the returns to investors should logically result in increasing share values
reflecting the improved financial position of Pulse. Any improvement in financial position will be
determined by the business performance of Pulse and accordingly the activities and risks of
Pulse that are discussed above demonstrate the key factors that will determine returns through
increased share values. However, even in these circumstances, if investors don’t consider Pulse
to be an attractive investment, or if market conditions are generally depressed, there can be no
certainty that the value of Pulse’s shares will reflect any increased underlying value of Pulse’s
investments.

The nature of returns presently intended by Pulse is accordingly through capital growth meaning
returns on an investment in Pulse will most likely only be received through a longer term holding
of Shares.

Given this is an early investment opportunity the initial share price after listing may have some
volatility. If this is the case we would envisage stability will be gained over time and the Shares
will be a long term investment.
                                                                                                 15

Dividends

                                                                                        s
Dividends are the main return applicable to the Shares and are payable out of Pulse' profits and
declared by the Directors. In the short-term, Pulse anticipates investing for the rapid development
                      s
and growth of Pulse' business and therefore the Board believes that there will be an ongoing
requirement to reinvest profits in order to enhance Pulse’s longer-term potential and attain
consistent earnings. Once capital assets are deployed and critical mass is reached, Pulse
anticipates significant and ongoing revenue streams from these assets. It is Pulse’s long term
desire to be a dividend stock and pay annual dividends from any operating surplus.

The Directors will develop a suitable dividend policy at the appropriate stage. The Directors can
give no assurance as to the extent, timing or actual payment of future dividends or the availability
or level of imputation credits. The level of dividends payable will depend upon a number of factors
including future earnings, capital requirements and the overall financial condition of Pulse. Pulse
has not declared or paid any dividends since incorporation. Pulse is the person legally liable to
pay any returns on the Shares.

Taxation

New Zealand taxes may affect returns to shareholders. Dividends will be subject to New Zealand
withholding and final taxes but the liability of shareholders in respect of such taxes may be
reduced or satisfied to the extent the dividends have imputation credits attached. Depending on
prevailing circumstances, dividends paid by Pulse will have the maximum allowable imputation
credits attached.

In addition, in certain circumstances, gains on the sale of the Shares may be taxable. Generally,
where shares are acquired as an investment, New Zealand resident shareholders will not be
taxed on gains from the subsequent sale of shares unless the shareholder is in the business of
dealing in such investments or acquired the shares for the purpose of sale or where the sale is
part of a profit making undertaking or scheme.

These comments and the descriptions on taxation are of a general nature only and in particular,
the statement in relation to New Zealand taxes relates to persons who are New Zealand residents
for tax purposes. These statements do not constitute legal or financial advice. Any investor
considering the purchase, ownership or disposition of shares in Pulse should consult their own
financial or tax advisors concerning the tax consequences of owning shares, in light of that
particular shareholder’s own personal situation.

8.      Guarantee of Securities
Neither Pulse, nor its Directors, or any other person, guarantee or promise any return of any
nature whatsoever from the securities of Pulse.

9.      Consequences of Insolvency
Shareholders would not be liable to pay money to any person as a result of the insolvency of
Pulse.

Claims on Pulse’s assets that rank ahead of claims of Shareholders in the event of Pulse being
put into liquidation or wound up include any creditors of Pulse, secured or unsecured and
including holders of Convertible Notes, that arise from time to time whether through the ordinary
course of business or otherwise, would rank ahead of holders of Shares.
                                                                                                  16

There are presently no claims on Pulse’s assets that would rank equally with the claims of
Shareholders in the event of Pulse being put into liquidation or wound up.

10. Alteration of Securities
The rights, privileges and restrictions attaching to Shares, other than those set out by law, are set
out in the Constitution of Pulse. The Constitution of Pulse may only be altered by special
resolution of shareholders, subject to the rights of interest groups under the Companies Act 1993,
or in certain circumstances by Court order.

Section 117 of the Companies Act 1993 restricts a company from taking any action that affects
the rights attached to its shares unless that action has been approved by a special resolution of
the shareholders whose rights are affected by the action. Under certain circumstances a
shareholder whose rights are affected by a special resolution may require Pulse to purchase its
shares.

11. Enquiries about Securities
Enquiries about the securities can be made to:

Pulse:                   Pulse Utilities New Zealand Limited
                         Don Purdon, Chairman
                         Phone:           09 3789981
                         Email:           don.purdon@pulseutilities.com

NZX Sponsor:             Quigg Partners
                         Level 7
                         28 Brandon Street
                         PO Box 3035
                         Wellington
                         Attention:     Matt Yates
                         Phone:         (04) 472 7471
                         Email:         mattyates@quiggpartners.com


12. Financial Statements
The most recent audited financial statements (including audit reports) and interim statements for
Pulse will be available on the NZAX website at www.nzx.com/nzxmarket/NZAX .


13. Annual Information
All shareholders on the relevant record dates, will be entitled to receive and will be distributed
certain information relating to the ongoing performance of Pulse in accordance with the
Companies Act 1993 and the Financial Reporting Act 1993. This information includes the Annual
Report, containing Pulse’s audited financial statements, and the Half Yearly Report, containing
unaudited half-year financial statements.

An annual meeting of Shareholders will be held each year, following the close of each financial
year on 31 March.
                                                                                               17


14.      On Request Information
The following information is required to be, or will be made available to shareholders on request
to Pulse:

    Pulse’s certificate of incorporation;
    the Constitution of Pulse;
    the share register of Pulse;
    the full names and residential addresses of the Directors;
    the registered office and address for service of Pulse;
    minutes of all meetings and resolutions of shareholders;
    copies of written communications to all shareholders since incorporation, including annual
    reports, financial statements, summary financial statements and group financial statements (if
    any);
    certificates given by directors under the Companies Act 1993;
    the most recent prospectus and investment statement (if any) of Pulse;
    The memorandum of understanding with Tasman Capital Limited;
    The Deed of Assignment with Pulse Utilities Limited;
    The terms of the Notes; and
    A copy of the financial statements of Pulse registered under the Financial Reporting Act
    1993.

A fee may be charged to cover the cost of copying and providing the requested information.
Requests should be made to:

Murray Wright                                            Email: info@pulseutilities.com
Pulse Utilities New Zealand Limited                      Phone: (09) 378 9981
PO Box 10044                                             Fax:   (09) 378 4405
Dominion Road 1446
Auckland

								
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