Alumina Limited

Share Sale and Top up Facility

A letter outlining a special opportunity to participate in a share sale and top-up facility ("Facility") established by Alumina has been sent to certain eligible shareholders. The letter was accompanied by a Sale Instruction Form and a Buy Instruction Form.

The Facility is open to Australian and New Zealand shareholders holding 1,000 Alumina shares or less as at 7:00pm (Melbourne time) on 3 November, 2003.

Eligible shareholders have the opportunity to buy or sell Alumina shares under the Facility for a transaction fee of A$19. Alumina will pay all other brokerage and handling charges.

Participation in the Facility is entirely voluntary and Alumina does not make any recommendation or give any advice regarding whether eligible shareholders should participate in the Facility.

The Facility will be open from 11 November 2003 until the end of the Offer Period on 16 December 2003 however Alumina does have the right at any time to extend or shorten the Offer Period or terminate the Facility.

For more detailed information on the Facility, please access the links below for copies of the shareholder letter and relevant forms (including the Facility Terms & Conditions). In addition, we have provided a series of relevant Questions and Answers regarding the Facility.

If you have any further questions about Facility, please contact Computershare on 1300 556 050 (for callers in Australia) or on +61 3 9615 5970 (for callers in New Zealand).

Documentation available:

Questions and Answers

Capitalised words are defined in the Terms and Conditions for, respectively, the Share Sale Facility and the Top-Up Facility (together the "Facility") included on the blue and pink instruction forms sent to Eligible Shareholders. Please note that the share prices nominated in examples below are hypothetical and do not represent, and are not intended to be a prediction of, actual sale prices or purchase prices that may be achieved.

When is the Facility open?

The Facility will be open from 11 November 2003 until the end of the Offer Period on 16 December 2003.

Alumina may extend or shorten the Offer Period or suspend or terminate the Facility. If it does so, it will publish a notice in "The Australian" newspaper, either before or as soon as practicable after doing so. Buy Instruction Forms and Sale Instruction Forms may be accepted and acted on under the Facility even if received after the Offer Period has ended.

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Why is Alumina arranging the Facility?

Alumina recognises that, for some shareholders who hold a small number of Shares, transaction costs and inconvenience involved may represent an impediment to selling Shares or acquiring a more meaningful holding. The Facility also assists in the Company's program to reduce its administrative costs.

Consequently, we have arranged a convenient way for small shareholders to buy some additional Shares or sell all of their existing Shares through the Facility. The Facility is available to Australian and New Zealand shareholders who hold 1,000 Shares or less as at 7pm on 3 November 2003.

If you wish to sell your Shares but find the transaction costs prohibitive, or engaging a broker is inconvenient, this Facility may be of interest to you. On the other hand, if you wish to increase your holding, the ability to buy Shares under the Facility may be useful to you.

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Can I still participate if my shareholding has changed?

As noted above, eligibility to participate in the Facility is determined on the basis of those shareholders with registered addresses in Australia and New Zealand who hold 1,000 Shares or less as at 7pm on 3 November 2003.

If you, as an eligible shareholder, increase or reduce your holding of Shares after that time, you may still participate in the Facility. You should note that this will have the consequence, if you have acquired more Shares after 3 November 2003 and choose to participate in the Share Sale Facility, that those additional Shares, as well as your original holding, will be sold on your behalf. That is, the Share Sale Facility will apply to all of your Shares at the time the instruction form is acted upon, and not just your holding as at 3 November 2003.

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When will my instruction form be acted upon?

If you choose to participate in the Facility, you cannot specify the date your instruction form will be acted upon. Your Shares will be sold, or additional Shares purchased, soon after your correctly completed Sale Instruction Form or Buy Instruction Form (as relevant) is received by Computershare, and accepted in accordance with the relevant Facility Terms and Conditions. Normally, the trade date will be less than one week after the form is received, however it may be up to two weeks after the end of the Offer Period.

Computershare will process instruction forms promptly after they are received.

Computershare with the Broker will determine the total number of Shares to be sold and purchased on any given trading day (if any). As appropriate, the Broker, as execution-only broker, will then sell on the Australian Stock Exchange ("ASX") the requisite number of Shares for persons who have lodged Sale Instruction Forms and buy on the ASX the requisite number of Shares for persons who have lodged Buy Instruction Forms.

The Broker may, in its sole discretion, delay the sale or purchase of some or all of the Shares available to be sold or bought on a particular trading day, if it considers market conditions to be unsuitable or to avoid an excessive concentration of selling or buying on a particular trading day.

If this discretion affects your instruction, your Shares would be sold, or additional Shares purchased, on subsequent trading days determined by the Broker.

As the Buy Instruction Forms and Sale Instruction Forms are processed, they will be divided into batches, according to the order in which they are processed. Buy Instruction Forms and Sale Instruction Forms will be divided into separate batches.

Monies provided to purchase additional Shares and proceeds of sale owing to selling shareholders will be kept in separate accounts pending purchase of the Shares or remittance of the monies to sellers (as applicable).

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What price will I receive?

If you choose to participate in the Facility, you cannot specify the price at which your Buy Instruction Form or Sale Instruction Form will be acted upon. Your Shares will be sold, or additional Shares purchased, at the volume weighted average price of the batch in which your shares are sold or purchased.

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How does trading my Shares through the Facility compare with trading them on the ASX?

If you are thinking of selling your Shares or purchasing additional Shares prior to the end of the Offer Period, then you can do this using the Facility or through your broker on the ASX. The different features of each method are outlined below:

Buying or selling Shares through the Facility
  • You can only sell all of your Shares through the Share Sale Facility;
  • You can purchase additional Shares through the Top-Up Facility to the amount nominated on your personalised Buy Instruction Form (either A$1,000, A$2,000 or A$4,000);
  • To participate, simply complete and return either the pink Sale Instruction Form or the blue Buy Instruction Form (including payment), but not both. There is no need to appoint a broker;
  • You will pay a flat fee of A$19 to participate in the Facility. Alumina will pay all brokerage, handling costs and Australian GST;
  • You will receive or pay the volume weighted average price of the batch in which your Shares are sold or purchased, less or plus the A$19 flat fee (as applicable). You cannot set a sale price or purchase price;
  • The date on which your transaction request is acted upon depends on when your instruction form is received and processed and the Broker's operation of the Facility.
Buying or selling Shares through your broker on the ASX
  • You can sell a portion of your Shares;
  • You can buy any number of additional Shares;
  • If you have never used a broker then you must first appoint one to represent you and establish an account;
  • You must pay brokerage fees that are agreed with your broker (plus any Australian GST);
  • You will receive the market price at the time your transaction request is acted upon - that price may be higher or lower than the volume weighted average price achieved for a batch under the Facility;
  • You can control the date on which your transaction request is acted upon through your specific directions given to your broker.

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When will I receive the proceeds from the sale of my Shares?

For Eligible Shareholders participating in the Share Sale Facility, the cheque for your sale proceeds will be posted to you within 10 business days after the day of the last sale of your Shares.

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How and when do I pay for the Shares that I buy?

Eligible Shareholders participating in the Top-Up Facility need to forward a cheque, in Australian dollars and drawn on an Australian bank or an Australian branch of a foreign bank, for the appropriate amount with their Buy Instruction Form. Cheques should be made payable to "Alumina Limited - Facility Account".

If you request to buy, say, A$2,000 worth of Shares, that amount (less the A$19 flat fee) will be divided by the applicable volume weighted average price to determine the number of Shares purchased by you (rounded down to the nearest whole Share). The balance of your funds will vest in Alumina.

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What is the volume weighted average price or VWAP?

You will receive (if you are selling Shares) or pay (if you are buying Shares) the volume weighted average price ("VWAP") achieved by the Broker in respect of the batch in which your Shares are sold or purchased, less or plus the A$19 flat fee (as applicable). Please see clauses 5.3 and 6.1 of the Share Sale Facility Terms and Conditions, and clauses 5.4 and 5.6 of the Top-Up Facility Terms and Conditions, for details about how this is calculated.

The following is an example of how the VWAP is calculated (based on arbitrary prices). If, on a particular trading day on the ASX, the Broker sells under the Share Sale Facility a batch of 500,000 Shares at the following prices: 200,000 Shares at A$5.70, 200,000 Shares at A$5.80 and 100,000 Shares at A$5.90, then the VWAP will be A$5.78.

VWAP   = (200,000 x A$5.70) + (200,000 x A$5.80) + (100,000 x A$5.90) =   A$5.78
500,000

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Can I withdraw my form?

No. When you return your Sale Instruction Form or Buy Instruction Form, you are irrevocably bound to sell the number of Shares you hold or purchase the additional Shares to the value requested.

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What are the Australian capital gains tax consequences if I sell my Shares?

The following is a general description of some Australian capital gains tax consequences for shareholders resident in Australia who hold their Shares as capital assets and who choose to sell their Shares through the Share Sale Facility. However, this is a complex area and will depend upon each shareholder's particular tax profile and individual circumstances. It is recommended that Eligible Shareholders consult their own professional adviser concerning the tax considerations of participating in the Facility.

Capital gains tax will generally be payable on the sale of your Shares if the sale proceeds exceed the cost base for your Shares (this is generally the cost of acquisition). Australian resident individuals or trusts (other than superannuation funds) who sell Shares which they have held for at least 12 months would only be taxed (at their marginal tax rate) on half of the capital gain (after deducting any available capital losses) realised by their sale. (If the Shares have been held since before 21 September 1999, the shareholder may choose to use indexation of the cost base in calculating the capital gain, instead of applying the 50% discount to the unindexed gain.)

This concessional capital gains tax treatment would not apply to an individual shareholder who holds their Shares as revenue assets (e.g. buys and sells shares in the ordinary course of business, i.e. as a share trader) or to a shareholder that is a company. A shareholder which is a qualifying superannuation entity is generally entitled to a capital gains tax discount of one-third, instead of one-half of the gain.

Australian residents who choose to sell their Shares before they have held them for at least 12 months, will not be eligible for concessional capital gains tax treatment.

If the sale proceeds are less than the 'reduced cost base' of the Shares (which is the cost base reduced by any certain adjustments which may be applicable), the sale will result in a capital loss. Capital losses may reduce taxable capital gains from other capital gains tax events, but they may not be claimed as deductions against ordinary income.

Overseas shareholders should take account of the tax consequences under the laws of their country of residence and should consult their taxation adviser before deciding to sell their Shares.

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What are the New Zealand tax consequences if I sell my Shares?

The following is a general description of some New Zealand tax consequences for shareholders resident in New Zealand who chose to sell their Shares through the Share Sale Facility. However, this is a complex area and will depend upon each shareholder's particular tax profile and individual circumstances. It is recommended that Eligible Shareholders consult their own professional adviser concerning the tax considerations of participating in the Facility.

The proceeds of disposal of your Shares should not be included in gross income for tax purposes, unless:

  • you acquired the Shares for the purpose of sale or other disposal;
  • you carry on a business of dealing in the Shares or other similar property and the Shares were held for the purposes of that dealing business; or
  • the Shares were held for the purposes of any business carried on by you and disposal of the Shares occurred as an act done in carrying on of that business.

Overseas shareholders should take account of the tax consequences under the laws of their country of residence and should consult their taxation adviser before deciding to sell their Shares.

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Will I receive interest on amounts held on my behalf in the nominated account?

No. Interest will not be paid on any balances.

For further information call the Alumina Share Registry Call Centre on 1300 556 050 (for callers in Australia) and on +61 3 9615 5970 (for callers in New Zealand).

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