Principal Conference Partner

IMPORTANT ANNOUNCEMENT

2015 NZSA Investor Conference and AGM

The Number One Investor Conference. Not to be missed!

When: Saturday 12 September 2015. 9.30 - 3.45p.m. Where: Wintec Atrium, Tristram St, Whitiora, Hamilton

Theme: Investing in a low Interest Rate World

• Are low interest rates the new normal?

• Spreading your risk - what strategies might work?

• Dairy - is there any boom left in the gloom?

• Can niche opportunities or infrastructure smooth returns?

Exceptional speaker line-up

• Andrew Little Leader of the Opposition

• Paul Glass Executive Chairman, Devon Funds Management

• Shamubeel Eaqub Economist and commentator

• Fiona Mackenzie Head of Investments, NZ Super Fund

• Michael Chamberlain Director and Actuary, Superlife Ltd

• Rob Campbell Chairman Summerset, Tourism Holdings and G3

• Mark Devcich Head of Research, Pie Funds

• Mark Cairns CEO,

FREE TO NZSA Members Includes Buffet Lunch Don’t miss out Mark this day on your calendar now

REGISTER NOW at www.nzshareholders.co.nz In this Issue The Red Tape Issue 2 Welcome Taranaki 4 August 2015 The AGM - Inquisition or Exposition 4 The Red Tape Issue Is the Financial Advice Sector ripe for Disruptive Innovation 6 oes anyone really like - to keep customers and make Unlisted - Russian Roulette? Bruce Sheppard’s reply 7 red tape? Complaints Company Meetings new ones, - to fill customer about having to comply needs, efficiently, and at a Restaurant Brands AGM 9 D AGM 10 with the disclosure require- profit to the company. More AGM 11 ments of government and stringent disclosure require- Chatham Rock Phosphate AGM 11 owners are as old as the ments often interfere with AGM 13 hills. Teachers, doctors, and those primary objectives, Green Cross Health AGM 13 managers all sweat under this just as they can distract a Goodman Property Trust AGM 14 yoke. Lawyers and company teacher from the real job of Comvita AGM 14 secretaries usually do not teaching. The usual criticisms AGM 15 because it is their bread are, that those making up the AWF Madison AGM 16 and butter. So it was not disclosure rules have usually Methven AGM 17 surprising to hear Don Braid, not managed a company, and AGM 18 CEO of Mainfreight, speaking that rules create more paper Kingfish Fund AGM 19 out passionately about the but don’t create sales, jobs, Caught on the Net 19 misconceptions harboured or profit. Branch Reports by bureaucrats, be they rule The primary target for these 20 makers in NZX, government, Waikato 21 comments was the publi- or even committees of fund Bay of Plenty. 22 cation by the NZ Corporate managers. It reminded me Wellington 22 Governance Forum’s principles of a popular management Canterbury 23 of good governance. book of 50 years ago, Up It is good to hear a CEO Members’ Issues The Forum is a collection the Organisation, by Robert speaking out in this way. It PGC – An update 23 of large fund managers, Townsend a former CEO of shows he is focused on the Education News Flash 24 including ACC, AMP, ANZ, Avis. real objectives of his team Upcoming Events 24 Government Super, JB Were,

ISSN 1179 -4275 Milford and other fund managers. You compliance, and direction. new independents was positive recently can look it up on the website www. Don Braid’s claim was that Mainfreight for Fisher and Paykel Healthcare, and nzcgf.org.nz. The guidelines include values trade experience in governance Tourism Holdings. sections on Ethical Standards, Board above diversity, or the rotation of The answer lies in the culture of the composition and performance, board directors. There is still debate about the individual firm. It is unique to the enter- committees, Disclosure, Remuneration, effect of independent directors. A broad prise and it demands buy-in from both Risk management, Auditors, Share- international study on the supply of board and management. Mainfreight has holder relations, and other Stakeholders’ independent directors by Knyaseva and that in abundance, and Mainfreight’s interests. They extend a little and fill out Masulis concluded: “Empirically we find independents must help the culture to the governance guidelines published by that board independence has a positive respond and develop in a competive the Financial Markets Authority. impact on firm value and operating global market. We need more proof that Board members of the NZSA welcomed performance.” independent directors do have positive the participation by Fund Managers Some independent research is on Braid’s influence. in shareholder activism where NZSA side. In a 2014 study of Australian Nevertheless both major fund mangers has often felt like a lone voice. Lifting companies since 2003, when a majority and retail shareholders are entitled the standards of governance has been of independent directors was required, to clear information in line with both a preoccupation of NZSA’s from its Swan and Forsberg found that boards accounting standards and NZX rules. inception, and Fund managers have not dominated by “gray” directors were The rules are there to curb the excesses always been vocal advocates for this, clearly more successful in increasing a of the past and to protect long term preferring to voice their opinions in firm’s value. A grey director is one who investors. They are not simply red tape private. is aligned with either major shareholders which blocks good management. They We are differentiating again between (incentivised,) or has a strong affili- are “best practice, “and they come with governance and management. The ation with management (ex executive.) the rider in the words of the Forum: governors of a business set the strategic Grey directors, it was found, generally “each company is different, and devia- direction and delegate the operating to a controlled costs including executive pay, tions from the guidelines are sometimes team of managers. They employ financial and invested shareholders funds well to appropriate. officers to produce the information on make the company perform better than However, transparency with the owners which proper disclosure can be made of others. is important and boards should explain both verbal and accounting information. Mainfreight is a successful company why a particular guideline is not being Managers should love their customers, and its success after conservative board followed.” Now, he probably didn’t see it and abhor a paper war, settle and renewals, falls directly into the research this way, but that is exactly what Don document transactions and agreements findings of the Swan-Forsberg study, Braid did, and shareholders enjoyed the as succinctly as possible, and move on but across the NZ market at large the difference to the next conquest. Boards are paid findings are mixed. Many failed finance Alan Best for their brain power, experience and companies were controlled by grey wisdom, (risk management.) Directors directors, as was GPG. The impact of are ultimately responsible for disclosure,

The Scrip August 2015 3 Welcome Taranaki The AGM - Inquisition NZSA Grows another Branch n Wednesday August 5th, NZSA sounding-board role played by NZSA . or Exposition? held the inaugural function of our Like Joan, Tony gave practical examples his month I want to raise some issues new Taranaki Branch. where NZSA is making a real difference. O around the conduct of meetings in the 2015 Around 60 people came to hear our star NZSA Chair John Hawkins gave an Treporting season. By and large we have line up and learn what the NZSA is all overview of the Associations origins, settled into a routine and the meetings consist of about. purpose and wide range of activities a general report from the chair, which highlights Joan Withers, current NZSA Beacon and benefits available to members. salient points from the published annual report Award holder spoke about Mighty River New Taranaki branch Chairman Grant and updates the market on the forecast for the Power, governance, diversity on boards, Langdon finished by introducing his following year. This is followed by a more detailed and the professional and credible conduit three committee members and seeking operational review by the CEO, and the meeting that NZSA has become in bringing retail additional assistance. As he said “you is asked to confirm the receipt of the report which shareholder views to the companies they get back what you put into something opens the way for questions and comments on own like this”. The audience clearly liked what the year past and the way ahead. The meeting they saw with a good number signing Tony Carter, current Deloitte Chairman of then moves to the resolutions which may include up on the spot and many others leaving the Year spoke about Air , constitutional amendments, and will include the clutching membership forms. Notably, Fisher & Paykel Healthcare, the impor- election of directors and the appointment and fees two people have already put up their tance of quality corporate governance of an auditor. hands for committee roles. and the essential watchdog and Although the routines may be similar in structure, An informal mix and mingle and supper the content yields the variety, and there is consid- followed with all speakers (plus NZSA erable variation in tone. Michael Hill for example director Martin Watson who drove from veers towards entertainment with its reviv- Cambridge to support the event) being in alist tone complete with a spot prize for a lucky great demand. It was only the increasing shareholder, while Cavalier tone is subdued and likelihood of missing out on dinner that we are warned about the dangers to directors of allowed our speakers the excuse to overpromising. depart, well after the scheduled finish Inevitably the tone of Restaurant Brands is influ- time. enced by the sandwiches of its coffee franchise, The success of this launch gives the board the fingerlickin smell of the KFC, and the spicy confidence that our intention to start two Italian fragrance of the Pizzas. Such associations or three other branches is achievable in a are absent from the chemical jargon of a Nuplex reasonable time frame. The next target is meeting, or the investment climate of Hellaby. likely to be in the South Island.

The Scrip August 2015 4 So much of the tone eminates shareholders to mark their from the Chair and CEO. Are papers, and then published the shareholders entitled to a good result of his proxy votes on the show? Is the AGM a marketing screen. The poll inevitably, was event in which shareholders not strictly necessary but the are coopted into a promo- process was right. tional network, or is it simply At the bottom end of share- a meeting of commercial holder meetings is the meeting advisers, accountants and which is not attended by the legal experts? Is the fine print chief manager, where several more important than spirit and directors are absent, and culture of the enterprise. where the auditor is not repre- We think the AGM should reflect sented by a partner capable of the enterprise, and the feeling presenting a clear and autho- of the meeting is important. rative picture of the accounts. That is why our proxy holders It is a rare occurrence, but comment on the question it is one which indicates and answer sessions, and concerns the point at which the important, so that can be how a company regards its the reaction to presentations chair provides for questions questioned as a point of order, minority shareholders and the which are now, themselves, and discussion. Some chairs and maintain relevance for community of interest around usually available on the even try to group all the resolu- questions on each subject. This its subsidiaries. Only PGC filled company’s website. Every tions so that discussion on each is not always followed. those conditions in 2014, but company is primarily about is limited. Proper procedure In one meeting, it was clear with the advent of more liberal marketing, not compliance, allows in sequence, points that NZSA’s proxy votes were rules for the NXT exchange and and shareholder meetings are of order, questions on the held both for and against crowd funding, we think it is part of that. Companies need annual report, questions and motions, but the company’s time for NZX or FMA to issue a rehearsed presentations, and comments on the presentation legal advice was that the proxy guidance note for the conduct the ability to answer clearly, by the chair and CEO, and holder was not entitled to vote of meetings. serious questions from the discussion on each resolution. either way in the meeting If the capital markets are to floor. An able and articulate The meeting should also because he had already taken continue working through NZX chair is important for all listed provide for items of general up the share issue being listings then company meetings companies, - not simply a business. A good chairman ratified by the meeting. This is should be well oiled, well leader with the most industry will explain at the outset what clearly erroneous, but it does presented, well chaired, and experience. Perhaps women procedure will be followed highlight the need for a written savoured with well informed generally are better at this so that shareholders know poll in such cases. In one of the questions from the floor. than men. when to signal their question. smaller meetings of the new Alan Best The perennial issue The initial explanation is year, the chair of Intueri asked

The Scrip August 2015 5 Is the Financial Advice Sector ripe for Disruptive Innovation? here has been a lot of want financial planning or class Automated advice is a growing he is promulgating in his app? discussion and column advice but to know whether a concern to Australian investors Does the buy, sell or hold Tinches written these past particular product was right with ASA Chair, Diana D’Ambra, recommendation come with a few months on the review of for them. They want to be able discussing this development full sensitivity to the broader the 2008 Financial Advisors to make easy comparisons of in her report published in the economic environment, and Act. From what I have read and products by features and cost.” August edition of their Equity the profile of the individual heard there seems to be signif- Meanwhile, a submission from newsletter. investor? icant dissatisfaction amongst Massey University lecturers An article on robo-advisors On line newsletters like Fat independent advisors who feel noted that: “The industry is in the June edition of Forbes Prophets, Motley Fool or Market they are not being adequately currently feeling uncertainty magazine notes that, “they may Analysis do give clear advice, but compensated for their profes- in terms of how much advice act as a gateway to the next require an initial commitment sional skill and responsi- can be scaled so they feel that generation of investors.” to invest as a retail shareholder, bilities. They see no future they have to give full advice or Submissions on the NZ review and they omit the broader for themselves or the small nothing. This means that they have just closed. Some change spectrum of private investment numbers entering the industry. are unwilling to offer advice to seems inevitable. Whatever it options. Investors are reluctant to pay non-wealthy clients (85% of the might be, it is unlikely to make for advice and as Retirement High frequency trading population) even if it is generic access to quality affordable Commissioner Dianne Maxwell programmes, (HFT) are effec- advice. This is increasing cost independent advice easier for has noted, “investors will often tively robotic programmes and reducing advice cover.” retail investors. Are you happy prefer their own gut feeling controlling buy and sell At a Massey University seminar with your current toward simple advice from functions by employing I picked up on a statement by someone they know and trust Bruce Parkes logarithms which calculate the Angus Dale-Jones, Head of than those who can bamboozle Editor: The opportunities for deviation from industry norms Compliance at New Zealand clients with complicated the automation of advice in of individual shares, and relying Asset Management. He solutions.” investment as in medicine and on numerous trades at small wondered if the time was other fields seem limitless. margin to produce a trading The FSC, which represents ripe for disruptive technology Nevertheless they are profit. These are common in financial product providers, said to transform the sector and constrained by the same issues larger markets overseas. in its submission to the review, suggested that if someone as verbal advice: Having said this, a well “the current financial adviser came up with an appropriate researched app, would probably regulation is confusing for app they could make a fortune. Is the advice impersonal and be better than the criteria used consumers, who have a different Are we ready to accept robotic objective, or supported by a by most retail investors, and idea of “advice” to that of the advice? A lot of the risk appetite bank or fund manager pushing could take account of individual legislation. Consumers who profiling offered clients by his own product? circumstances. sought advice did not usually advisors seems rather robotic. Does a broker gain by the advice

The Scrip August 2015 6 Unlisted - Russian Roulette? Bruce Sheppard’s reply am the Chairman of and associated with the market boards of many NZX listed important to know. Unlisted the largest shareholder in and you cannot even get issuers. publishes not only all bids IConnexionz whose shares onto the Unlisted website The driving culture of Unlisted and offers, they also display are quoted on the unlisted without acknowledging the companies is to drive value, the full transactional history platform. risk. they choose to do the right of the trades on the site. This John Hawkins in his last Perspectives of an Issuer, thing because it is just right, is valuable and is concealed editorial stated that Unlisted the Connexionz (CNX) Story. they do so out of a sense of on NZX. Also all announce- ments by the issuer remain as an unregulated market, CNX is one of only 3 NZX what is right, not fear. displayed. NZX archives should not be granted and listed companies that has NZX boards spend inordinate these and investors have to exemption to the FMC, in chosen to de list from NZX time on the optics of go to the relevant issuer’s effect closing that platform and listed on Unlisted. what they do, they spend and forcing the migration of website if they have one or Living in the forced trans- much of their meetings on a number of companies to pay NZX to give this data to parent world was actually compliance issues and much NZX or alternatively moving you. holding the business back. of the executive reporting to over the counter markets. Primary omissions from the Our customers, suppliers is around compliance. regulatory framework on He said that investing in and employees could see They permeate fear and Unlisted. companies Listed on Unlisted continuously how vulnerable resentment. You don’t find was like Russian roulette. All we were and it adversely this in the companies that The primary issues are investing involves risk. In affected our ability to sell list on Unlisted. these: effect all investing is Russian our value proposition If you compare actual • Insider trading roulette, and there is no Raising capital was easier investor harm by the number • Continuous disclosure. evidence that investing on and cost less than when of events and capital losses Unlisted is any more risky • Conflict of interest we were listed on NZX, and over the last 10 years on than any other investing you freedoms. the ability for shareholders the bottom third of NZX might do in small cap stocks. • Unrestricted ability to to buy and sell was not listed entities and the entire issue shares. He states that there is a materially different either. Unlisted crop of companies chance an investor might be and scale it relative to the Of these the only one that I Unlisted traded companies confused and unwittingly end number of entities, my rate as agnostic to the size might be safer! up on this market. Untrue. instinct is that more harm and scale of an enterprise is Try to buy a share some I have attended a number of occurs in NZX listed entities the first. Market manipulation time. The brokers make you Unlisted events with other on any measure. is rare in illiquid markets, as Unlisted issuers. I thus met sign waivers, they also will Investor interface. the ability to sell a few then talk you through the risks the boards of these issuers. buy a lot cheap is just not I have obviously met the Bid and offer balance is

The Scrip August 2015 7 realistically available. trading policy. owned companies with the opportunity to invest in Most of the companies listed The harm to the whole has a lower cost of capital to Unlisted companies unless on Unlisted have an insider to be weighted against acquire them and thus help those companies estab- trading policy that replicates the harm to shareholders with ensuring that such lished their own secondary best practise. CNX does. buying shares. businesses remain in NZ. markets, which some could. Sensible business people Where, as is usually the Ownership of our businesses What is underrated in the know that insider trading case with small companies, is obviously more desirable shareholder advocacy arena destroys confidence and the market is illiquid, the than overseas companies is the loss of opportunity, this heavily discounts the weight of harm to buyers owning them. This is often caused by harm protection traded price of the issuers is massively outweighed referred to as the hollowing measures. share. Thus increasing by the harm to the whole. out effect, and is simply To ensure diversity of the cost of capital for such Thus boards on Unlisted, an arbitrage on the cost of investor opportunity aberrant behaviour, as it and even on NZX, will often capital across borders. remains available I would rightly should. not announce bad news. Larger economies with hope that the NZSA would Bad behaviour gets The difference is that the greater liquidity in their consider supporting Unlisted punished, surprisingly more companies and directors markets have a lower cost on a conditional basis. The in illiquid markets than of Unlisted companies do of capital and thus can primary matter to be dealt liquid markets. not suffer a further penalty acquire businesses in less with is insider trading. In small companies, the which also comes out of the liquid economies, at the I would encourage you to latter three are a significant depleted resources of the same time increasing their contact Unlisted and get a bar to the commerciali- company. own value. copy of their application for sation of their businesses. Macro economic issues. Shareholder protection. an exemption. It contains I will only examine briefly NZ is a nation of small No rules obviously increase interesting data. the counter argument to companies. the opportunity for unscru- Bruce Sheppard the benefits of continuous To the extent that Unlisted pulous directors and major disclosure. provides a liquidity shareholders to profit at Breach of Continuous platform for SME’s without the expense of investors. I disclosure is only an issue the compliance cost and emphasis that there is no with bad news. regulatory oversight it will evidence that this is the Failure to disclose bad news reduce the cost of such case on Unlisted. only harms the buyers of businesses acquiring capital Some would propose that an shares when that news is not by removing the liquidity unregulated market should publicly known. The chance discount. be regulated to protect of such harm to buyers is The increased value to the investors from harm. The reduced if the company existing owners will thus consequence however is that has a best practise insider make it harder for overseas investors will also not have

The Scrip August 2015 8 Company Meetings New Zealand listed companies now usually post AGM presentations by the chair and CEO, on their website. Our commentaries therefore concentrate on the flavour of the meeting and the questions raised by shareholders. We encourage members to use the company website, before attending the general meeting, to see what has been said previously, and to familiarise themselves with the latest news. Comments are those of the attendee, who will often be a shareholder in the company, and are not necessarily NZSA policy. Run your cursor over the report heading for a link to the company website Restaurant Brands AGM 2nd July bout 200 shareholders attended this • The Carl’s Jr group was expanding but particularly in the Auckland region. AGM. Restaurant Brands covers the had suffered supply disruption from the They are aware of other competitors but AKFC, , Starbucks and the US ports dispute. However, alternative market saturation is a long way off. newly launched Carl’s Jr. It operates 181 supplies had been sourced which were • Are they worried about competition stores throughout the country employing now benefiting from recent exchange such as from the recently launched about 4,000 staff. rate movements. Texas Chicken chain? This is a US The Chairman, Ted Van Arkel and the CEO, • Company diversity was indicated with brand; a “knock–off” of KFC”. It is being Russel Creedy, gave presentations on the women now forming 50% of their senior monitored but they are not impressed company’s annual performance highlighting management team and 25% of the with the product. It was noted that Red aspects given in the annual report. All four directors. Rooster had tried to enter the NZ market divisions were doing well with NPAT up 19% There were a number of questions from some years ago but withdrew. and EBITDA up 14% on the previous year, shareholders:- • There can be long queues and waits dividends had been increased 15% to 19c • Why don’t we see ads for Starbucks? at KFC. Could phone ordering be and the share price had strengthened. The The brand is well known and promotion implemented? The queues are problem latest quarter’s figures showed strong sales spreads by word of mouth recommen- at lunch and dinner times in the drive- growth, up 14.7% or 7.6% on a same stores dation and their digital presence through through channels and reflect the explosive comparison. Capital expenditures were Facebook and Twitter. growth in sales! Monitoring systems are targeted for the best return:- being explored to track it. Mobile Apps • Why aren’t you running ? We • 82 of the 92 KFC stores had now been for ordering are being developed for KFC are looking at it so “watch this space”! upgraded. and Carl’s Jr. • Why had trade creditors doubled • The development of its own warehousing • The high NZ$ had benefitted margins in the last 12 months? The opening has improved supply and control. last year but will margins be hit now of their own warehouse and holding our $ has tumbled? We are now using • The strategy of exiting the lower volume additional inventories had increased this more local suppliers which helps insulate Pizza Hut stores to franchisees was item of the accounts. continuing and same store sales were from the fall in our $. Coffee is the big • Is there a risk that fast-food is going strong. item for Starbucks and they buy on the too far? Population growth is increasing

The Scrip August 2015 9 spot market. Mainfreight AGM 29th July • Are you still planning substantial growth in the number of Carl’s his AGM is always interesting because have opened opportunities to negotiate with Jr stores? Currently there are 18 the chair and speakers try to make a larger businesses, noting that small in North which they are cautiously developing Treal connection with shareholders. Bruce American can be larger than any single NZ and the target is still 40-50 stores. Plested gave the government his usual serve customer. In Europe, recent management when he reported that treasury had included changes are bearing fruit, and the successful • Starbucks in Christchurch lost 4 the option of winding up Kiwirail as an option service operation for John Deere tractors is of its 5 stores from the quakes and for economic action. Later Don Braid pointed being levered into other regions. there’s still only one operating. out that NZ’s roading alternatives to rail could Coffee Culture has 15. Has there Growth will continue in Asia with a force of not cope with Mainfreight’s shipments, let been a change in strategy? Not 50 representaives increasing the logistics alone the country’s. all were profitable some years ago component of Mainfreight service. Don spoke with such high central city rents. Mainfreight faces economic uncertainty which with passion about the need to value experience They are looking for good locations is bound to be reflected in overall freight and wisdom above diversity in Board appoint- but finding the right sites has been volumes – NZ dairy problems, Australian ments, and the need to keep expanding the difficult in Christchurch. mineral problems, Asia’s financial tightening, company’s own branch locations where they and very meagre growth in USA and Europe. could retain the whole gross margin instead of • Do you think that Starbucks Nevertheless the company faces the future giving away half to an agent. is still competitive? Yes, but with determination and confidence. New we continue to look for the best The presentation was a tour de force, leaving premises in Christchurch and Hamilton will investment opportunities across our the speaker flushed and his audience excited. provide local efficiencies, while new customer brands. The market is reshaping and It was left to the chair to round off: “Thank initiatives overseas will capture increases in demand has evolved over the last you, Don. I wish you could have shown a bit those larger markets. seven years. of passion.” CEO Braid reviewed the EBITDA increases in Ted van Arkel sought reappointment Questions covered the need for a national all regions, and showing slides of premises in to the board and was re-elected. The strategy for our string of small ports, airfreight Hamilton and Sydney airport, pointed out that proxy votes held by the NZSA were volumes in China, and support for Kiwirail’s global expansion made the company capital cast in his favour. Director Sue Suckling national network. Then it was time to elect hungry. It pays only about 30% of net profit announced her intention to stand down Simon Cotter and Richard Prebble. Richard in dividends, and would not become a cash from the board later in the year. Prebble has experience and expertise in cow while expanding its global reach. While transport, and according to management, is After the conclusion of the meeting NZ governments regulate insurance cover for contributing fully and in-depth to the board. there were light refreshments including transport, Australia lets users pay for shipment There were a number of proxy votes against pizzas and KFC chicken! and again for spoilage, and so Mainfreight his election, and so the proxy holder abstained Robin Harrison has introduced insurance cover for freight from voting although privately and on balance, and stimulated staff to be more conscious of supporting the resolution. handling standards. Alan Best In USA, stoppages along the Eastern seaboard

The Scrip August 2015 10 Z Energy AGM 1st July Chatham Rock Phosphate AGM NZSA proxies 200704 or exceeded appetites of the 180 23rd July attendees s part of its policy of national combined AGM of Aorere Resources (AOR: exposure (and perhaps to get • On a positive note, Directors and NZX) and Chatham Rock Phosphate Aa larger attendance) Z Energy senior management circulated and (CRP:NZAX) was held in Wellington. All but held its 2015 AGM in Auckland. The were available for discussion both A one director and approximately 60 - 70 share- meeting was webcast and can be before and after the meeting. holders were in attendance. The formal resolu- viewed on the company’s website. Chairman, Peter Griffiths and CEO tions concerning re-appointment of directors and Z is still developing its meeting Mike Bennetts, both made presenta- auditors’ fees were passed overwhelmingly by show style and still has opportunities for tions. They highlighted the takeover of hands and were supported overwhelmingly by improvement. of Chevron NZ (Caltex) – now parked proxies. Holders of CRPOB options (which were well out of the money) supported the resolution that • There was no provision for voting waiting Commerce Commission by poll – not critical at this meeting approval. They see Caltex and Z these options be converted to CRP shares 1 for 7. as there were no contentious operating as complementary but quite As AOR has a significant shareholding in CRP the resolutions on the table but has different companies aimed at different major theme of the meeting was CRP’s activities the potential to cause skewed sections of the market. during the past year. results when there are matters All resolutions before the meeting Unfavourable decision from the Environmental Protection of shareholder concern. I note were passed by a show of hands (the Authority. that the Corporate Governance chairman held proxies for 72% of the Disappointment at the EPA decision and the conse- Forum (representing institutional share capital). Peter Fowler and Alan quences and implications thereof, underlay much of investors) also argues against Dunn were re-elected as Directors and the business of the evening. the use of a “show of hands” at KPMG reappointed as auditors. Quite clearly, the company expected something company AGMs. There was time for questions from the quite different. It thought it had dealt with the objec- • Directors up for re-election did not floor covering: tions raised at the hearing and that its proposals speak to the meeting. The Board Discounts for customers; regarding monitoring, mitigation etc provided ample had considered whether they protection in respect of the concerns expressed by Keeping Caltex and Z brands separate? should or not and decided not to those opposed to the application. Your represent- - Yes; do so. I think that was a mistake, ative was, in fact, advised that the company had now too does Mr. Griffiths and the Is there enough feedstock for the made very comprehensive suggestions regarding Directors concerned. They promise bio-fuel plant? Yes will require 14,000 the monitoring of its operations with an undertaking a change for future years. tons of tallow annually; to discontinue its operations if it did not meet the

• The after meeting refreshments Has the high sulphur content of diesel required standards – hence demonstrating tangible seem to always be the focus for been fixed? - Yes - Now 10ppm less confidence in its position. The company was indeed many who attend AGMs. I can than Australia. “putting its money where its mouth was”. But all of report that the supply matched Bruce Parkes this was to no avail.

The Scrip August 2015 11 Where to from here? trading and small, niche It is anticipated that this devel- NZ mainland, the low 1 Resubmit to the EPA. mining prospects with opment will give Chatham capital requirement (the low capital requirements access to sources of capital hardware will be provided As your representative under- but where the company’s that, up to now, it has found it by Boskalis), and the low stands the position, the guide- professional expertise can difficult to access. operating costs, any mining lines under which the EPA be utilised. To summarise:- operation would hold the operates are being reviewed promise of very attractive and Chatham has been asked In the view of your representa- • The company was bitterly profitability. for its input. No amendment tives (and this is certainly not disappointed with the EPA to the Exclusive Economic the view of the company), decision earlier in the year AOR also has investments in Zone and Continental Shelf such activities are/would be but is confident of success Mosman Oil and Asian Mineral (Environmental Effects) something of a sideshow with next time round. Resources. Act 2012 is envisaged but, the inherent danger of diverting • Whether there will be “a Mosman Oil is continuing explo- it was suggested, no such management attention from next time round” depends ration at Petroleum Creek, West amendment is really required. the main chance. in large part, in the view Coast and will start drilling in This review is expected to be Listing on an overseas exchange. of your representative, on the Murchison area later this completed by December. On the day of the Chatham whether the next appli- year. Petroleum Creek flow cation can be funded. The tests and technical analysis Assuming the outcome of this AGM, it was announced that, company is strapped for have been encouraging. review gives a reasonable subject to the completion cash (2-3 million dollars prospect of success, a new of certain requirements, Asian Mineral Resources is required) but the company submission will be prepared Chatham would gain access to involved with minerals explo- is placing alot of emphasis and lodged, it is currently the Toronto Stock Exchange by ration in Vietnam and its on what may flow from its estimated, in June with a final way of a reverse takeover of a zinc/copper mine is now in access to the Toronto Stock decision being available by the company that currently goes successful production and is Exchange (per Antipodes of the year. by the name of Antipodes Gold still continuing with explo- Ltd. Gold.) ration work. 2 Raise just enough new • The company is being Brian Tyler and Peter Milne capital for work commit- Antipodes will come with currently valued on the ments and to keep team about $300,000 cash (which assumption that it is most together will certainly be a help!) and will result in approximately unlikely to be successful in 3 List on an overseas an 80/20 split between the any further application to exchange with more current Chatham shareholders the EPA – or will simply go liquidity and access to and those of Antipodes Gold. broke. capital (see (c) below The name of Antipodes Gold will • However, given the 4 Widen investor appeal by then be changed to Chatham expertise of its preferred progressing other projects. Rock Phosphate Ltd. contractor (Boskalis), its These include phosphate close proximity to the

The Scrip August 2015 12 Kiwi Property Group AGM 31st July Green Cross Health AGM 28th July hairman Mark Ford welcomed about 200 share- or a company which is diversifying management will make profitable holders to the meeting. He commented on the and growing in new directions, improvements to these services in the transformation of the group in the last three Fthis was a singularly uneventful near future, in spite of the reliance on C meeting. Chair, Peter Merton began government and insurance funding. years, involving internalisation of the management contract, and the change from a property trust to a by saying he held proxies for 67% Other consolidators like Abano corporate structure; hence the name change in this of the voting shares and ran over and AWF have shied away from report. All this has seen as not only a much improved the objectives for the past year: to government-funded services recently. structure for management and staff, but also better improve the existing operations in The contribution of retiring director transparency for shareholders who he thanked for Life and Unichem pharmacies, and to Ian Sharp was acknowledged. The supporting the moves. expand the 2 recent diversifications re-election of Peter Merton and new of medical centres and community Financial performance was improved by an $8 million Director Dame Margaret Millard were nursing. reduction in expenses from internalising management, carried without opposition. Peter a reduction in interest paid following a rights share The 313 pharmacies managed Merton was described as a “hands-on, issue, and a major increase of $58 million in property an 11% increase in revenue, the and commercially astute” chair, and valuations which, under present accounting rules, are medical centres gained traction with we gained the impression that he included in profit calculations for property companies. the acquisition of Peak Primary and operates as an executive chairman The result was an increase of 13.7%on the previous Community Care, with the purchase amongst the staff. This can present year. Distributable income showed a more modest of Homehealth. The Chair later said governance problems, but the increase of 4.5% to $79.7 million, and dividends per that the challenge for the current existence of strong and experienced share increased from 6.4 cents to 6.5 cents. Forecast year was to ensure that these devel- board around him should prevent any for next year is a further increase to 6.6 cents. oping operations were delivering confusion of roles. services efficiently and to the highest Chief executive Chris Dudgeon commented on the A 30% increase in the directors’ fee standard. He refused to be drawn on acquisition of the so-called lifestyle precinct across the pool when the last increase was in the budget or to update the forecast road from the main Sylvia Park shopping area and also 2012, at first sight seemed excessive. earnings, adopting a pessimistic view plans for a major addition of shops and offices in Sylvia However it was justified in relation to of retail conditions particularly in the Park costing up to $200 million with completion in other companies of the same size, rural areas. Nevertheless he painted about 2018. The existing office portfolio is performing and given the increase in scope and a picture of opportunity amongst the well with average lease term 4.5 years and occupancy complexity of the new operations, the fragmented and often inadequately of 98. 4%. The retail portfolio has equivalent figures revised fee at $500,000 is not out of managed GP market and the home of 7.6 years and 96.1%. line. The announcement of a special support market, which has been dividend of 15c/share satisfied share- Joanna Perry and Mike Steur were re-elected as undervalued by both government and holders after a successful year for a directors. business. well-positioned company. Bill Jamieson He believes the introduction Alan Best new technology and corporate

The Scrip August 2015 13 th Goodman Property Trust AGM 29 July Comvita AGM 24th July and he exercised his option under the Trust NZSA proxies 1,064,654 he AGM was very well attended as deed to have all votes (there was only one) his year Goodman used the Stamford always, the beehive was jammed taken by poll rather than a show of hands. Plaza for its peripatetic AGM. They do packed, and an overflow was catered recognize that all venues they have T T Keith Smith, CFO, Andy Eakin and CEO, John for in the café area. This is a complex used have both advantages and drawbacks Dakin addressed the meeting. In brief, their company which is performing well with for the various attendees, and are open news was what the attendees wanted to passionate people from the Chairman to suggestions as to where the next AGM hear. The new incentives for management to down to the workers. might be held. Not only in Auckland, they convert the land banks were working. The Alan Bougen, Co-founder and Sarah are committed to taking this meeting to unit Trust was going well and the distribution to Ottrey, independent director were re holders in other parts of the country. The unit holders was forecasted to rise. elected and Sarah Kennedy was elected meeting was podcast and from links on the Questions from the floor covered: as a new Director. She has had extensive company website the proceedings can be Are there any plans to move into mixed experience in China/Asia and comes from read, or listened to. With competing Ryman residential development? – No. a rural background. and Mainfreight meetings on at the same time, numbers were down a little on past Are there any risks on the building CEO Brett Hewlett announced his resig- years. project with the current uncertainty over nation after 10 years to take effect from Fonterra’s future development? – No, 31 March 2016. He remains passionate As a property trust Goodman functions a Fonterra have signed a 15 year lease. about the company and there is no doubt little differently from a normal company. that he will not be lost and will become a I’m not sure many unit holders understand What is the current holding in undeveloped director in due course. or want to understand the difference, they land? – Currently about 10% of the portfolio just get a little annoyed when the meeting is in undeveloped land, which is about 75 It was voted that Directors fees would does not follow the standard procedure. The hectares mostly at Highbrook. increase over the next two years and for Trust deed (available on the GMT website,) There were no questions for Leonie Freeman the 2016-2017 following representations is an interesting read. However, on a casual after her presentation. She was re-elected from NZSA, the Comvita Board agreed sampling of attendees I could not find anyone with 99.8% of the votes in favour – that still that the increase of director fees in 2nd who had done so. works out at over 100,000 votes against! year would only be applied if Comvita’s net profit after tax per share increases bya The Trust is trying to make things a little With that, the meeting was over after 42 minimum of 20% for the year ended 31 more transparent for unit holders. The Trust minutes. March 2016. The Board are happy and are deed has been changed so unit holders now, I later asked Andy Eakin about the deriva- confident of achieving 35% which is of for the first time, got to vote for directors tives line in the balance sheet. He told me course good news for shareholders. independent of the manager. that the Trust has hedged against interest Jane Lyndon Chairman, Keith Smith, made sure Leonie rates and since balance date has, for new Freeman – the only director up for re-election US Bank loans, hedged against the principal – got to speak to the meeting before the vote Bruce Parkes

The Scrip August 2015 14 Xero AGM 22nd July he Xero AGM was well Xero’s growth from two people to date. He also spent some work out the lifetime value of attended with around 200 in 2006 in a small flat in Willis time talking about how the the customer. Plugging these Tshareholders present, but Street - before the iPhone economics of Software as a figures in Rod came up with it seems like there were fewer had been released and when Service (Saas) companies 450 million of value added in people here this year than last, GFC stood for Group Financial are quite different to that of FY2015 to Xero. That is why it and the mood was also more Controller - to the IPO in 2007 ordinary companies. A lot of is all about growth today and subdued; possibly a reflection with around 100 subscribers people don’t understand this. profitability tomorrow for SaaS that this year the Xero share (most as Rod noted later with In a SaaS company all the costs companies. Expect to hear a price has traded between $15 the surname Drury), to today of acquiring a customer fall the lot more on this subject over and $25, whereas last year it with over 540,000 subscribers year the customer is acquired the next eighteen months and bubbled away between $30 globally and a global board. but the benefits accrue over Xero readies itself for a US and $45. He finished by noting that the many years after that while the listing. The AGM started with Chair company was in good hands costs to service the customer (My interpretation of) Rod’s Chris Liddell introducing the and not much was changing are low. Knowing your costs take on how Xero is doing in its board, apologies for Bill Veghte, with Graham Shaw being and the average period you will core markets – New Zealand and a welcome to new board replaced by Graham Smith, hold a customer for you can belongs to Xero, Australia member Graham Smith. both accountants by training is well on the way and is the and they even looked like each Chris then got the price current growth engine and other. sensitive information out of the the UK is looking like another way by announcing that they Following that they knocked Australia and will be the next are expecting subscription out resolutions in a most to fire. In all these markets revenue for the full year to workman like fashion. It was Xero has a measurably superior 31 March 2016 to exceed good to see that all directors product to the incumbents. It NZ$200m, based on June 2015 up for election/re-election is the US that Xero has real FX rates, and that a US listing spoke about what they brought competition with Quickbooks is still planned but won’t be to the company, and that on Online, and it is not at all clear prior to the release of our 2016 the screen as a resolution was who has the best product. So in financial year results. being proposed there was a the US the focus is on building count of the proxy count for, the team and building features Chris then gave retiring against and discretionary. All into the US version of Xero for director Graham Shaw the companies should do this. that market. Rod believes Xero microphone. I believe Graham has the advantage of being was allotted 7 minutes for his After all resolutions passed on able to innovate faster than farewell speech and Graham a show of hands Rod Drury got Quickbooks. made the most of it with an up and spoke at length about entertaining potted history of the company and the journey

The Scrip August 2015 15 AWF Madison AGM 22nd July ith an increasing people placement capabilities dividend, debt of the expanded group. Simon Wreduction of $15m Hull reminisced on growth and and a successful rights issue opportunity over the 10 years to take shareholders funds since listing. up 73%, Chair Ross Keenan Proxies in support of the resolu- conducted a positive meeting. tions were all well over 95% On the face of it this board has and so a show of hands was an impressive mix of talent – 2 called to confirm the adoptions. senior males (Keenan and Van The substantial increase in fees Arkle,) one founding executive was not contested because director and cornerstone share- the new levels are now in line holder (Hull,) 2 highly qualified with remuneration on boards independent women (Hoare of equivalent size. The note and Amour,) one future director on employee share schemes (Rachel Hopkins,) and a new By the end of the year payroll will be rolled out into 50 US states provided your proxy with an CEO who reports to the Board and this will help drive growth in the US. opportunity to talk about the (Simon Bennett.) Refreshment criteria for the issue of shares Rod also made the point that there are 65 million English speaking has occurred with technical and to employees, particularly in small business and at least and other 135 non English speaking gender balance, and the results staff incentive schemes, and small business so Xero with just of half a million customers has of the Madison acquisition are the chairman agreed that the plenty of room to grow. showing up. new CEO would be bringing In summary Xero is well capitalised, the core product is in place Presentation from departing recommendations to the board and working well and the focus continues to be on growth. Profit- MD Mike Huddleston, and new on this. One shareholder ability will follow. CEO Simon Bennett reinforced lamented the languishing At the end of Rod’s talk there were no questions. Perhaps after the idea that although this share price and felt the board nearly 1.5 hours of AGM there wasn’t much left to be said. company is market leader in needed to consider more public Martin Dowse its field, and twice as large promotion. However with the as its nearest competitor, it scrip tightly held by only about is operating in a fragmented 500 shareholders who see market where labour utili- future growth, trading in these sation is not as efficient as it shares is usually light. should be. Companion promo- Alan Best tional videos emphasised the trade based labour pool and

The Scrip August 2015 16 Methven AGM 14th July small group of shareholders attended was not being targeted and pointed out that we believe are essential to protect share- this meeting held in Auckland on 14 the modest improvement had come from holder interests. AJuly. investing in acquisitions rather than from Despite some concerns and uncertainties Although relatively leading edge in its organic growth. He disputed that this was a around performance and governance, shower products, Methven has struggled “solid” result and challenged management we were persuaded that it was appro- with reducing turnover and profitability to achieve a $10m profit from the Chinese priate to vote in favour of each resolution for a number of years, in part due to its operation and queried how much would be on this occasion although the board and lack of critical mass. In the latest period available for a dividend payment given the management must surely know they are its investment in a Chinese manufacturing need to invest more in the parent company on notice from shareholders. or face continuing decline.. The Chair said plant has arrested this trend with turnover Helen Hawkins static but net profit rising nearly 21%. that the anticipated profit growth would see an increase in the dividend. The At the meeting, Chairman Phil Lough and company has no further acquisition plans CEO David Banfield talked up prospects at present. with its Methven 130 strategy being the centre piece. This aims to grow revenue Bruce Sheppard opined that the MD and from $96m to $130m by 2018 and NPAT male directors on the current board should to 10% of revenue. The company has go, however shareholders rejected this invested heavily in new products, although and Mr Banfield was re-elected with 99% how long it will be before similar products of the votes as were Alison Barrass and appear is anyone’s guess. A new website Nora Barlow. with enhanced ordering capabilities is Unusually, the company’s constitution showing promise, but the company faces a was up for discussion, with a number of shift to new premises, surely a significant amendments proposed. NZSA ‘s view expense in the short term. is that this document remains at odds Many shareholders were understandably with best practise. While it is a modest unhappy with the track record. Responding improvement, it is not nearly as positive to questioning, the Chair said they intended as the company claimed in its notice of to take the company from a yield stock to meeting. For example, the board retains a growth and yield story. One questioner the right to not accept postal votes and asked if the $130m target was a realistic directors can be paid retirement allowances stretch or just a morale booster. (although currently none are). The Chair has committed to a comprehensive review NZSA founder, Bruce Sheppard, a Methven over the next 12-18 months and NZSA has shareholder, wanted to know why the USA provided a detailed list of changes that

The Scrip August 2015 17 Ryman Healthcare AGM 29th July bout 250 people braved this rate of growth for the growth target of 70% in 5 Another questioner suggested a cold and blustery day foreseeable future. The Chair years, much of it in the higher the build rate could be even Ato attend Ryman Health- also pointed out that $1000 value Auckland and Melbourne higher, but the chair was care’s AGM held at their brand invested in 1999 has now markets. He produced graphs adamant that the company did new resort-like Bruce McLaren grown to $22,857 as well as showing that both markets not want to move too rapidly Retirement Village in Howick an additional $2430 being paid could easily cater to this growth and increase the risk profile on 29 July. in dividends and the company and in fact demand continues unnecessarily. Rather than a dry restatement has spent $1.7 billion on new to outstrip supply. In answer to other questions, of the Annual report financials, villages. New directors Claire Higgins the Chair said that occupancy Chairman, Dr David Kerr talked Currently 7 new villages are and Doug McKay and returning was about 96% with stock at length about the importance at various stages of build with directors Warren Bell and Jo available being about one the company places on the a target of 1200 new beds or Appleyard all addressed the month’s supply at any one time. resident and staff experience. units annually by 2017. The meeting. Unsurprisingly, all About 8 sites in Auckland were Ryman has lifted staff remuner- first Melbourne village has were elected in a landslide. under investigation but this ation by 16% over the past 3 been very successful and the NZSA voted in favour of all was an exhaustive assessment years and is the industry leader target is 5 villages by 2020. resolutions as selecting the right site was on pay. 700 staff achieved By then there should be In question time, NZSA crucial to the outcome. NZQA standards in the past 15,000 residents across all the suggested the board should A very happy bunch of investors year. The management share company’s villages. consider an audit change as the including a number of Ryman scheme has been extended to CEO, Simon Challies continued incumbents had been in place Village residents then retired 150 senior staff with all shares the staff/resident theme since at least 1995. We also to enjoy an excellent afternoon purchased on market. New previewing a new “Show a little asked that at future meetings, tea and network with board paperless recording systems kindness” video and talking to resolutions should be voted members. and a new range of residents the difference the staff make. on by poll. the Chair agreed John Hawkins activity programmes have Each residents apartment is that the board would seriously been introduced. being equipped with a 10 inch consider both matters. Underlying profit rose for tablet to facilitate the new “My A question was raised about the 13th successive year- Ryman” database as well as for listing on the ASX. the Chair up 15.3% to $136.3m and residents use. “Ryman Engage” said there was no intent to dividend was increased by is bringing innovations such do so to raise capital, but a a similar percentage. IFRS as men’s clubs to broaden the Compliance listing was a possi- profit (including development offering to residents. bility to allow Australian insti- margins and revaluations Looking forward, Simon tutions to access the stock rose to $242m. The company reiterated a resident number more easily. expects to be able to maintain

The Scrip August 2015 18 Kingfish Fund AGM 31st July hairman, Alistair Ryan commented that Caught on the this year’s net profit returning 6.7% was Cdown on the previous 2 very good years Net and NZX index gain of 13.5%. The market focus on high yielding stocks (Gentailers and Why 99% of trading is Irvine Property listings which did not score well on pointless carried the Fisher STEEPP valuation process,) was the This is the opinion of out a principle cause. John Bogle the founder of study The share price $1.34, at 31 March was 2.2% Vanguard Group. Vanguard with colleagues from the the systematic risk created above NAV compared with a discount to NAV is the funds giant our NZX Humboldt University in by fund managers incentive over the previous 4 years recognising the has just got into bed with to Germany. They found, to problems and first mover strength of the current investment portfolio. offer an extended range of their surprise, that people advantage for end investors. completed interrupted tasks More In November last year a 1 for 4 issue of index tracking funds. More with no difference in quality warrants was made to Shareholders giving Are mortgages like Did you spend too much because they worked faster. the right to purchase additional shares in potatoes? Unintended on your wedding? This came at a cost: more October this year at a final exercise price to consequences in a world There can only be one stress, higher frustration, be announced of approx. $1.18. of many restraints answer - but Slate offers a time pressure and effort. calculator to work out how The quarterly dividend of 2% of NAV continues. Bank Underground is a blog More I was drawn to the rich you would be if you had Carmel Fisher commented on the underper- for Bank of England staff to research report from a work instead invested that sum formance for the past year, and the changes share their unofficial views productivity blog, which on the stock market. More made to the investment portfolio, the on emerging issues. In drew a different headline unchanged criteria for evaluating investments this blog Rena Corrias and from the same data. Instead The end of capitalism which has a proven track record to date, and Tobias Neumann discuss it focused on the time it has begun the current market conditions affected by “Giffen goods” - those that takes to get back to task Paul Mason, writing in the low interest rates, low commodity prices and violate the law of demand after an interruption - 25 Guardian admits that his is international events. which says that is something minutes. More an utopian view but claims becomes more expensive, Q & A – Several questions were asked, but Asset management and that we are entering the people should consume less of note was the point that the extra funds financial stability post capitalist era with infor- of it. More mation technology offering from the warrants would be invested in new A paper from VOXEu on The cost of interrupted new ways of working and “fishing pond” stocks being evaluated. Smaller concerns that the growth work; More speed and the sharing economy. More Companies were not favoured due to liquidity of the asset management stress. constraints. industry and the potential Its time for fund Noel Thompson Gloria Mark from the impacts on financial managers to stop skirting University of California, stability. The paper assesses around diversity

The Scrip August 2015 19 Victoria Thieberger points out in a Business Spectator article that while there are various Branch Reports efforts underway to increase the number of women in the higher echelons of finance and banking We recognise that branch reports in our newsletter do not adequately represent the tiny number in funds management has been the expertise and preparation of those presenting. The work of these professionals seldom remarked about. She says its time for this who give their time is appreciated by all who attend. Members are encouraged to change. More to refer to the individual company websites for the latest news and disclosures. Saving investors from themselves

Jason Zweig, author of the Intelligent Investor Branch Contacts column in the Wall Street Journal says that while Auckland Andrew Reding [email protected] people need good advice, what they want in advice that sounds good. Sadly, the advice that sounds Waikato John Davies [email protected] best in the short run is always the most dangerous Bay of Plenty Jane Lyndon [email protected] in the long run. Yet most financial journalism is Taranaki Grant Langdon [email protected] dedicated to the basic principle of marketing. When Wellington Martin Dowse [email protected] the ducks quack, feed ‘em. He sees his main job as Canterbury Robin Harrison [email protected] saving investors from themselves. More Stock Market hoaxes, from Napolean is dead Upcoming Auckland Branch Meetings to Twitter for Sale All at Alexandra Park Convention Centre, Green Lane. 7pm tea & coffee – 7.30 Paul Vigna, in a WSJ blog looks at hoaxes aimed pm start at manipulating the market. Now, in a networked Wednesday, 16th September - Wednesday November 18th social media world scams are picked up and amplified at the sped of light.More a very short Branch AGM - then Albert Bramley. CEO, Genesis Energy Why investing is so complicated, and how to Simon MacKenzie, CEO, Vector, and Second speaker to be advised make it simpler Mark Ratcliffe, CEO, Chorus. In a NY Times article, Sendhl Mullainathan, a Please diary these dates, and look for details of the programme on the branch Harvard economics professor tries to make sense section of the NZSA website of his investment choices. More Company Visits None currenty programmed Bruce Parkes Auckland The latest presentation to Auckland Branch was given by Josh Daniell. A video of this is available on the NZSA members’ website, click on presentations. A written summary of a similar presentation made to the Waikato Branch is included in their branch report below.

The Scrip August 2015 20 Waikato

Branch Meeting 23.07.15 owned by councils and ports contributing relatively small Investors have access to high ur speakers this month and closed to public funding. sums of money to support a returns at high risk; simple continued our education This is where crowd funding and business or project. There are and continuous information; on new markets in New the NXT can expand the market 3 types of crowdfunding: no fees; standard protec- O for small companies to be open tions; and a familiar framework Zealand open to investors. Our 1 rewards or donations crowd- first speaker, Mark Peterson, to the public. Whereas the NZX funding, where financial for investors. The average with help from Tim Lee, is suited to companies >$50 supporters receive rewards investment is $4,500 but range informed us on the NXT, and million, the NXT is designed for or simply make donations from $100 to $500,000. 27% then Josh Daniell, introduced companies in the $10 mill + through platforms such as of investors are female, and us to the fast-growing crowd- range. Kickstarter and Givealittle the age group is 45+. 750 companies in New Zealand are funding phenomenon, the The aim is to have short 2 debt crowdfunding, where interested in joining. Snowball Effect. This is a lot simple rules, better guidance investors lend their money to get through in an hour and by prescribed continuous and receive interest on As an example of crowdfunding, a half, and we were fortunate disclosure, with targets to their loans, and we were told that the UK market to have experienced speakers meet. Support is given by began in 2011, the average 3 equity crowdfunding, dedicated and passionate about an ongoing relationship with growth rate is 410%, 43% where investors raise funds their topics. an NXT adviser, and research in 2014 were angel investors for a business and in return coverage for financial advisers and 30% seed investors. In Mark Peterson is Head of receive shares. Markets for the NZX, and is paid by the NZX. There is NZ the larger amounts raised The Snowball Effect, a company started by describing the effect guaranteed liquidity, and there have been with later stage category 3, has played an active Kiwisaver has had on New are clear listing criteria for companies, by co-investment role in providing feedback to the Zealand equities. Kiwisaver is investors. with angel groups topped up FMA and Ministry of Business now worth $27 billion, and it The first successful company by the public. Josh said that Innovation and Employment has 2.4 million members with has been G3, whose shares are a lead investor that fitted with in the development of crowd- an average balance of $12,000. tightly held. NZT is working company values was important, funding regulations in NZ. The It is likely to be worth over with three other companies it also a non-executive board Snowball Effect, of which Josh $300 billion by 2056. 10% hopes to list before Christmas. member. He also told us that Daniell is co-founder, has had 9 of its investments are in NZ In summary, the main incentive Snowball Effect stays as an successful and 1 unsuccessful equities, 33% offshore equities, to go to the NXT is size, email marketing platform with company listing. Companies 55% in fixed interest, and 2% disclosure regimes and liquidity the company after its target gain by having access to a large in NZ property. The question for investors. funding has been raised. For pool of money; wide exposure further information see https// is: how to expand the NZ As an introduction to crowd- through marketing; and to a www.snowballeffect.co.nz financial market? Many of our funding we received notes clear, transparent and efficient or the presentations on the companies are privately owned explaining that crowdfunding is funding process. members’ website of NZSA, and a lot of cooperatives are a number of people collectively

The Scrip August 2015 21 AGM and dinner to cover them. This will affect Bay of Plenty. Our guest at our mid-year dinner how we live and work. These and AGM in June was Franceska cars are designed not to have Money week seminar – Banga, CEO of the New Zealand accidents, hence car insurance NZSA branch will run an investors’ seminar on the first day of spring Venture Investment Fund since may become redundant. – Tuesday 1st September at 5.30pm. Another example – Amazon is its inception in 2001. Her Location – Club Mount Maunganui. Bring your friends and relations. using drones to deliver goods, topic: Technology, Disruption Start family young on a path to savings and financial independence. and the NZ Opportunity. and regulations cannot keep up with these innovations. Expert Speakers: The NZVIF was established by Franceska warned that only Mark Lister from Craigs the New Zealand Government 2/100 companies succeed. To Investment Partners, as a 50:50 partnership with be successful companies need private investment, because Craig Stent from Harbour Asset entrepreneurs, a good team, of a lack of capital and Management market opportunity and a expertise available to support unique idea. Even then it may young technology companies. take years, and regrettably Franceska oversees partner- some companies go on to the ships in 9 venture capital Wellington NZX too early. funds and 15 angel investment ur branch AGM was held in meeting, he fielded the numerous For those wanting to invest in networks, with 186 companies June and took marginally questions from the audience very this area, Franceska recom- on their books. The key services longer than the formal well. It was a useful session. provided are: the implemen- mended reading, ”If you build O part of the Berkshire Hathaway It feels like the year has just tation of global best practice, it, will they come?” by Rod AGM (which clocked in at 10 started but there are only four monitoring performance, Adams. minutes). Geoff and Scott have meetings left in 2015. We have fostering development and In summary: retired – thank you for your Orion Health in August, Ray growth, education, and prepa- 1 Technology is disrupting efforts over the past years – Jack in September, Meridian in ration of reports and advice. across all sectors. and we welcome new committee October and the Christmas film The Fund reports performance 2 Growth will continue into member Christine Pullar. evening in November. to Government. the foreseeable future. Garth Stanish Director of Markets Martin Dowse Where technology is apposite 3 New Zealand is well Oversight presented at our July to all of us as shareholders in positioned and has unique large companies is the speed opportunities. of disruption. An example given – 16 years ago driverless 4 Capital for growth is vehicles were predicted for the New Zealand’s biggest year 3000. They are now being challenge. tested in the USA and road rules will need to be rewritten

The Scrip August 2015 22 Canterbury he Branch was fortunate Members’ Issues to have as part of its AGM PGC – An update Tevening, presentations of Castlepoint’s fund management irstly let me say that The Directors of NZSA do More recently, Questions have again been raised system, by Stephen Bennie and not own shares in PGC. We watch its machina- over what lies behind Torchlight, whose special Greg Peacock of NZAM (NZ Asset Ftions because of the issues it raises for retail and managing partners are Messrs Gould and Management.) Their talk was investors. Naylor, both PGC directors. Lantern Hotel Group particularly notable for its practical The first issue was the booking of an asset sale, is 30% owned by Torchlight, represented by tips on building a portfolio. They Perpetual Trustees to Bath Street Capital in the “independents” Mogridge and Naylor, and the other gave examples of things to avoid last annual accounts. PGC claimed it was catego- interests including Millinium Asset Management and watch out for and talked of rised as a receivable, and this was upheld by the are aiming to vote down the two PGC directors. a wide range of companies as FMA. NZSA claimed that the purchaser had raised Naylor, the former MD of Lantern was in fact voted examples. such doubt over the conditions of the sale that the out in the June AGM. Our next meeting will be on 20th valuation was excessive and misleading. Finally, Torchlight faces court action from investors August, at The Fendalton Croquet Within that subject it was also interesting to note in the failed subsidiary Van Eyk. Although it was Club, when Press Commen- that the auditors Grant Thornton helped with the wound up by Macquarie Group, investors in Van tator, Peter Alexander will be the valuation, before they were officially appointed as Eyk claim that Torchlight misappropriated funds, speaker. auditors. We note that an auditor cannot provide buying and selling property to created tax losses We are also hosting a special independent valuations for a company which it is outside the Cayman Islands and then on-selling evening for Money Week (30th auditing, and PGC had to correct its announcement property in Torchlight to create non taxable profit August to 5th September.) This to reflect this. in the Caymans. During the period of loss, over 4 years,it is alleged that Messr Kerr and Naylor paid will be aimed at new and inexpe- The second issue was over the 25% owned and themselves through their management company, rienced investors and will be controlled special partnership, Torchlight regis- excessive fees. on Tuesday 1st September. The tered in the Cayman Islands. NZSA said the detail programme will be advertised in of this partnership should be disclosed, because While listed on the NZX, PGC has obscured throughout Canterbury. although it was a minority holding it was effec- the transactions in Torchlight from investors. Robin Harrison tively controlled by PGC. Once again PGC’s expla- There are lessons to be learned here. As Buffet nation that it did not own a controlling stake, was advised:”Invest in directors you trust, a company upheld by the FMA. you can understand, and assets priced well in relation to future prospects.” It’s a complicated What was not excused was the relatively minor slip story, but we hope that NZX will not allow the of operating without two independent directors transfer of this company to the LSE before the (one is Mr Brian Mogridge,) for a five day period questions are answered. after the unexpected resignation of Mr Bright. This earned PGC a public censure. Alan Best

The Scrip August 2015 23 Education News Flash Upcoming Events These courses are gaining in popularity. Both our May courses were full this year. Enrol early. For more information go to Branch section of NZSA website

2015 Auckland Education Courses 2015 August 11 Wellington Branch meeting

Western Springs Community College will run two education August 20 Canterbury Branch meeting courses mid 2015. August 25 Waikato Branch meeting Website:www.leisuretimelearning.co.nz/businessandfinance Our courses are right for new investors, for current investors who September 1 Bay of Plenty Money Week seminar need more knowledge, and for those who want to understand their Kiwisaver investments. September 1 - 2 Canterbury Branch Money Week seminars

Course 1. Investing for your future – general investing principles September 8 Wellington Branch seminar - 2 x 2hr sessions September 12 NZSA National AGM and Investor Commencing 12th August; Tutor John Hawkins Conference Price $65 inc GST; plus $20 for the NZSA course book September 16 Auckland Branch meeting

Course 2. Sharemarket basics – understanding how and why to September 22 Waikato Branch meeting invest in shares. October 13 Wellington Branch meeting Commencing 24th August; Tutor Jacquie Hagberg – 2 x 2hr sessions October 20 Waikato Branch meeting Price $65 inc GST; plus $20 for the NZSA course book November 10 Wellington Branch film evening

Tell your friends, family, and work colleagues about these inform- November 18 Auckland Branch meeting ative courses. You don’t have to be an NZSA member – just keen to develop your understanding November 24 Waikato Branch meeting

The Scrip August 2015 24 NEW ZEALAND SHAREHOLDERS ASSOCIATION INC PO Box 6310, Wellesley Street, Auckland 1010, Phone (09) 309-9768 Website – www.nzshareholders.co.nz Chairman John Hawkins [email protected] 021 640 588 Secretary/Treasurer Chris Curlett secretary-treasurer@nzshareholders. 021738032 co.nz Governance Issues Grant Diggle [email protected] Legal & Regulatory Gayatri Jaduram [email protected] Legal & Regulatory Lyn Lim [email protected] Auckland Issues Andrew Reding [email protected] AGM Co-ordination Max Smith [email protected] Company Research Martin Watson [email protected] Co-opted Associates Proxy Co-ordination Jacquie Hagberg [email protected] Corporate Liaison Des Hunt [email protected] (9) 521 6117 The Scrip Alan Best [email protected] (9) 524 0317

Disclaimer

Comments or information contained in this newsletter or other editions of The Scrip, or within courses conducted by the NZ Share- holders Association including related course books, should not be construed as providing investment advice under the provisions of the Securities Markets Act of 1988 or its Amendments, or the Financial Advisers Act 2008. The point of our activities is to provide you with Editor Alan Best the tools needed to enable you to assess investment proposals, and decide for yourself. Layout Bruce Parkes

ISSN: The National Library has allocated the International Standard Serial Number 1179-4275 to The Scrip so that researchers will have access to our material.