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VIEW FROM THE BUYSIDE

Coty, a World Leader in Beauty, Has 123% Upside The company has a strong market position as a result of its aggressive acquisition strategy. By ELEVATION CAPITAL MANAGEMENT LIMITED, NEW ZEALAND June 8, 2017 8:41 a.m. ET

This article first appeared on SumZero, the world’s largest research community of buyside investment professionals. In some cases Barron’s edits the research for brevity; professional investors can access the full version of this thesis and tens of thousands of others at SumZero.com.

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Growth Through M&A Coty’s strong market position is the result of its aggressive M&A strategy. In October 2016, Coty doubled in size through the merger with P&G’s beauty business. The merger, initially valued at $12.5B, saw Coty take control over some 41 brands previously owned by P&G. The transformational deal bolstered sales and expanded Coty’s product suite to include the addition of ‘salon professional’ and hair coloring brands. Coty is now ranked as the third largest beauty manufacturer in the world, holding dominant positions across key beauty categories including #1 in fragrances, #2 in salon hair, and #3 in color cosmetics. However, the deal has not been without its challenges. Stock Price Weakness Presents a Long-term Opportunity

Coty (ticker: COTY) Recent price:

$18.81

Estimated Intrinsic Value Range:

$16.68 $42.02*

Downside/Upside Potential Range:

-11% to +123%

Dividend Yield:

2.70%

Market Cap:

$14.1 billion

52-Week Range:

$16.95-30.13

LTM Revenue:

$6.4 billion

LTM Ebitda:

$991 million

LTM Diluted EPS

-$0.28

Coty has experienced negative investor sentiment following trading disruption around the close of the P&G beauty deal and concerns toward slowing revenue growth and capital expenditure. Coty has posted weak quarterly results while inventory levels (for acquired brands) have been significantly higher than anticipated. There appears an increased likelihood of integration complications with inherent uncertainty towards the timing of synergy extraction. As a result, Coty’s stock has fallen 41% from its recent high of US$29.75 in August 2016 to $18.81 on June 7, 2017. M&A Integration

The most important value creation from the merger of P&G’s beauty brands is Management’s estimated improvement of Coty’s operating profit margins from 14.3% (Standalone Coty FY16 adj. operating profit margin) to ~19.6% in FY2020 (Pro forma Coty adj. operating margin). This will make Coty an industry leader in profit margins. There exists skepticism toward whether this is achievable by 2020. However, it is our view that even if Management missed their target by say 1%. i.e., only achieved an 18.6% operating margin by 2020, the significant improvement would still require the market to rerate the stock. We also note that the margin improvement forecast does not include the anticipated portfolio rationalization and any underlying growth in the newly combined business. LTM P/E: NA *Assumptions for our estimated intrinsic values are below.

SOURCE: Barron’s

Economies of Scale The completion of the P&G deal marked the largest beauty portfolio acquisition in history, significantly increasing Coty’s scale. It saw the Company become the third largest beauty company globally, from seventh before the merger. The move places Coty in an even stronger position when negotiating with suppliers, retailers, advertising agencies, and the likes. The Company has already established a name for itself as a tough negotiator including the insistence of 120-day payment terms for marketing contracts. (Advertising agency Grey, recently resigned its Coty account citing financial differences – we hypothesize this represents a push by Coty to reduce its cost base). We further assert that Coty’s scale will enable the Company to accelerate revenue growth through the acquisition of smaller products/brands, utilizing their distribution and sales networks to enhance their value. Diversified Portfolio of Iconic Brands Coty has a broad, well-diversified portfolio of more than 70 iconic brands including Calvin Klein, Chloé, Clairol, CoverGirl, Marc Jacobs, Max Factor and Wella to name a few. We see additional upside through further optimization of Coty’s brand portfolio. We suggest that the acquired P&G brands have not received the necessary attention required to run them optimally as they were being prepared for sale. We further highlight the 16-month window the Coty/P&G deal took to close during which time P&G would have had little incentive to invest in the growth of these brands. We look to Coty to continue to strengthen its global brands by directing resources to higher growth potential brands while stabilizing remaining brands. Coty has openly stated its intent to explore alternatives for non-core brands including the potential for divestment. We believe that this is one short-term catalyst that can improve margins, revenue/profit growth and at the same time deleverage the balance sheet. Cornerstone Shareholder of Positive Influence JAB Holding Company (“JAB”) is Coty’s largest shareholder, with a shareholding of 36.84%. JAB is the investment arm and holding company of the billionaire Reimann family. JAB focuses on long-term investments in companies with premium brands, attractive growth and strong margin dynamics (Assets as at 31 December 2016 totaled €21.3B including a ~9% stake in Reckitt Benckiser ). JAB stands out, mainly due to the immense experience of the people who run it, particularly within the consumer products industry. Current management consists of Peter Harf (ex-Chairman of Anheuser-Busch InBev ), Bart Becht (ex-CEO of Reckitt Benckiser) and Olivier Goudet (Chairman of Anheuser-Busch InBev). JAB has direct ties to renowned investment firm 3G Capital - Olivier Goudet currently serves as chairman of 3G-controlled Anheuser-Busch InBev. Both JAB and 3G have a history of investing in consumer brands with a focus toward cost reduction. We believe JAB’s cornerstone shareholding is extremely positive for long-term minded minority shareholders. Insider Trades ‘Insiders’ (including Management, Directors and JAB) have been actively buying Coty shares since the completion of the merger with P&G’s beauty brands. This includes an additional ~€72M of Coty shares acquired by JAB in February 2017. Such acquisitions highlight JAB’s confidence in Coty to execute on its integration strategy. We view such stock purchases as affirmation of the apparent value gap between Coty’s current share price and its intrinsic value. Returning Capital to Shareholders Management continues to show confidence in Coty’s cash flow generation capability – the Company recently transitioned to quarterly dividends and increased its dividend payment by 82% to $0.125 per quarter (this amounted to $93.4M, vs Coty’s Free Cash Flow of $567M in Q2/17). This implies a dividend yield of 2.7%, which is currently ~90% higher than the industry peer group average of 1.4%. Furthermore, Coty bought back 1.4M shares for the six-month period ending 31 December 2016, with a price range of $25.35 - $27.40. Investment Thesis - Summary Following the completion of Coty’s complicated multi-year integration process, we expect the Company to emerge as a formidable challenger to leading peers of L’Oréal and Estee Lauder. A focus on increased scale and business segment expansion are projected to deliver economies of scale and further diversify revenue streams. We see this as a catalyst for Coty to improve its margins and stabilize its earnings profile. Due to the extent of integration and reorganization required, we expect Coty to experience a period of short-term uncertainty and volatility. However, we continue to have confidence in both the Board and Management to execute on its plan. Furthermore, we believe the investments into P&G’s orphaned beauty brands (e.g., the relaunch and repositioning of COVERGIRL and Max Factor) could yield surprising upside in the medium term that is not currently being considered by the market. In the meantime, we are paid to be patient, as Coty currently pays what we believe to be a sustainable dividend which yields above its peers at 2.7%. Assuming sustainable cash flow generation, the attractive yield should reduce downside risk in a market sell-off. Assumptions for Our Estimated Intrinsic Values Coty currently trades at $18.81 per share (as of June 7, 2017), at an implied P/E multiple of 19.7x (based on an adjusted FY16 EPS of $1.05). We estimate Coty’s Intrinsic Value to be between $16.68 - $42.02 assuming normalized trading conditions. Our valuations represent downside/upside potential of between -13% to +123%. Pessimistic Scenario #1 - We assume the Company’s earnings stagnate at FY2016 Adjusted EPS of $1.05. - We also assume GFC low P/E ratio of 10.49x, which is the average of the lowest P/E ratio of L’Oréal (11.32x*) and Estee Lauder (9.66x ) during this time period. Pessimistic Scenario #2 - We assume the Company’s earnings stagnate at FY2016 Adjusted EPS of $1.05. - To simulate the market pessimism/disappointment, we apply a 30% discount to the current peer group average Forward P/E multiple of 22.7x that provides us with a 15.89x P/E ratio. Neutral Scenario - We assume Management is only able to achieve some of the forecast margin/profitability improvement. We apply a 25% discount to Management’s FY2020

Forecast EPS of $1.53 and arrive at our estimated FY2020 EPS of $1.22. - We think it is appropriate to discount the current peer group average Forward P/E multiple of 22.7x by 10% in this neutral scenario that provides us with a 20.43x P/E ratio. Optimistic Scenario #1 - We assume Management is able to achieve its forecast margin/profitability improvement, and achieve its FY2020 Forecast EPS of $1.53. - We utilize the current peer group average Forward P/E multiple of 22.7x in this scenario. Optimistic Scenario #2 - We assume Management is able to achieve its forecast margin/profitability improvement, but is also able to grow the business organically and achieve further margin improvement from planned divestments. We apply a 10% premium to Managementâ€™s FY2020 Forecast EPS of $1.53. - In this Optimistic Scenario, we suggest the market is willing to pay a 10% premium to the current peer group average Forward P/E multiple of 22.7x, this implies a Forward P/E multiple of 24.97x. The Elevation Capital Value Fund began to establish a position in Coty in January 2017, at an average cost of $18.72 per share (as of 12 April 2017). Elevation Capital Management Limited Website: www.elevationcapital.co.nz Email: info@elevationcapital.co.nz Twitter: @ElevationNZ 0 comments

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JUNE 2017

ACHIEVING CRITICAL MASS

INFINZâ€™s first 15 years

AN EARLY LEAD

Professional development for emerging leaders

T H E J O U R N A L F O R T H E F I N A N C E A N D C A P I TA L M A R K E T S I N D U S T R Y

POSITIVE TERRITORY

A roundup of recent market activity

Award winner Rod Duke on staying at the top

5 SOURCE: INFINZ Journal PLUS: ALL THE WINNERS AND HIGHLIGHTS OF THE 2017 INFINZ INDUSTRY AWARDS

CONTENTS

IN THIS ISSUE

02 03 04

EXECUTIVE DIRECTOR’S LETTER CHAIR’S LETTER FIRST 15 YEARS INFINZ has grown to become a powerful and influential body within the sector

YFP UPDATE YFPs in all areas of the capital markets who are keen to connect with others are being sought to help the initiative grow

STRATEGIC RISK The drivers of strategic risks to New Zealand’s financial markets were explored at a recent event held by INFINZ in partnership with the FMA

ADVOCACY

EMERGING LEADERS

Ross Pennington questions the sustainability of New Zealand’s reluctance to implement a G20 Pittsburgh Accord legislative package

From polishing your personal brand to engaging with media as an expert, professional development is the focus of INFINZ’s Emerging Leaders Programme

PROFILE

REGIONAL EVENTS UPDATE

12 16

Emerging Leader Award winner Richard Milsom talks about what’s motivated him to take on his leadership roles

After the events in Tauranga and Christchurch late last year, INFINZ is continuing a successful push into the regions in 2017

MARKETS REVIEW A look at debt capital markets over the past six months

EQUITIES NZX’s Mark Peterson provides a roundup for the period October 2016 to March 2017

MERGERS AND ACQUISITIONS

FMCG CONFERENCE

24 26

A review of mergers and acquisition activity in the six months ending 31 March

A summary of the presentation from corporate finance guru Professor Richard Roll

CONFERENCE PREVIEW Mark the date in your diaries now: 2 November 2017!

THE 2017 INFINZ INDUSTRY AWARDS A roundup of all the winners – and other highlights – from the big night

CONTRIBUTORS Editor

CAITLIN SYKES

INFINZ JOURNAL JUNE 2017

Sub-editor

TRISH HEKETA

Produced by Sugar Bag Publishing Ltd

Project Manager

BETTE FLAGLER

Art Direction

AMANDA TRAYES

Publisher

SUGAR BAG PUBLISHING LTD www.sugarbag.co.nz

Executive Director

JIM McELWAIN, INFINZ

Admin. Manager

IONA GIBBS, INFINZ

Sponsorship and Advertising

CATHERINE GARDINER, Prescient Marketing & Communications

Published by Sugar Bag Publishing Ltd. The INFINZ Journal is produced twice yearly for the Institute of Finance Professionals NZ Inc (INFINZ). The views expressed in the articles are those of the contributors and do not necessarily reflect the views of INFINZ or Sugar Bag Publishing Ltd. No part of this work may be reproduced in any form by any means without the written permission of the publisher. Any unauthorised use of this publication will result in immediate legal proceedings.

JUNE

2016

DECEMBER 2016

Every care has been taken to ensure the accuracy of the information in the INFINZ Journal. Neither INFINZ, the publishers, authors, nor their employers can be held liable for any inaccuracies, errors or omissions. Readers are strongly advised to contact their professional financial adviser before buying or selling securities.

THE JOURNA L FOR THE FI NANCE AND C A P I TA L M A R K ETS INDUSTR Y

THE

JOUR

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EMERGING LEADERS

New programme targets top talent

Subscriptions:

REACHING OUT

wing id on gro wers Don Bra , not follo leaders

INFINZ extends its reach in the regions

TH STRENGBERS IN NUMbership YFP mem high new hits a

THE BIGE PICTUR s

CFO TO CEO

Michael Boggs: from money manager to media business leader

$40 plus GST for two issues or $25 plus GST/single issue for non-members.

What driveleader emerging r? Kiese Daniel

BLAZING A

G KEEPIN TRACK

TRAIL

dup of A roun market recent activity

Jan Dawson on what it takes to succeed

PLUS:

ALL THE PLUS:

S WINNER

OF LIGHTS AND HIGH

INFINZ.COM

THE

RDS STRY AWA ALL THE HIGHLIGH TS FROM THE 2016 NZ INDU INFINZ CONFEREN 2016 INFI

Institute of Finance Professionals NZ Inc (INFINZ) PO Box 10350, The Terrace, Wellington 6143 Phone: +64 4 499 1870 | Fax: +64 4 499 1840 Email: mail@infinz.com | infinz.com

6 2017 INFINZ JOURNAL | JUNE

YFP UPDATE

Auckland YFP ambassadors

YFPs in all areas of the capital markets who are keen to connect with others are being sought to help INFINZ’s YFP initiative to grow.

he YFP programme aims to boost INFINZ’s engagement with those aged under 35, and a focus for 2017 is growing the reach of its ambassador programme. YFP ambassadors are now in many major organisations operating in the capital markets and are helping to connect young professionals at a firm level to the work of INFINZ. YFP board chair Richard Milsom says they’re keen to grow the network further. “We’d like to see a growth in ambassador numbers and a growth in ambassador engagement – because the more engagement we get, the better refined the programme becomes,” says Milsom. “We really want to serve our members the best we can, so the more feedback from members that we can get via our ambassadors, and have the dialogue going back the other way as well, the better the programme becomes.” New graduates just starting out in the workforce have also benefited from the YFP programme’s annual ‘tips and tricks’ sessions, held earlier this year in both Auckland and Wellington. The sessions focused on tips for career development. In Auckland the speakers included Alexander Hyndman, a partner at recruitment firm Convergence Partners, and ANZ’s head of transaction banking New Zealand and Pacific, Reuben Tucker. Andrew Bayly, who was a merchant banker and the co-founder of Cranleigh, a firm offering corporate advisory and capital markets advice, before becoming the MP for Hunua, was the ‘tips and tricks’ speaker in Wellington. YFPs also gained insights from a range of speakers in the first half of the year, including Tourism Holdings CEO Grant Webster in Auckland and former Justice Minister and now general manager of consumer banking and wealth at Westpac New Zealand Simon Power, who spoke at a YFP event in Wellington. Existing Auckland and Wellington YFP ambassadors are listed at right. If you would like to become an ambassador, contact Briar Malpas at briar.malpas@chapmantripp.com in Auckland or Roimata Mitchell at roimata.mitchell@nzx.com in Wellington for more details. n INFINZ.COM

Aleisha McKinley

PwC

aleisha.k.mckinley@nz.pwc.com

Alex Devereux

Fonterra

alex.devereux@fonterra.com

Briar Malpas

Chapman Tripp

briar.malpas@chapmantripp.com

Chloe Leech

KPMG

cleech@kpmg.co.nz

Finn Templeton

First NZ Capital

finn.templeton@fnzc.co.nz

George Donaldson

Forsyth Barr

george.donaldson@forsythbarr.co.nz

Harrison Tocher

BNZ

harrison_tocher@bnz.co.nz

Jordan Kitchen

Westpac

jordan_kitchen@westpac.co.nz

Joshua Dale

Craigs Investment Partners

joshua.dale@craigsip.com

Lottie Ashford

Cameron Partners

charlotte.ashford@cam.co.nz

Lucy Drake

ASB

lucy.drake@asb.co.nz

Luke Bilbrough

Fletcher Building

luke.bilbrough@fbu.com

Michael Nelson

BDO

michael.nelson@bdo.co.nz

Niranjan Naguleswaran EY

niranjan.naguleswaran@nz.ey.com

Olivia Blundell

ANZ

olivia.blundell@anz.com

Richard Milsom

Elevation Capital

richard.milsom@elevationcapital.co.nz

Talapo Uivaa

NZ Superannuation TUivaa@nzsuperfund.co.nz

Tash Smith

Bell Gully

natasha.smith@bellgully.com

Tenille Burnside

Russell McVeagh

tenille.burnside@russellmcveagh.com

Toby Holborow

Simpson Grierson

toby.holborow@simpsongrierson.com

Wellington YFP ambassadors Bernadette Scanlon

PwC

bernadette.f.scanlon@nz.pwc.com

Che Ammon

Russell McVeagh

che.ammon@russellmcveagh.com

Darshika Patel

Contact Energy

darshika.patel@contactenergy.co.nz

George Milne

Bell Gully

george.milne@bellgully.com

Guy Hooper

Forsyth Barr

guy.hooper@forsythbarr.co.nz

Henare Mihaere

Treasury

henare.mihaere@treasury.govt.nz

Kyle Edmonds

First NZ Capital

kyle.edmonds@fnzc.co.nz

Michael Morris

RBNZ

michael.morris@rbnz.govt.nz

Nick Barry

Deloitte

nbarry@deloitte.co.nz

Paul Mountfort

BNZ

paul.mountfort@bnz.co.nz

Robert Huang

Morrison & Co

robert.huang@hrlmorrison.com

Roimata Mitchell

NZX

roimata.mitchell@nzx.com

Simon Momich

Simpson Grierson

simon.momich@simpsongrierson.com

Susannah Neild

Cameron Partners

susannah.neild@cam.co.nz

7 2017 5 INFINZ JOURNAL | JUNE

EMERGING LEADERS

AN EARLY LEAD

stablished late last year, the INFINZ Emerging Leaders Programme is aimed at professionals aged 30 to 40 years, and this year has kicked off a series of professional developmentfocused events. Uber New Zealand’s general manager Richard Menzies spoke at the group’s first event, along with Glenn Beattie, who is the New Zealand general manager of plastics giant Sistema, and Rick Braddock, whose directorships include a seat on the board of Ngai Tahu Property. As well as sharing their back stories at the open forum event held in Auckland in April, the trio offered insights into career opportunities, lessons they’d learnt as managers, and tips for creating a balance between personal and professional lives. Daniel Kieser, who won the inaugural Emerging Leader Award at the 2016 INFINZ Industry Awards, chairs the Emerging Leaders Programme, and the group’s board also includes economist Shamubeel Eaqub, medical doctor Angela Lim, equity research analyst Anastassia Juventin, and chair of the INFINZ YFP initiative Richard Milsom. 8

INFINZ JOURNAL | JUNE 2017

From polishing your personal brand to engaging with media as an expert, professional development is the focus of INFINZ’s Emerging Leaders Programme.

Explains Kieser: “We’re trying to concentrate not only on the financial elements of professional development for our members, but also on all the elements of professional development. “In the age bracket this group represents, people are starting to enter management positions, they’re starting to take on family commitments, they might be having children – they’re doing a whole range of things. So both within work and outside of it there is a whole bunch of new stresses and new demands, and our activities are centred around the provision of professional development with those factors in mind.” Kieser says that speakers for the group’s first event were chosen to offer a range of perspectives: entrepreneur, CEO and director/chair. “It was a relaxed forum, designed to get people to engage and realise we’re all in this together while facing different stresses and experiencing different pitfalls.” Subsequent events have offered more targeted insights. A session on personal brand development, for example, looked particularly at the importance of polishing emerging leaders’ social media profiles. “What you ‘like’ on social media, and when you like it and why – this creates little footprints that can follow you. And as you take on greater exposure as your career develops, you need to be even more aware that these footprints can follow you and affect you as your brand grows,” says Kieser. Other sessions have focused on how to engage with the media as a subject matter expert, governance, public speaking, and managing relationships within an organisation, as well as with those outside it. A focus for the first half of 2017 has also been connecting new members with the group. Kieser says the group is keen to develop a network of champions or ambassadors within organisations, along similar lines to the INFINZ YFP initiative, to champion its work within corporates. n For queries relating to the INFINZ Emerging Leaders Programme, please contact daniel.kieser@shareclarity.com.

8 INFINZ.COM

IMAGE: ISTOCKPHOTO.COM

WE’RE TRYING TO CONCENTRATE NOT ONLY ON THE FINANCIAL ELEMENTS OF PROFESSIONAL DEVELOPMENT FOR OUR MEMBERS, BUT ALSO ON ALL THE ELEMENTS OF PROFESSIONAL DEVELOPMENT.

EMERGING LEADERS

TAKING THE LEAD

L-R Prof Norman Wong – UABS, Richard Milsom – Elevation Capital

ichard Milsom, who has headed one of INFINZ’s most successful initiatives in recent years, has taken out the University of Auckland Business School Emerging Leader Award at the 2017 INFINZ Industry Awards. Milsom has been chair of the INFINZ YFP initiative since its inception, overseeing growth in YFP members from 60 in early 2014 to more than 600 today. The 29-year-old was also recognised for the successful career he’s forged at Elevation Capital Management, where the judges noted his leadership qualities, energy and work ethic.

Q. A.

Congratulations on being named INFINZ’s Emerging Leader of 2017. How did it feel to gain that recognition? I was thrilled and I was humbled. I get to see so much talent in our area of the market, so just to be a finalist was wonderful, but to actually win was obviously a thrill. It’s a wonderful night that INFINZ puts on.

The award recognises in part the wider impact you’ve had on the industry through your involvement in the YFP initiative from its inception. What motivated you to get involved in this area of INFINZ’s work? I have a strong interest in growing the capital markets and its participants, but if I had to pick one area I enjoy more it’s the micro-level projects more than the macro ones. I’m really interested in what’s going on with the constituents and the businesses involved in the markets. I had felt there was a gap between the younger and the longer-tenured members of INFINZ, and I thought the way to create a really vibrant and engaged body was to have a membership with high levels of engagement across the spectrum. Ultimately I believed that getting people to interact more and learn from one another would only create a better market in general.

PHOTOGRAPHY: GARRY BRANDON

INFINZ.COM

Q. A.

2017 INFINZ Industry Awards Emerging Leader Award winner Richard Milsom talks to Caitlin Sykes about what’s motivated him to take on his leadership roles.

The programme is now more than three years old. What’s kept you engaged with it? We’ve had such a great INFINZ YFP board every step of the way, and working with excellent people of such ability and enthusiasm has really kept me going. Each one of them has been a pleasure to work with. It’s also been great watching people turn up time and again to events, and watching the event numbers grow. And it’s humbling watching these captains of industry – people like Christopher Luxon and Barbara Chapman – give up their time to assist with the mission. That’s been just incredible.

You’re now a board member of INFINZ’s more recently established Emerging Leaders Programme, as well as a shadow director on the main board of INFINZ. What’s your next step? The next step of the journey will be my transition off the YFP board, although I’ll stay engaged in an advisory capacity there. My work on the Emerging Leaders board will become more of a focus as we firm up the offering there, and I’m thoroughly enjoying my time working with the main board of INFINZ. The different roles offer great variety.

The Emerging Leader Award also recognises the progression of your career at Elevation Capital Management, where you’ve worked for four years and are now a shareholder. What factors do you attribute your success to there? It’s the time, advice and encouragement I’ve been offered by the founders of the business – Chris Swasbrook, Craig Stobo and Andrew Harmos. They offered me not only the initial opportunity but the development along the way; their generosity of time and spirit has been the bedrock of my capital markets growth. They are incredibly able partners to work with and I got exceptionally lucky. I’ve been a huge beneficiary of their skills and experience. n

9 2017 INFINZ JOURNAL | JUNE 2016 9

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PWC - NZ EQUITY MARKET TRANSACTION OF THE YEAR

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ѕ Christchurch Adventure Park Funding ŽƌƌŽǁĞƌ͗ >ĞŝƐƵƌĞ /ŶǀĞƐƚŵĞŶƚƐ E >ƚĚ WĂƌƚŶĞƌƐŚŝƉ ;>/E Ϳ >ĞŶĚĞƌ͗ ŚŝŶĂ ŽŶƐƚƌƵĐƟŽŶ ĂŶŬ ;EĞǁ ĞĂůĂŶĚͿ >ƚĚ ; E Ϳ

UNIVERSITY OF AUCKLAND BUSINESS SCHOOL - EMERGING LEADER ѕ ZŝĐŚĂƌĚ DŝůƐŽŵ͕ WƌŝŶĐŝƉĂů Ăƚ ůĞǀĂƟŽŶ ĂƉŝƚĂů Mangement Ltd

CALDWELL PARTNERS - LEADERSHIP AWARD

ѕ Rod Duke, Group Managing Director, Briscoe Group Ltd

sŝƐŝƚ ǁǁǁ͘ŝŶĨŝŶǌ͘ĐŽŵ ƚŽ ĨŝŶĚ ŽƵƚ ŵŽƌĞ ĂďŽƵƚ ƚŚĞ /ŶƐƚŝƚƵƚĞ ŽĨ &ŝŶĂŶĐĞ WƌŽĨĞƐƐŝŽŶĂůƐ ;/E&/E Ϳ ĂŶĚ ƚŚĞ ďĞŶĞĨŝƚƐ ŽĨ ŵĞŵďĞƌƐŚŝƉ͘

CRAIGS INVESTMENT PARTNERS - EXCELLENCE IN TREASURY ѕ Fletcher Building

INFINZ AWARDS COCKTAILS SPONSOR

BEST SHAREBROKING SECTOR RESEARCH & SERVICE AREA AWARDS SPONSOR

MEDIA SPONSOR

INFINZ AWARDS CATEGORY SPONSORS

SOURCE: Value Walk

2017-6-27

SOURCE: New Zealand Herald

INFINZ Awards: Celebrating the best in ďŹ nance - NZ Herald

2017-6-27

INFINZ Awards: Celebrating the best in ﬁnance - NZ Herald

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11858219

2017-6-27

INFINZ Awards: Celebrating the best in ﬁnance - NZ Herald

2017-6-27

INFINZ Awards: Celebrating the best in ﬁnance - NZ Herald

1/3

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11858219

2/3

SOURCE: Value Walk

MAKING BANK With the increasing amount of CAPITAL required to get onto the first rung of the property ladder, amassing any form of long term WEALTH has been relegated to the â€˜too hardâ€™ basket by many. We investigate the alternatives to think outside the twobedroom, one-bathroom, weatherboard box. by Madeline Saxton-Beer

page 110 | thedenizen.co.nz

am 27 years old and on a good day I might have $40k to my name, all invested in shares that my grandmother decided were worthy — I did after all, inherit the majority of that figure from her. But not everyone in my age group is as fortunate; having graduated from university with large student loans, the crippling cost of rent in the city and an entry level salary — there’s not much left for saving schemes. Before you jump to conclusions about Generation Y and our preoccupation with dining out, travelling and generally financially frivolous behaviour, recent evidence suggests the contrary. A 2016 survey conducted by US firm Fidelity Investments, proves that millennials do know how to save. In fact, they are doing much more of it than their predecessors did at the same age. Neither the Baby Boomers nor Generation X began putting money away as early as 20

of retirement and investing strategies at Fidelity. His firm’s survey of 305 millennials between age 25 and 35 found that 85% have some savings, 60% are saving for retirement (up from 51% in 2014) and 59% have emergency funds that would cover six and a half months of living expenses, on average. But, as surmised by a Wells Fargo survey, the majority (59%) of thirty-something workers “focus more on avoiding loss than maximising the growth of their investments for retirement.” Suffice to say, engaged investing is not at the forefront of their minds. It’s all very well to save for a rainy day, or for life after receiving a coveted retirement Gold Card, but what about the meantime — your midlife years? With buying a house being the single symbol of financial and social stability, many young Aucklanders have become resigned to the fact that they will never be homeowners without a decent amount of help from their parents (if they are so lucky). But to avert being left in financial limbo, there

“ There’s no reason not to take the bull by the horns and get a little more aggressive about augmenting your assets, physical or otherwise. ” and 30-something-year-olds are today. Having borne witness to the 2008 Global Financial Crisis, millennials — much like their forefathers, several generations prior, who were psychologically affected by the Great Depression — were at an impressionable age and thus took heed from the global meltdown. ‘Millennial super savers’, as Fidelity calls them, are not necessarily high earners, however. On average, they make US$73,000 a year — a decent income but not enough to make saving a slamdunk. One of the biggest issues this generation faces — as articulated by CNN’s chief economist Christine Romans — is extremely steep accommodation costs. This is often up around the 40% mark when it should be 30% of one’s income or lower. With better retirement funds in place, and subsequently, higher employer contributions, Generation Y are “taking the right steps to build a solid future and that’s a really good trend,” says John Sweeney, Executive Vice President

SOURCE: Denizen Magazine

are investment areas that those with limited savings can turn to in order to grow their wealth. Whether its $5,000 or $50,000, there’s no reason not to take the bull by the horns and get a little more aggressive about augmenting your assets, physical or otherwise.

Rules to Get You Started CHANGE YOUR MINDSET A 2016 Forbes article entitled ‘The Blind Spot for Millennials’ outlined how one of the biggest hurdles for this age group is that they don’t think of themselves as ‘investors’. In Fidelity’s survey only 9% of millennials said they see themselves as investors — a very low number. Point being, there’s a mindset that young people need to embrace before they can embark on a savvy path to growing their money.

EDUCATE YOURSELF Don’t fret if your knowledge on different investment tools is zilch. Gaining some knowledge on the subject is easy and highly worthwhile. The financial education site Smart About Money (smartaboutmoney.org) is an excellent resource with free guides that explain everything from stocks, bonds and mutual funds (called Managed Funds in NZ) to exchange traded funds, as well as outlining things you should be asking before you invest.

ACKNOWLEDGE THAT BEING A HOMEOWNER ISN’T THE BE ALL AND END ALL Richard Milsom from global value fund manager Elevation Capital is quick to point out the risks of investing solely in property, describing New Zealand’s national obsession with home and land ownership as a precarious way of placing the whole population’s eggs in one basket, leaving Kiwis highly exposed in the event of a natural disaster, or, the market’s eventual, cyclical downturn. Accepting this will help you look towards other investment opportunities such as the stock market, which isn’t as volatile as you might perceive it to be. So long as you understand what you own — remember buying a share is owning a fractional part of a business — and be sure to look at the long term.

KNOW THAT IT’S NOT GOING TO HAPPEN OVERNIGHT While there are some incredible stories à la Warren Buffet’s Berkshire Hathaway Inc., getting into highly speculative investing is at one’s own peril. Whether it’s a savings account, an indexed share fund, or a managed share fund, allowing time for compound interest to accumulate, annual gains or losses to aggregate, or dividend reinvestments to kick in is what will really boost your financial gains. It’s therefore better to establish a time period so that you can clearly calculate your goals — anywhere between 5-10 years is a good starting point. Using the CNN Money Millionaire Calculator online is also a motivational way to keep your head in the long-game. And, if you ever find yourself getting impatient, remember what Albert Einstein once said: “Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t… pays it.”

What to invest in? PRIVATE MANAGED SHARE FUNDS Such as: Elevation Capital (elevationcapital.co.nz) Risk level: 3/10 Average annual return in the last 5 years: 9% p.a. Stocks, historically and over the long term, have outperformed bonds and cash. What’s important is measuring the result against an appropriate timeline. Data on US shares back to 1871 is readily available. According to Craigs Investment Partners, the average annual return since then has been 8.9%, and shares were up in 74% of those 144 years. What’s more, if you look at 10-year blocks, shares were higher 99% of the time with the best annual return was 19% over the period, and the worst a 1.1% loss. Thus, investing in shares is fairly simple so long as you are sufficientlydiversified (own an array of different shares). Choosing the right stock, however, isn’t always easy, even if you have a ‘solid’ tip-off. Using a reputed firm can be the best bet and it doesn’t have to be daunting just because you don’t have $100k to put in off the bat either. NZ-based Global Share Fund, Elevation Capital, works with monthly APs from young

investors who don’t need a down payment. Its approach is to invest offshore in shares that are undervalued with respect to the quality of the business. The great thing about this firm is that clients are encouraged to familiarise themselves with the businesses the fund invests in, getting to know players such as Discovery Communications (Discovery Channel & Animal Planet) and Luxottica (Eyewear company that has the licence to produce Chanel, Dolce & Gabbana and Giorgio Armani glasses).

INDEXED SHARE FUNDS Such as: Smartshares (smartshares.co.nz) Risk level: 2/10 Average annual return in the last 5 years 8% p.a. As endorsed by well-known financial advisor, Mary Holm, indexed share funds are a straight-forward way of investing in the stock market’s biggest companies. Because they operate on such a large scale, there are low interest and operational fees. Smartshares builds a portfolio of funds that invests across New Zealand, Australia and a variety of global stock exchanges. A quick visit to the website

page 112 | thedenizen.co.nz

So you want to call yourself a millionaire at 50? We break down what you’ll need to be investing each month in order to hit the $1 million target. Starting Age

Monthly Contributions (with $25,000 deposit)

20 25 30

3% interest rate $1,600 $2,100 $2,900

6% interest rate $800 $1,200 $1,900

9% interest rate $325 $650 $1,200

35 40

$4,000 $6,500

$3,100 $5,500

$2,300 $4,500

provides more in-depth detail including benefits, holdings, value, fees and performance. Forbes also claims that indexed share funds can be a highly favourable investment in the long term. Here, you can invest as little as $500 up front and $50 dollars per month, if not more, to slowly accumulate units.

BONDS/SECURITIES Such as: Nikko Asset Management (nikkoam.co.nz) Risk level: 3/10 Average annual return in the last 5 years: 7% p.a. Bonds, as opposed to shares, are another way for companies to raise funds, by borrowing money from the public with the promise to pay it back for an agreed interest rate. Government bonds are issued by a national government and can be purchased by members of the public through some registered banks and are very trustworthy given their credit rating is AA+ — just beneath the highest possible. They are usually purchased for terms of six months, one year, two years or four years, generally with a promise to meet periodic interest payments and to repay the face value on the maturity date.

Bonds, also called fixed income investments, can be issued by large corporations too. If this is the avenue you’re looking to however, it’s highly recommended that these debt securities be bought through an investment adviser or share broker such Nikko Asset Management rather than straight through the NZDX market. Using Rabobank as a conduit, Nikko Asset Management offers a range of funds in which you can invest for as little as $250.

TERM DEPOSIT Such as: Offered by your bank Risk level: 1/10 Average annual return in the last 5 years: 3% p.a. As one of the safest, and perhaps least inspiring ways to invest your money, naturally the return on keeping cash as cash isn’t going to be the best out there. That said, if you have anything upwards of $5,000 that you don’t intend on doing anything with for the foreseeable future, only let sit in the comfort of your savings account, it’s likely to do much better in a term deposit. This doesn’t mean locking it up forever either. A six-month deposit on $10,000 in an ASB term fund would receive 3.2% per annum

interest as opposed to the flat, 1% yearly rate in your Fastsaver account.

STARTUP EQUITY Such as: Equitise (equitise.com) Risk level: 7/10 Average annual return in the last 5 years: Unknown While the opening up of regulations that surround crowdfunding, i.e. selling off a small part of a business to the public, has been a real coup for those wanting to invest in something different and a little more exciting, the projected return for such investments are yet to be seen. Australian-New Zealand firm Equitise has marketed sell-offs for the New Zealand compression clothing business Skins and flight drink 1Above. To become involved, investors can choose from one of eight syndicates, given their minimum buy-in (which ranges from $50 to $5k) and which industries they prefer to invest in. Here, the ‘unknown’ factor is much greater, but it provides some great fodder to discuss with your mates over Friday drinks.

thedenizen.co.nz | page 113

Elevation signs Australian deal 0

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New Zealand fund managers Elevation Capital have signed a joint venture with Australia’s Bennelong Funds Management to distribute their funds across the Ditch. Monday, March 6th 2017, 5:59AM by Susan Edmunds Elevation took the international equities category in the Morningstar Fund Manager of the Year awards this month. Managing director Christopher Swasbrook said the deal would allow Elevation to offer itself as a global investment manager in the Australian market. He said international investors saw the team’s New Zealand location as a benefit. “It’s a huge advantage to be away from the noise. Some American clients like that we are in New Zealand. We have a different perspective of investing around the world so they give us their money to invest internationally, they don’t give it to us to invest in New Zealand.” He said Australia was a substantially bigger market for Elevation to tap into and he was optimistic about the opportunity. Australians had traditionally been overinvested in their own market, he said. "They are looking for investment managers that can provide them with attractive longterm returns in the global market and we believe we can achieve that." Within two or three years, the Australian venture should be a meaningful part of the business, he said. The firm’s strategy had not changed in the 10 years it had been in business, he said. It started with $8 million under management and now has $225m. The investment approach is conservative, with a high level of cash held compared to other managers. Over the past year the value fund has had between 20% and 21% in cash, which Swasbrook said gave Elevation the ability to buy when it saw value, without having to sell out of another position first. It has a maximum position size of 5%. He said the team focused on bottomup stock selection and offering clients full research expertise to a high degree of detail. “We are very transparent, which gives people a lot of confidence about where their money is invested. That is one of our key differentiating factors – the research and transparency around our underlying investments.” « Court says Warminger manipulated the market

Special Offers SOURCE: Good Returns

Super age to rise »

Good Returns www.goodreturns.co.nz March 2nd, 2017

Harbour Asset Management was, last night, crowned Fund Manager of the Year for the second consecutive time. Fund researcher Morningstar, which handed out the award, said that Harbour was one of the best stewards of money in New Zealand. Harbour has more than $3 billion of funds under management and it was a !nalist in the domestic equities and !xed interest categories of the awards. "The shop applies a detailed, well-thought-out investment process to all its funds, has an open and transparent approach, and has consistently delivered marketleading longer-term returns." Harbour narrowly missed out on winning the !xed interest category, which was instead awarded to AMP Capital. Morningstar head of research, Chris Douglas, lavished praise on AMP Capital for its rich history of delivering for good returns to investors. "The fund remains the pre-eminent vehicle for New Zealand !xed income investing. Head of Fixed Income Grant Hassell and Senior Portfolio Managers Vicky Hyde-Smith and Warren Potter are an impressive trio, which they demonstrated yet again in 2016 when they navigated renewed bond market volatility with aplomb and were one of the few options to trump the local market index." "The stability, depth of insight, and portfolio management skills on o"er here remain outstanding."

SOURCE: Good Returns

Devon Funds Management topped domestic equities and Elevation Capital won the international equities category. Elevation Capital chairman Craig Stobo said the award comes 10 years after the fund started. Douglas paid tribute to Elevation's value-oriented investment philosophy, a style which has been out of vogue for a number of years. The award was also recognition of the fund's performance, which has been good as it was carrying cash of up to 20%. Douglas said Elevation's "sharp stockpicking talents really came to the fore in 2016. Founder and Portfolio Manager Chris Swasbrook's approach of judiciously selecting companies that have built â€˜brand moats' around their businesses and trade at discounts to intrinsic value enabled the !rm to deliver a banner year, all the more impressive given the relatively high cash hoard." "Also noteworthy are the !rm's commitment to transparency and to future fee reductions as assets grow. These characteristics all make Elevation Capital a worthy option for Kiwis looking to diversify their investments overseas." ASB bank won the KiwiSaver award.

Morningstar New Zealand Fund Manager of the Year Awards 2017

AUCKLAND, 1 March 2017 – Morningstar Australasia Pty Limited, a subsidiary of Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, today announced the winners of the New Zealand Morningstar Awards 2017. Harbour Asset Management received the top award as Morningstar's New Zealand Fund Manager of the Year. “The winners in the Morningstar Awards have all shown themselves to be first-class stewards of their investors’ capital,” Chris Douglas, Morningstar Director of Manager Research Ratings, Asia-Pacific, said. “This compact but highquality group of funds continues to deliver great outcomes for investors. As the New Zealand funds management industry grows, we expect to see more products and greater competition, driving even better outcomes for Kiwi investors.” The winners of the New Zealand Morningstar Awards 2017 are: Award New Zealand Fund Manager of the Year Winner Harbour Asset Management Finalists AMP Capital, Milford Asset Management Award Fixed Interest Category, New Zealand Winner AMP Capital Finalists Harbour Asset Management, Russell Global Fixed Interest Award Domestic Equities Category, New Zealand Winner Devon Funds Management Finalists Harbour Asset Management, Milford Asset Management Award International Equities Category, New Zealand Winner Elevation Capital Finalists AMP Capital Award KiwiSaver Category, New Zealand Winner ASB Finalists Mercer, Milford Asset Management New Zealand Fund Manager of the Year 2017 – Harbour Asset Management Harbour Asset Management is the winner of the overall Fund Manager of the Year award for the second consecutive year. The firm was also a finalist in the Domestic Equities and Fixed Interest categories, only just missing out on the latter. Morningstar believes Harbour is one of the best stewards of New Zealand investors’ money. The shop applies a detailed, well-thought-out investment process to all its funds, has an open and transparent approach, and has consistently delivered market-leading longer-term returns.

SOURCE: Morningstar

Fund Manager of the Year: Fixed Interest Category, New Zealand 2017 – AMP Capital AMP Capital New Zealand Fixed Interest maintains its rich history of delivering for investors and remains the preeminent vehicle for New Zealand fixed income investing. Head of Fixed Income Grant Hassell and Senior Portfolio Managers Vicky Hyde-Smith and Warren Potter are an impressive trio, which they demonstrated yet again in 2016 when they navigated renewed bond market volatility with aplomb and were one of the few options to trump the local market index. The stability, depth of insight, and portfolio management skills on offer here remain outstanding. Fund Manager of the Year: Domestic Equities Category, New Zealand 2017 – Devon Funds Management Devon Funds Management is best known for its flagship Trans-Tasman and Alpha strategies, which have been great long-term performers. But it’s the performance of the Dividend Yield strategy that has elevated the firm to win the award for Domestic Equities. Portfolio Manager Nick Dravitzki has achieved stellar returns for investors since the firm launched the strategy in December 2012. This expertise was particularly evident in 2016, as Devon skilfully steered through difficult market conditions in an environment when many high dividend-paying companies were sold off. Devon’s family of equities offerings is among the best, making the firm the deserving winner of this award. Fund Manager of the Year: International Equities Category, New Zealand 2017 – Elevation Capital Elevation Capital’s value-oriented investment philosophy and sharp stockpicking talents really came to the fore in 2016. Founder and Portfolio Manager Chris Swasbrook’s approach of judiciously selecting companies that have built ‘brand moats’ around their businesses and trade at discounts to intrinsic value enabled the firm to deliver a banner year, all the more impressive given the relatively high cash hoard. Also noteworthy are the firm’s commitment to transparency and to future fee reductions as assets grow. These characteristics all make Elevation Capital a worthy option for Kiwis looking to diversify their investments overseas. Fund Manager of the Year: KiwiSaver Category, New Zealand 2017 – ASB ASB KiwiSaver proves that a low-cost passive investment strategy with broad diversification creates a winning combination. A local investment committee oversees all decisions, drawing on the asset allocation expertise of affiliate Colonial First State Global Asset Management. ASB’s client-centric focus and the straightforward, true-to-label approach continue to deliver impressive results, making ASB the pre-eminent KiwiSaver provider for 2016. The Awards are copyright Morningstar. Fund managers may not publicise the Award(s) without the prior written consent of Morningstar. Methodology Only fund managers with managed funds available for sale in New Zealand qualify for inclusion in the New Zealand Morningstar Awards. Morningstar determines the winner based on a combination of qualitative research by its manager research analysts; risk-adjusted returns over medium- to long-term periods; and performance in the 2016 calendar year. Morningstar's manager research analysts assess the track record for a fund based on Morningstar's Risk-Adjusted Return measure over the one-, three-, and five-year periods. The objective is to screen for fund managers that have provided consistently strong returns, and not just reward those with the most impressive one-year return but have otherwise struggled to impress. Morningstar's manager research analysts then conduct a qualitative assessment of the fund managers under consideration. This incorporates the five pillars of the Morningstar Analyst Rating™ – people, process, parent, price, and performance. The qualitative assessment also captures practical issues that quantitative screens cannot. After assessing the quantitative and qualitative outcomes for each fund manager, Morningstar's analysts then debate and decide on the fund managers they believe are worthy winners and finalists across the various categories. If a verdict cannot be reached by a unanimous decision, then each analyst casts a vote to decide. Determining the Morningstar New Zealand Fund Manager of the Year 2017 To receive the overall Morningstar New Zealand Fund Manager of the Year award, a fund manager must have offered funds in multiple award categories or delivered an outstanding outcome for investors. Fund managers were assessed not only on whether they were a finalist in more than one category, but on products that had peer-beating returns but did not obtain a top three position. Morningstar’s manager research analysts present the Morningstar New Zealand Fund Manager of the Year 2017 award to the fund manager that had strong returns across multiple categories and was deemed a good steward of investors' capital. The Morningstar New Zealand Fund Manager of the Year 2017 therefore represents the New Zealand fund manager that, in Morningstar's opinion, has achieved the highest level of funds management excellence. Determining the KiwiSaver Category Award The winner in this category is the provider that offers the best solution for New Zealanders' retirement savings needs. The winner is determined by a combination of qualitative research by Morningstar's manager research analysts, transparency and disclosure, investor experience, performance, and fees. For more information about Morningstar’s other global fund awards, visit http://awards.morningstar.com. About Morningstar Australasia Pty Limited and Morningstar, Inc.

transparency and disclosure, investor experience, performance, and fees. For more information about Morningstar’s other global fund awards, visit http://awards.morningstar.com. About Morningstar Australasia Pty Limited and Morningstar, Inc. Morningstar Australasia is a subsidiary of Morningstar, Inc., a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individual investors, financial advisers, asset managers, retirement plan providers and sponsors, and institutional investors in the private capital markets. Morningstar provides data and research insights on a wide range of investment offerings, including managed investment products, publicly listed companies, private capital markets, and real-time global market data. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than US$200 billion in assets under advisement and management at 31 December 2016. The company has operations in 27 countries. Analyst Ratings are subjective in nature and should not be used as the sole basis for investment decisions. Analyst Ratings are based on Morningstar’s current expectations about future events and therefore involve unknown risks and uncertainties that may cause Morningstar’s expectations not to occur or to differ significantly from what was expected. Morningstar does not represent its Analyst Ratings to be guarantees nor should they be viewed as an assessment of a fund’s or the fund’s underlying securities’ creditworthiness. The references above should not be considered a solicitation by Morningstar to buy securities.

Harbour Asset Management named top fund manager By Tamsyn Parker

9:11 PM Wednesday Mar 1, 2017 Harbour Asset Management has been named the top fund manager in Morningstar's annual awards.

It is the second year in a row the fund manager has won the overall title.

It was also a finalist in the domestic equities and fixed interest categories. Morningstar said Harbour was one of the best stewards of New Zealand investors' money.

"The shop applies a detailed, well-thought-out investment process to all

Andrew Bascand heads up Harbour Asset Management which has been named fund manager of the year by Morningstar. Photo/Supplied.

its funds, has an open and transparent approach, and has consistently

delivered market-leading longer-term returns."

AMP Capital won the fixed interest category while Devon Funds Management topped domestic equities and Elevation Capital won the international equities category.

ASB bank won the KiwiSaver award. By Tamsyn Parker

- NZ Herald

SOURCE: New Zealand Herald

Value-oriented Equity Investment Ideas for Sophisticated Investors A Monthly Publication of BeyondProxy LLC  Subscribe at manualofideas.com “If our efforts can further the goals of our members by giving them a discernible edge over other market participants, we have succeeded.”

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Editorial Commentary ………………. 3 Highlights from Best Ideas 2017 …... 7 Interview with Jay Willoughby …… 15 Interview with Shawn Kravetz ……. 19 Essay by Dennis Jean-Jacques ……114 10 Essential Value Screens ……….116

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The Zurich Project 2017

► Exclusive Interview with Shawn Kravetz of Esplanade Capital ► 10 Essential Screens for Value Investors Companies analyzed in this issue include 21st Century Fox (FOXA), Abercrombie & Fitch (ANF), Avon Products (AVP), Bridgepoint Education (BPI), CGG (CGG), China Yuchai (CYD), Crocs (CROX), Ericsson (ERIC), First Solar (FSLR), Fossil (FOSL), Guess (GES), Jamba (JMBA), LSB Industries (LXU), Molson Coors (TAP), Morgan Stanley (MS), Movado (MOV), Och-Ziff Capital (OZM), Office Depot (ODP), White Mountains (WTM), and Wynn Resorts (WYNN).

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REPLAY at BestIdeasConference.com Copyright Warning: It is a violation of copyright law to reproduce all or part of this publication for any purpose without the prior written consent of BeyondProxy. Email support@manualofideas.com to request consent. © 2008-2017 by BeyondProxy. All rights reserved. Terms of Use: www.manualofideas.com/terms-of-use

SOURCE: The Manual Of Ideas

Value-oriented Equity Investment Ideas for Sophisticated Investors

with minimal share dilution through the combination of share issuance and debt. Limbach is one of the largest commercial air conditioning contractors in the U.S. It is a fundamentally healthy business that is growing revenue and backlog by 30%. The company has the opportunity to grow organically, expand margins through increased service offerings, and opportunistic acquisitions. Both the common stock and long-dated warrants provide an interesting risk-reward proposition. PHIL ORDWAY, MANAGING PRINCIPAL, ANABATIC INVESTMENT PARTNERS U.S. COMMUNITY BANKS: One key to understanding banks is the nature of their deposit base. The amount, cost and quality of these liabilities determine a bank’s safety and soundness as well as its ultimate profitability. Deposits are the “raw material” for banks, and a good deposit-gathering franchise can make for a very valuable business. And while all banks are levered, many capital structures are actually quite stable. Total deposits in the U.S. have exhibited remarkable consistency, growing almost every year since the Great Depression and often outpacing GDP growth. At the same time, U.S. banks have purged their problem assets and retained much more equity capital. The quality of the U.S. banking sector’s aggregate capital and liquidity make the industry as safe as it has been in decades. Another focus area for investors is the quality of a bank’s assets. If deposits provide the “raw material” for a bank, it is up to management to then make intelligent capitalallocation decisions. The credit culture of a bank is crucial, and it must be judged both quantitatively and qualitatively. A few phone calls or meetings to find out which bank in a given market is stretching on terms or price will go a long way in avoiding future problems. In banking, an ounce of prevention really is worth a ton of cure. A third factor driving returns is consolidation. The number of commercial banks in the U.S. has declined almost linearly from more than 14,000 in 1985 to ~5,000 today. Across the broader industry, M&A has – with very few interruptions – continued every year for decades. In a typical year, 2-4% of the banks in America are acquired by other banks, and essentially zero new banks have entered the industry in the past decade. Some particularly interesting opportunities are often found in the small “community” banks that comprise the vast majority of the 5,000 U.S. banks in existence today. Some of them are attractive businesses, some may have quantitatively cheap stock prices, and some might be candidates for acquisition; the combination of those factors can make for a sound and profitable investment. OCEANFIRST (OCFC) is a century-old community bank that has recently completed several acquisitions and may be a merger candidate itself. OceanFirst is now a mid-size community bank, with $5+ billion in assets. It is the largest community bank headquartered in Central and Southern New Jersey and the fourthlargest bank in New Jersey by deposit market share. The bank has an attractive deposit base (54% consumer, 46% commercial). Non-performing assets are ~0.5%, with zero non-performing commercial loans originated in the past five years. OceanFirst has an unusually deep and long-tenured management bench. ~20% of the shares are owned by insiders and employees. Management has © 2008-2017 by BeyondProxy LLC. All rights reserved.

been prudent in deploying capital via dividends, buybacks, and M&A. If OCFC is likely to earn 10-15% on equity, with a 35-40% payout ratio and 5-10% growth per year, is ~1.75x book value the right valuation? WELLS FARGO (NYSE: WFC) is an amazingly resilient and predictable business, with massive scale and scope and low-cost deposits. A powerful core deposit franchise (+8.5% LTM 9/30/16) funds ~125% of loans, with total cost of deposits of ~11 bps. Fees are almost half of net interest income. Capital allocation includes a ~30% dividend payout and ~20% net share repurchase “payout”. The fake accounts scandal reflected a colossal management failure but, financially, the entire issue was immaterial. A new incentive system is coming, reportedly emphasizing customer service and core account balances. TARP warrants offer very cheap, nonrecourse leverage, but the dangers should not be ignored. If WFC is likely to earn 10-15% on equity, with a 30-40% payout ratio and a modest reduction in share count via buybacks, is ~1.5x book value the right valuation? CHRISTOPHER SWASBROOK, MANAGING DIRECTOR, ELEVATION CAPITAL MANAGEMENT LUXOTTICA (Milan/NYSE: LUX) (presented by Chris prior to Essilor merger announcement) is the world’s largest eyewear company and undisputed market leader. The group manufactures and distributes products across more than 150 countries, with 95 million prescription frames and sunglasses produced annually worldwide. As a category, Eyewear is benefiting from strong structural growth drivers and attractive socio-demographic factors while significantly underpenetrated markets provide opportunity for market-leading players. In this regard, Luxottica holds the dominant proprietary and licensed brand portfolio in the market, in addition to owning and operating several leading retail brands which similarly hold principal positions in their respective markets. Guided by founder Leonardo Del Vecchio, Luxottica has vertically integrated its business model with operations spanning all stages of the eyewear industry’s value chain. Through these twin pillars (brand power and business model), Luxottica has created an extremely strong competitive advantage, enabling them to maximize efficiencies and extract value throughout all stages of their business. Furthermore, such qualitative factors are exceedingly hard to replicate and grant a defensible position against potential competitors as it increases barriers to entry. Looking forward, ongoing optimization of the group’s vertical integration strategy and execution of current growth initiatives provide substantial headroom for long-term capital appreciation. Chris acknowledges that softness within the eyewear market may create volatile trading conditions in near term. However, he asserts that the quality of the business has been established such that it can endure short-term uncertainty and still thrive in the long run. In contrast to popular belief, Chris views the active involvement and leadership of Mr. Del Vecchio since 2014 as a positive for the Company and the other 33.5% of shareholders while concerns towards succession planning should be viewed as short-term “noise”. Luxottica trades at ~€50 per share with an EV/EBITDA multiple of 13x which Chris believes to be attractive given the

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January/February 2017 – Page 13 of 126

DECEMBER 2016 T H E J O U R N A L F O R T H E F I N A N C E A N D C A P I TA L M A R K E T S I N D U S T R Y

EMERGING LEADERS

New programme targets top talent

REACHING OUT

INFINZ extends its reach in the regions

CFO TO CEO

Michael Boggs: from money manager to media business leader

BLAZING A

TRAIL Jan Dawson on what it takes to succeed

31 SOURCE: INFINZ Journal PLUS: ALL THE HIGHLIGHTS FROM THE 2016 INFINZ CONFERENCE

CHAIR’S LETTER

DELIVERING ON

STRATEGY

We have successfully achieved several milestones in past months and we are well on our way to delivering on our strategy to help create a more prosperous New Zealand. 1300-member milestone reached During September INFINZ achieved several milestones, the most notable being that we now have over 600 Young Finance Professionals (YFPs – those under 35) of a record 1300 members overall. During the 30 months to 30 September 2016:

• YFP membership has grown from 75 to 616 (as at October 2016)

• members under 40 have increased from less than 20 per cent to just over 50 per cent of the total membership

• total membership has grown from 735 to 1344 (up 83 per cent) • female membership has trebled and now accounts for 24 per cent of the total membership, up from 13 per cent. In February 2016 the board undertook a strategy review. To recap, the findings were:

The INFINZ purpose and mission We help create a more prosperous New Zealand by improving the capability and effectiveness of the New Zealand capital markets and our members within them. Strategy statement to deliver on purpose Keep increasing the value provided to an expanding membership base. Achieved by engaging with members in ways relevant to who they are, where they are and what they do. Delivered through an independent collegial network of financial markets professionals.

WHO YOU ARE: We have established an Emerging Leaders Programme led by Daniel Kieser to address the needs of members in their late 20s/mid-30s and specifically with respect to their leadership aspirations. We have held a lunchtime presentation titled ‘Getting back into the workforce’ as ex-pats and those on parental leave face challenges re-entering the market. WHERE YOU ARE: INFINZ wishes to increase the relevance of its offering to those operating in the mid-market and to offer more activities outside Auckland and Wellington. We have held panel sessions on treasury management in both Tauranga (20 October) and Christchurch (24 November), with more than 50 registrations for each. This has encouraged the board to commit to a regular programme of events in these locations.

DIGITAL: This platform enables the delivery of initiatives within the other three focus areas. A LinkedIn group has been established for financial members and MailChimp has been used to monitor the effectiveness of our communications. The redesign of the INFINZ website is underway, with one of the objectives being to facilitate more advertising of job opportunities. We have also established a First Director programme, with the first appointment being Richard Milsom, who chairs our YFP Committee. We look forward to his contribution to board discussions over the next year, including on the YFP and digital initiatives. We are committed to enhancing the value proposition for members. Please do not hesitate to contact either myself or the executive director Jim McElwain (exec@infinz.com 021 632 047) should you have any suggestions or wish to assist us with any of the planned initiatives.

We are delivering on this strategy based on the following pillars and initiatives:

WHAT YOU DO: During 2017 we will offer two grants towards a master’s research topic of relevance to New Zealand’s financial markets. Engagement with universities includes, for example, joint events with VUW and AUT. INFINZ.COM

Philip King Chair, INFINZ philip.king@fb.co.nz

32 2016 INFINZ JOURNAL | DECEMBER

MENTORING YFP UPDATE

A VIEW FROM THE TOP YFPs have been offered insights into corporate life at the highest levels thanks to recent events organised by the INFINZ network.

INFINZ JOURNAL | DECEMBER 2016

held in the capital in September is another example of how the group is helping members to learn from, and network with both peers and industry leaders, says Milsom. “At that event there were six VIP industry professionals, with small groups of YFPs moving around them in 10- to 15-minute increments,” he explains.

“It was an opportunity for them to really get face to face with some very senior people, in a way they otherwise couldn’t at a regular networking event.” Milsom says another focus for the group is to keep building on its network of ambassadors, who provide a direct link between individuals working in firms to the programme.

Existing Auckland and Wellington YFP ambassadors are identified below. Those wishing to put themselves forward as ambassadors in Auckland should contact Briar Malpas at briar.malpas@ chapmantripp.com or, in Wellington, Pip Poole at pip.poole@Meridianenergy. co.nz.

Auckland YFP ambassadors NAME

ORGANISATION

Lucy Drake

ASB

lucy.drake@asb.co.nz

Olivia Blundell

ANZ

olivia.blundell@anz.com

Sarah Hargreaves

BNZ

sarah.hargreaves@bnz.co.nz

Michael Nelson

BDO

michael.nelson@bdo.co.nz

Jordan Kitchen

Westpac

jordan_kitchen@westpac.co.nz

Aleisha McKinley

PwC

aleisha.k.mckinley@nz.pwc.com

Briar Malpas

Chapman Tripp

briar.malpas@chapmantripp.com

Tony Schrama

KPMG

tschrama@kpmg.co.nz

George Donaldson

Forsyth Barr

george.donaldson@forsythbarr.co.nz

Joshua Dale

Craigs Investment Partners

joshua.dale@craigsip.com

Richard Milsom

Elevation Capital

richard.milsom@elevationcapital.co.nz

Finn Templeton

First NZ Capital

finn.templeton@fnzc.co.nz

Tenille Burnside

Russell McVeagh

tenille.burnside@russellmcveagh.com

Wellington YFP ambassadors NAME

ORGANISATION

James Bascand

Forsyth Barr

james.bascand@forsythbarr.co.nz

Michael Morris

RBNZ

michael.morris@rbnz.govt.nz

Sherilyn Olls

Simpson Grierson

sherilyn.olls@simpsongrierson.com

Shanella Rajanayagam

MFAT

shanella.rajanayagam@mfat.govt.nz

Darshika Patel

Contact Energy

darshika.patel@contactenergy.co.nz

George Milne

Bell Gully

george.milne@bellgully.com

Alice Borthwick

ANZ

alice_borthwick@anz.co.nz

Caroline Letham

Westpac

caroline_letham@westpac.co.nz

Susannah Neild

Cameron Partners

susannah.neild@cam.co.nz

Han Sung Kim

KPMG

hansungkim@kpmg.co.nz

Paul Mountfort

BNZ

paul.mountfort@bnz.co.nz

Nick Barry

Deloitte

nbarry@deloitte.co.nz INFINZ.COM 33

IMAGE: ISTOCKPHOTO.COM

n October Air New Zealand CEO Christopher Luxon spoke at a full-capacity event in Auckland about his career to date – including 18 years spent at multinational Unilever that saw him take on roles across Europe, Asia Pacific and North America – as well as his views on corporate strategy and culture. INFINZ’s YFP network aims to give those aged under 35 working in finance and the capital markets a chance to broaden their understanding and network across the industry – both horizontally and vertically. YFP chair Richard Milsom of Elevation Capital says some great career opportunities exist for finance professionals within corporates, and such events serve to open YFPs’ eyes to some of those options. YFP numbers continue to increase quickly, with more than 100 new members signing up in the six months to October this year, taking total membership to more than 620. Milsom says all events continue to be oversubscribed thanks to the quality of speakers the group’s board is able to attract. Alongside Milsom, the Auckland board comprises Olivia Blundell (ANZ), Lucy Drake (ASB), Briar Malpas (Chapman Tripp) and Aleisha McKinley (PwC), with Pip Poole (Meridian Energy), Roimata Mitchell (NZX) and Blaine Abraham (Harbour Asset Management) on the Wellington board. A speed networking event

EMERGING LEADERS

OUTSTANDING IN ANY FIELD Fintech entrepreneur Daniel Kieser has been named to helm a new INFINZ programme focused on developing emerging leaders. The founder and managing director of the online business ShareClarity and the inaugural winner of the Emerging Leader award at this year’s INFINZ Industry Awards, Kieser speaks of his involvement with the new programme and what it aims to achieve.

How and why did you get involved in INFINZ’s Emerging Leaders Programme? There were two reasons. Firstly, I’ve had increasing exposure to and overlap with INFINZ, driven in most part by a better focus on its members and what they value. I’ve seen this through very creative and relevant guest speaker events, workshops and so forth. Secondly, I was approached about it by Richard Milsom, who heads the INFINZ Young Finance Professionals programme. After he explained his ideas and the vision of INFINZ as a whole, the opportunity was difficult to ignore.

What – and who – will the programme involve? What I think is important is that we keep broadening the INFINZ member base – and part of that involves attracting members from outside of the traditional financial markets and outside of Auckland. That’s because all emerging leaders, irrespective of their industries, will be increasingly exposed to finance, accounting, governance and management principles. They will also be exposed to different types of stress, career opportunities and work-life tensions. And that’s a big part of who we’ll likely target.

It’s still early days but we’ve formed our advisory team, which has a mix of fantastic representatives from within the finance sector and other industries. Alongside myself and Richard Milsom are economist Shamubeel Eaqub, medical doctor Angela Lim and equity research analyst Anastassia Juventin.

What are your hopes for what the programme will achieve, both for the individuals involved and the wider finance and capital markets industry? The New Zealand financial markets are small and intimate, which gives us a unique opportunity to communicate and collaborate across the industry. And that is a massive strategic advantage when we think about the global capital markets, which are changing rapidly and becoming easier to enter. My hopes and aspirations are to build a tighter community with better relationships. That means we’ll be able to start to collaborate more than compete, so we can see more New Zealand businesses and more New Zealand ideas make it to the global stage. For queries related to INFINZ’s Emerging Leaders Programme please contact daniel.kieser@ shareclarity.com.

… ALL EMERGING LEADERS, IRRESPECTIVE OF THEIR INDUSTRIES, WILL BE INCREASINGLY EXPOSED TO FINANCE, ACCOUNTING, GOVERNANCE AND MANAGEMENT PRINCIPLES. DANIEL KIESER

INFINZ.COM

342016 INFINZ JOURNAL | DECEMBER

SOURCE: Value Investor Insight

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Elevation Capital Managements’ Presention On Edgewell Personal Care [Slides] Elevation Capital Managements’ Presention On Edgewell Personal Care [Slides] Search …

By VW Staff • on November 15, 2016 10:58 pm • in Value Investing

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Investors in the Elevation Capital Value Fund own a stake in Edgewell Personal Care, ! Share " read Tweetabout it below. # Pin It $ Submit Investors in the Elevation Capital Value Fund own a stake in Edgewell: A Great Business Model… Edgewell Personal Care, read about it below.

Edgewell: A Great Business Model… “you can sleep pretty well at night if you

think of a couple billion men with their hair growing onpretty their faces. is growing “you can sleep well at/tnight if you all night you sleep.men Women think of awhile couple billion with have their two legs, it is on even better. So/titisbeats hair growing their faces. growing counting sheep. And those are thehave kinds all night while you sleep. Women of business you look for)…So it beats two legs, it is even better.

counting sheep. And those are the kinds of Buffett business you lookbusiness for)… 15th October 1998 — Warren on the shaving

Edgewell: Investment Summary — Warren Buffett on the shaving business 15th October 1998 Energizer Holdings, Inc. -> Edgewell Personal Care Company

Edgewell: Investment Summary

Edgewell the personal businessPersonal of the old Energizer Holdings. EnergizerisHoldings, Inc. care -> Edgewell Care Company

Send us your tips at tips(at)valuewalk.com Send us your tips at tips(at)valuewalk.com LATEST NEWS FROM VALUEWALK LATEST NEWS FROM VALUEWALK

Updater: The Next Uber Or Airbnb? Sinclair Would The Updater:Merger The Next UberCreate Or Airbnb? largest local TV News Monopoly In U.S. History Sinclair Merger Would Create The largest local TV News Monopoly In Retail Apocalypse: The world is U.S. History ordering like the Jetsons but shopping like the Flintstones Retail Apocalypse: The world is ordering like the Jetsons but Vision Fund SoftBank’s shopping like101: the Inside Flintstones $93B Vehicle Vision Fund 101: Inside SoftBank’s $93B Vehicle

In 2015, the Company spun off the battery business to the new Energizer Holdings, Inc. (ENR – NYSE listed) and renamed itself Edgewell Personal Care Company (EPC – NYSE listed). EPC reported annual net sales of US$2.4B (in 2015). Challenger” Position in Personal Care Market SOURCE: Valuewalk

Edgewell has a portfolio of personal care brands that it acquired in

EPC reported annual net sales of US$2.4B (in 2015). Challenger” Position in Personal Care Market Edgewell has a portfolio of personal care brands that it acquired in the years since 2003. These brands include Schick, Wilkinson Sword, Edge, Skintimate, Playtax, Hawaiian Tropic, Banana Boat, Carefree, Stayfree, o.b. and others. These brands hold competitive positions in attractive categories within the Personal Care market. Four Reporting Business Segments: Wet Shave (60% of revenue) Sun 8: Skin Care (17% of revenue) Feminine Care (16% of revenue) Infant Care and Other (7% of revenue) Disappointment and Uncertainty Creates Investment Opportunity The disappointing results after the separation, and the uncertainty with regard to the Company’s future has seen the share price decline 24% between July 2015 and September 2016. The elimination of dividends also saw a sell-off from institutional investors which require companies to pay dividends. Channel Shifting The rise of new (e-commerce based) competitors such as Dollar Shave Club and Harry’s has “disrupted” the two major players in the wet shave market – P&G and Edgewell. Edgewell is currently developing its own Direct-To-Consumer (DTC) proposition for the fast growing online/DTC market. Potential Catalysts 1. To be acquired by one of the larger players in the personal care industry once two year period from Separation lapses (1 July 2016) 2. International market expansion in existing categories 3. Capital returns through opportunistic share repurchase and the possibility of reinstating the dividend 4. The launch and successful execution of the Company’s DTC proposition that is under development Risks 1. Negative macro trends in men’s shaving systems 2. Slow response to channel shifting and new competitors 3. Customer concentration – Wal-Mart accounts for 24% net sales

proposition that is under development Risks 1. Negative macro trends in menâ€™s shaving systems 2. Slow response to channel shifting and new competitors 3. Customer concentration â€“ Wal-Mart accounts for 24% net sales 4. Relatively leveraged balance sheet post separation 5. Re-rating downward to 10.7x EV/EBITDA Conclusion Edgewell is a relatively small company (Market Cap : US$4.58) in a highly competitive global personal care industry. Its portfolio of strong brands in attractive categories makes it a likely acquisition target for larger players in the industry. The stock is currently trading at a meaningful discount to our estimated Private Market Value and takeover target price range providing upside potential of+20% to +49%.

Edgewell Formed Via A Separation From Energizer Holdings. Inc. Edgewell: 1 July 2015 Separation Takes Effect

Following the separation, each standalone company will be able to: Intensify focus on its distinct commercial priorities; Allocate its own resources to meet the needs of its business; Pursue distinct capital structures and capital allocation strategies; and Provide a clear investment thesis and visibility to attract a longterm investor base suited to each business. As an independent entity, we believe Personal Care will be able to:

term investor base suited to each business. As an independent entity, we believe Personal Care will be able to: Accelerate growth across all categories: Execute a focused global go-to-market strategy; Grow through disciplined strategic acquisitions; and Generate substantial free cash oow that will enable investments and capital return. Source: Energizer announces intent to separate into two publicly trade companies on 30 April 2014

Edgewell: Tax-Free Treatment Of The Separation In its 2015 Annual Report, Edgewell listed the activities which would void its tax-free treatment of the Separation within a twoyear period, among them the acquisition of separated Energizer. We suspect Edgewell may also wish to wait for the two-year period to end (1 July 2017) to seriously open up merger/acquisition discussions to avoid a potential dispute with the IRS. In the meanwhile, the lack of M&A news since the Separation is causing impatient investors to divest the stock.

See the full slides below.

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Elevation Capital Value Fund Elevation Capital Value Fund Limited: US Election Surprise Limited: US Election Surprise By VW Staff • on November 11, 2016 6:42 pm • in Politics By VW Staff • on November 11, 2016 6:42 pm • in Politics

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Elevation Capital " Value Fund letter investors$ forSubmit the ! Share Tweet # to Pin It month of November 2016. Elevation Capital Value Fund letter to investors for the month of November 2016. Dear Investors, Dear Investors, The US election result ushers in a new era in American Politics and to say the least, the result was unexpected by The US election result ushers in a new era in American many. Politics and to say the least, the result was unexpected by many.

Send us your tips at tips(at)valuewalk.com Send us your tips at tips(at)valuewalk.com LATEST NEWS FROM VALUEWALK LATEST NEWS FROM VALUEWALK

Updater: The Next Uber Or Airbnb? Updater: The Next Uber Or Retail Apocalypse: The world Airbnb? is ordering like the Jetsons Sinclair Merger Would Create but shopping like the The largest local TV News FlintstonesIn U.S. History Monopoly Sinclair Merger Would Create The largest local TV News Monopoly U.S. History Vision FundIn101: Inside SoftBank’s $93B Vehicle

Photo by Maialisa (Pixabay)

Elevation Capital Value Fund

It is SOURCE: important to remember in times like these ….the future Valuewalk is always unknown and no-one can accurately time the

Elevation Capital Value Fund

It is important to remember in times like these ….the future is always unknown and no-one can accurately time the market or predict the future. That’s why we focus more on what we can control or inYuence. As long term investors we believe that downside protection is accomplished by maintaining conservative positioning – we entered the election with +20% cash in the Fund – and we attempt to purchase businesses below what we estimate is their intrinsic value. This provides a “Margin of Safety” allowing for the vicissitudes of the market, including unexpected events. That being said, the _nancial markets were expected to react poorly to the unexpected Trump presidency, and the opposite was true – markets were up overall – with the Dow Jones Industrial Average now at a new record high (at the time of writing). The Elevation Capital Value Fund is invested globally, holding fractional interests in businesses, for the long term. We focus on buying businesses with a “Margin of Safety” built into the purchase price and businesses that are conservatively _nanced.These sorts of business exhibit longevity whoever is in “The Whitehouse” and are well _nanced to weather unexpected events and storms. A reminder of the businesses we own fractional interests in can be found at: www.elevationcapital.co.nz/currentinvestments Our latest presentation on Edgewell Personal Care (EPC:US) can be found here: http://www.elevationcapital.co.nz/edgewell Putting aside personal views (whatever they maybe), we sincerely hope Trump is a good president – the American people will have him as their “Commander in Chief” for the next four years.

sincerely hope Trump is a good president – the American people will have him as their “Commander in Chief” for the next four years. Warren Buffett once said “Buy into a business that’s doing so well an idiot could run it, because sooner or later, one will.” We have followed Mr Buffett’s sage advice in all aspects of the Fund’s holdings. Tags:

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JUNE 2016 T H E J O U R N A L F O R T H E F I N A N C E A N D C A P I TA L M A R K E T S I N D U S T R Y

STEPPING

Don Braid on growing leaders, not followers STRENGTH IN NUMBERS YFP membership hits a new high

THE BIG PICTURE

What drives emerging leader Daniel Kieser?

KEEPING TRACK

A roundup of recent market activity

45 SOURCE: INFINZ Journal PLUS: ALL THE WINNERS AND HIGHLIGHTS OF THE 2016 INFINZ INDUSTRY AWARDS

2016 INFINZ INDUSTRY AWARDS AWARDS

THE GREATER

INFINZ JOURNAL | JUNE 2016

GOOD

INFINZ.COM 46

Entrepreneurship, energy, leadership and vision are the qualities that helped Daniel Kieser take out the inaugural University of Auckland Business School Emerging Leader Award at the 2016 INFINZ Industry Awards.

“I

’m one of those weird entrepreneurs,” admits Daniel Kieser, “who doesn’t think of the money first.” The winner of the Emerging Leader Award at the 2016 INFINZ Industry Awards, Kieser is the founder and managing director of online business Shareclarity, which he says he set up to create greater transparency, accessibility and collaboration in the capital markets. Shareclarity is a first-of-a-kind information platform that provides crowd-based and cloudbased share price valuations, and Kieser says he was motivated to set it up following the global financial crisis. “We’re trying to facilitate access and understanding of the capital markets to anybody so people can participate more and more in our markets,” explains Kieser. “And on the small-cap company side of things we’ve got some great companies, but we just need them to be understood better and have a greater level of visibility so they can raise decent capital and do decent things.” Shareclarity launched in September last year and Kieser says the company currently covers around 140 New Zealand and Australian listed companies. Two to three are being added each week, he says, and the company aims to have 250 on the platform by year’s end. Information on each company includes a detailed description of what it does, a chat forum and a fully transparent valuation that can be changed and personalised. Access to information on some companies is provided free of charge, and access to all companies on the platform is gained via paid subscription. Shareclarity isn’t 34-year-old Kieser’s first entrepreneurial venture, nor his first with an eye to the greater good. After working as an equity research analyst for ABN Amro in New Zealand, he got involved in the front end of the carbon trading movement, moving to Singapore to work with Sindicatum Carbon Capital – a forerunner in the then-nascent field. When the INFINZ.COM

world’s attention moved on from carbon trading, however, he focused on the renewables sector, becoming co-founder and managing director of Asia Renewables. He was group manager of corporate development at Vector before launching Shareclarity. Finalists for the Emerging Leader Award also included Dace Caldwell, associate director of corporate finance at PwC New Zealand, and Richard Milsom, principal at Elevation Capital Management. The judges noted that the high calibre of the finalists made choosing a winner difficult, but Kieser was selected based on his entrepreneurial talents, leadership qualities, energy and vision. “These attributes have been evident throughout his successful career spanning roles as an equity research analyst, group manager corporate development at Vector, establishing startup companies in the renewable energy space and most recently as founder of Shareclarity,” they noted. “Daniel is a very capable, engaging and articulate emerging leader whose vision at Shareclarity is to improve the understanding of the equity capital markets through simplicity, transparency and collaboration. This will lead to better informed investment decisions by investors. Daniel has made an outstanding contribution to the finance industry and wider community during his career thus far and is a worthy recipient of this award.” Kieser says he’s always loved business, and is particularly excited to be involved in the fintech sector. He is currently focused on developing two particular areas of the Shareclarity business: the first is the release of version two of the platform, which will enhance the experience of users across a broad range of investor sophistication; the second is working with ASX to gain Australian licensing, which will enable the company to expand across the Tasman. “Fintech is a very current trend; there are developments happening from so many angles and there’s so much creativity out there,” he says. INFINZ JOURNAL |47 JUNE 2016

YFP UPDATE

STRENGTH IN NUMBERS

embership of INFINZ’s Young Finance Professionals (YFP) initiative has now cracked 500. The initiative, which is designed to boost INFINZ’s engagement with those aged under 35, has experienced stellar growth since it began activities just over two years ago – rising from 68 members at the end of March 2014 to 503 members at the end of April 2016. So far this year YFP activities have included a diverse range of events tailored for members at varying stages of their study or early careers in the finance and capital markets industry. In March a ‘tips and tricks’ session for university students was held at The University of Auckland Business School, where investment banker Simon Worker of Cameron Partners and recruitment consultant Alexander Hyndman of Debbie Graham & Associates shared insights into developing professional profiles online, how to apply for internships and graduate roles, and how to gain further education on capital markets. Another recent event, held at the PwC offices in Auckland, focused on development opportunities for graduates, with speakers including Carl Dwight from PwC and Briar Malpas and Lucy Drake from the YFP board. A major development in the initiative last year was the introduction of the YFP ambassador

INFINZ JOURNAL | JUNE 2016

The YFP ambassador programme has proven wildly successful, as evidenced by the rising tide of new members of the YFP initiative.

programme. YFP board chair Richard Milsom of Elevation Capital reports there’s now a YFP ambassador in all the major firms involved in the capital markets – from banks and law firms to advisory firms, brokerages and fund managers. “The ambassador programme has been one of the real strengths of the YFP, because it’s allowing us to engage directly with people at a firm level and get a great level of communication flowing,” he says. “The whole idea of the YFPs is for people to be able to associate with others both horizontally, in different sectors of the capital markets, as well as vertically, with people at different levels, and learn more by way of events – and that’s really being facilitated by the ambassadors.” Milsom also reports that YFP events continue to be oversubscribed. 2014 World Class New Zealand Supreme Award winner Claudia Batten’s YFP address in Wellington late last year, for example, proved so popular that she was called on to speak at another YFP event in Auckland in May. Deputy Prime Minister and Finance Minister Bill English also spoke to YFPs about his career journey at a breakfast event in March. “The success of the YFP initiative is absolutely the product of a great YFP board,” says Milsom. “They’re great innovators, but also have a real ability to execute, when they’re also juggling busy jobs at the top of their game.” The Auckland YFP board currently consists of Milsom, along with Simon Worker (Cameron Partners), Briar Malpas (Chapman Tripp), Lucy Drake (ASB) and Kate Waller (PwC). In Wellington the board is made up of Fiona Foster (PwC), Pip Poole (Meridian Energy) and Blaine Abraham (Harbour Asset Management). Upcoming YFP events will include a CEO series featuring speakers from leaders of New Zealandowned and multinational companies, who will share insights into their respective CEO journeys, including the challenges they faced and what they have learned along the way.

RISING TIDE: YFP membership growth

48 INFINZ.COM

SOURCE: New Zealand Herald

SOURCE: The Manual Of Ideas

DECEMBER 2015 T H E J O U R N A L F O R T H E F I N A N C E A N D C A P I TA L M A R K E T S I N D U S T R Y

HIGH PERFORMANCE A young finance professional shares his experience of the INFINZ mentoring programme

RISK AND REWARDS

An academic perspective on the market risk premium

ALL ABOARD

Meet the new faces around the INFINZ board table

GLOBAL

VIEW Key insights from the 2015 INFINZ Conference

Economic Development Minister Hon Steven Joyce.

PLUS: MARKET DATA AND ANALYSIS FROM THE PAST SIX MONTHS SOURCE: INFINZ Journal

YFP UPDATE

FLYING THE FLAG Ambassadors in firms in Auckland and Wellington are now further connecting under30s to the work of INFINZ’s Young Finance Professionals (YFP) initiative.

PHOTOS: JASON DORDAY

he initiative, which kicked off activities in early 2014, has massively grown the number of YFPs involved with INFINZ; in the two years from August 2013 to August 2015 their ranks have swelled from 47 to 323, including student members. The recently introduced ambassador programme has involved appointing a YFP ambassador in many of the major firms working in the capital markets industry, explains YFP chair Richard Milsom, including banks, and law and investment firms. “Having a YFP advocate at each firm has benefits in two ways,” says Milsom. “Firstly it really helps us engage with everyone in a firm, from recent graduates through to the more experienced YFPs. And secondly, it strengthens the pipeline of information in terms of advocacy, and the needs and wants of the wider group. It provides a direct channel to hear from our members and we’re getting a much richer and wider flow of information.” The focus of the YFPs’ activities is to further educate young professionals and help them to rub shoulders with others so they can broaden their knowledge of both the wider capital markets industry and the opportunities available within it. YFP events over the past six months have included an innovation discussion with entrepreneur Vaughan Rowsell and ASB’s Barbara Chapman; an evening with Prime Minister John Key; and a panel discussion on the topic ‘Are we in a bubble?’ in Auckland. In Wellington, Andrew Bascand and Stephen Toplis headlined a

INFINZ.COM

discussion about the hot-button issue of Auckland house prices, and in December serial entrepreneur and World Class New Zealander Claudia Batten will be addressing a YFP audience. Milsom says all events were oversubscribed, and the calibre of speakers has helped engage YFPs with the education message. “There are so many moving parts to the capital markets, and the more people can learn about areas outside their immediate focus the better it is not only for their understanding of the role they play in the bigger picture, but for the wider industry as a whole.” Milsom emphasises that the strength of the initiative lies in its board, which in Auckland includes Briar Malpas (Chapman Tripp), Anna Dorrington (PwC), Simon Worker (Cameron Partners) and Lucy Drake (ASB); and in Wellington includes Fiona Foster (PwC), Raiko Shareef (BNZ) and Philippa Poole (Meridian Energy). n

THERE ARE SO MANY MOVING PARTS TO THE CAPITAL MARKETS, AND THE MORE PEOPLE CAN LEARN ABOUT AREAS OUTSIDE THEIR IMMEDIATE FOCUS THE BETTER. RICHARD MILSOM 532015 INFINZ JOURNAL | DECEMBER

JUNE 2015 T H E J O U R N A L F O R T H E F I N A N C E A N D C A P I TA L M A R K E T S I N D U S T R Y

COMING

HOME

Westpac CEO David McLean on the challenges and opportunities ahead MARKET MATTERS

Data and analysis from the past six months

BRIGHT YOUNG THINGS

INFINZ opportunities find favour among Young Finance Professionals

SOURCE: INFINZ Journal PLUS: READ ALL ABOUT THE WINNERS OF THE 2015 INFINZ INDUSTRY AWARDS 54

YFP UPDATE

NEW YEAR, NEW FACES

Two new boards have heralded the start of a second successful year for INFINZ’s flourishing YFP initiative.

INFINZ JOURNAL | JUNE 2015

new set of faces has taken on the challenge to lead INFINZ’s Young Finance Professionals (YFP) initiative in 2015, with a new board in Auckland and one also established in Wellington as the group continues to grow. Briar Malpas (Chapman Tripp), Anna Dorrington (PwC), Simon Worker (Cameron Partners) and Lucy Drake (ASB) have come on to YFP’s Auckland board, replacing outgoing members David Sainsbury (PwC), Charlotte Baird (Chapman Tripp), PJ Cairns (ASB), Michael Peters (OMF) and Hannah Broederlow (PwC). Richard Milsom of Elevation Capital remains the board’s chair. A separate Wellington YFP board has also been set up comprising Fiona Foster (PwC), Raiko Shareef (BNZ) and Philippa Poole (Russell McVeagh). The YFP initiative, which aims to increase the engagement of under-30s with INFINZ, began running its first events early in 2014 and has since grown its ranks to over 170 young finance professionals and close to 50 student members. Kicking off activities this year were ‘tips and tricks’ sessions aimed at aspiring finance interns and graduates, held at AUT University on 16 March and Victoria University on 17 March. Rachel Dunne, recruitment partner at Chapman Tripp; Alexander Hyndman, recruitment consultant at Debbie Graham and Associates; and Karl Dwight, recruitment partner at PwC, were on hand at the Auckland event to share their advice on applying for graduate and internship positions, which traditionally close at the end of that month. Josh Blackmore, a partner at Chapman Tripp, and Amy Ellis, a director at PwC, offered their tips and tricks in Wellington, and YFPs were also on hand to chat and share their experiences with students at both events. “We do these events annually and the purpose is to help guide university students through the application processes and to give them some tips and tricks around what makes a good application,” explains YFP chair Richard Milsom. “It also allows them to meet senior hiring managers of firms face to face, as well as people who are a couple of years ahead of them in terms of what they’re trying to do with their careers.” In April, technology entrepreneur Vaughan Rowsell of Vend, and ASB CEO Barbara Chapman spoke at an event called ‘Keeping it fresh – innovation across the board’, held in Auckland for the more established members of the YFP community in Auckland. Also planned for this year, says Milsom, is a panel discussion or debate on a topic of interest to those in the finance community, and a breakfast event. Both events will be held in Wellington and Auckland.

55 INFINZ.COM

SOURCE: The Manual Of Ideas

DECEMBER 2014 T H E J O U R N A L F O R T H E F I N A N C E A N D C A P I TA L M A R K E T S I N D U S T R Y

MENTORING SUCCESS

Young high flyers get a helping hand

Geraldine McBride Co-founder of MyWave and 2014 INFINZ Conference speaker

WELCOME ABOARD

Meet the latest additions to the INFINZ board

SEIZING

THE OPPORTUNITY

Extended coverage of the 2014 Annual INFINZ Conference

PLUS: DATA AND ANALYSIS OF THE MARKETS FROM THE PAST SIX MONTHS SOURCE: INFINZ Journal

MARKETS YFP UPDATE REVIEW

BUILDING THE

MOMENTUM D Several successful launch and outreach events and get-togethers have resulted in an extremely successful first year for INFINZ’s YFP initiative.

INFINZ JOURNAL | DECEMBER 2014

emand to attend events exceeding supply, an increase in membership sign-ups and a solid social media following are among the achievements of INFINZ’s YFP initiative as it comes to the end of its first year. The initiative, which aims to up the engagement with INFINZ of the under-30s, kicked off with the YFP board presenting a strategy paper outlining the three key YFP demographics – university students, recent graduates, and professionals with three to five years’ experience – and how INFINZ might engage with and add value to them. “We asked, ‘How do we cast the net wide and get as many people interested as possible? How do we get them engaged right from university, help get them into jobs and educate them about the industry?’,” says YFP chairman Richard Milsom, of Elevation Capital. “Then we went about trying to plan some events with that in mind, and targeting each of those groups.” YFP launch events in Wellington and Auckland were both oversubscribed, Milsom reports, with the board getting great feedback from those who attended. Outreach to universities has included presenting a ‘Capital markets for dummies’ presentation to students at a range of universities and investment clubs, outlining the different pieces that make up the capital markets puzzle, and the role that INFINZ plays.

Another event, called ‘Tips and tricks’, was targeted at recent graduates and brought them together with young, high-level directors and those involved in recruitment, who shared their observations and tips on how graduates could best incubate their careers. A first get-together of mentors and mentees involved in INFINZ’s inaugural mentoring programme has been another highlight on the calendar, says Milsom. Rounding out the year have been four more events, connecting up-and-coming university graduates with recent grads in Auckland and Wellington, and end-of-year get-togethers for the more established group of YFPs in both cities. Milsom says that although it’s early days for the initiative, the board has been encouraged by the boost in membership sign-ups, the oversubscription to its events and the growing following on social media. He emphasises that key to the success has been the hard work and talents of the YFP board, which also includes David Sainsbury (PwC), Charlotte Baird (Chapman Tripp), Fiona Foster (Pwc), PJ Cairns (ASB), Michael Peters (OMF) and Hannah Broederlow (PwC). YFP activities in 2015 will continue to build on the momentum created so far, he says. “It’s a dynamic process, so we’re still finding out what works and what doesn’t and taking feedback. We’re still in our infancy with a lot of growth to go, so it’s about leveraging off that.”

59 INFINZ.COM

JUNE 2014 T H E J O U R N A L F O R T H E F I N A N C E A N D C A P I TA L M A R K E T S I N D U S T R Y

EBOS Group’s MARK WALLER on what it takes to be an industry leader

YOUNG GUNS

INFINZ’s under-30s initiatives take off

MARKETS REVIEW

Data and analysis from the past six months

PLUS: READ MORE ABOUT THE WINNERS OF THE 2014 INFINZ AWARDS SOURCE: INFINZ Journal

EXECUTIVE DIRECTOR’S LETTER

CAPITAL MARKETS

DO MATTER

What a fantastic year it has been for capital markets. The partial SOE floats, the flurry of technology company IPOs and, of course, KiwiSaver have helped to raise the profile of our capital markets among the wider public. While those of us who work in the industry are keenly aware of the importance of healthy capital markets to a thriving economy, it’s great to see that wider interest grow.

e certainly need it. As I’ve expressed here before, to move the dial on New Zealand’s export performance, some $200 billion of extra capital is needed over the next decade. Growing vibrant capital markets will play a key role in helping us get there – and propel many a Kiwi company success story along the way. It’s what we’re all about at INFINZ, and an important event on our calendar each year is to acknowledge and celebrate those who have made outstanding contributions to the industry at the INFINZ Awards. These individuals not only add huge value to clients, but are also helping to grow our economy along the way. A record crowd of 800 joined the celebration at Auckland’s Langham Hotel on 8 May, where 13 awards were granted, as well as two Fellowships to exceptional industry leaders David Green and Sue Brown. Congratulations once again to all our winners. You can catch the highlights from the night on page 24 of this issue of the INFINZ Journal. Thank you to all who came and shared a fantastic evening, and a special note of thanks to our awards judges and sponsors.

Another key initiative in 2014 is engagement with students and young professionals. The inaugural Young Finance Professionals (YFP) event was held in Wellington on 26 March (for coverage, please see the opposite page) and in Auckland on 13 May. A key driver is the INFINZ Young Finance Professionals Group, led by Richard Milsom. Richard and his team have assisted with collateral and promotion of YFP events. They operate a Facebook page and LinkedIn group, with some 200 members in each. This year we have also initiated a pilot mentoring scheme. It’s great to see our members supporting these and other efforts we’re making to advocate for, celebrate, and provide education around New Zealand’s capital and financial markets.

Jim McElwain 021 632 047 exec@infinz.com

FOR MORE INFORMATION AND TO REGISTER YOUR INTEREST IN BECOMING A MEMBER,

visit www.infinz.com or email admin@infinz.com 2

INFINZ JOURNAL | JUNE 2014

61 INFINZ.COM

By Henri Eliot Posted March 28, 2014 In Insights, News

HENRI HENRI ELIOT: ELIOT: WHY WHY ARE ARE NZ NZ SHAREHOLDERS SHAREHOLDERS SO SO PASSIVE? PASSIVE? 9:30 AM Friday Mar 28, 2014 9:30 AM Friday Mar 28, 2014

Companies holding more cash than ever on Companies are are holding Companies are holding more more cash cash than than ever everon on their balance sheets, and activists want them their balance their balancesheets, sheets,and andactivists activistswant wantthem themto to give it to says Henri Eliot. give it back to shareholders, says Henri Eliot. to give it back back to shareholders, shareholders, says Henri Eliot. Almost two years ago, the board of British bank Barclays was told that it was “a disgrace to Almost two years ago, the board of British bank Barclays was told that it was “a disgrace to capitalism”. The directors of insurance giant Aviva were also accused of being “more capitalism”. The directors of insurance giant Aviva were also accused of being “more concerned about their remuneration packages than growing our business”. concerned about their remuneration packages than growing our business”. That was the beginning in 2012 for Britain of the Shareholder Spring (named after the That was the beginning in 2012 for Britain of the Shareholder Spring (named after the spring round of annual shareholders’ meetings). These events and others have offered spring round of annual shareholders’ meetings). These events and others have offered great challenges for boardrooms in the UK and US. great challenges for boardrooms in the UK and US. Today, activists are more likely to be chasing dividends or share repurchases than costcutting measures. Private shareholders such as Carl Icahn in the case of Apple have provided great entertainment where he recently tried to force the Apple board to buy back $50 billion worth of its own shares to boost the share price. He even used twitter to update his followers in tweeting a favorable comment following a meeting with Apple CEO Tim Cook. At the end of 2013, Apple had $160 billion in cash reserves. Apple won the war but Icahn put up a brave fight. As a serial activist he won a small battle in the end, as Apple did buy back $14 billion worth of its own shares. A former corporate raider was now a hero according to local media. New Zealand Herald TheSOURCE: main reason is the most obvious one: Companies are holding more cash than ever 62 on

according to local media. The main reason is the most obvious one: Companies are holding more cash than ever on their balance sheets, and activists want them to give it back to shareholders. Why are we more passive in New Zealand? Is it due to our higher level of trust in our company CEO’s and boards? Are we happy with their decisions in growing shareholder value? PwC New Zealand CEO and Senior Partner Bruce Hassall says, “It is interesting how most shareholders in New Zealand are relatively passive, compared to other countries. This could be down to the way we conduct business here and the level’s of trust more generally of the business community by investors in New Zealand. We have a diﬀerent cultural and business approach, haven’t we? This doesn’t mean investors don’t pay attention to their investments and company activities. Rob Campbell, a professional director and investor adds, “I guess the ﬁrst point is that the overwhelming majority of investors in every market are passive at least in the sense that their money is in funds managed by others. Again in every market the great majority of funds are index or “closet” index funds in some sense or another.” [Closet index funds means an actively managed fund that closely mimics the volatility and performance of an index fund]. According to Rob, “The New Zealand market has very few activists since the prime of Ron Brierley. Some fund managers do rattle the cage of under performing companies and I came into my current role at GPG as a result of such rattling by a group of fund managers. The same applies to my role at a Tourism Holdings. We do have some strongly opinionated fund managers, Brian Gaynor and Chris Swasbrook spring to mind, which is useful in the market. My guess is that we will see more, there are some temptingly plump pigeons in the bush.” From my personal experience most AGM’s are poorly attended and often a great opportunity to have free morning tea. Should we be breaking down the barriers for shareholders subjecting company management to frank and public questioning at the annual general meeting? The question is and has always been whether shareholder activism is a good thing. People like Icahn would argue yes – according to him, “most corporate boards are made up of lackeys to the CEO, people who typically don’t make great investment decisions and shouldn’t be entrusted with spare cash.” Others simply argue that if a company has run out of productive places to put investment capital, then why not give it back to shareholders? There’s no question that the share buybacks and dividend payments pushed for by activists boost stock prices in the short term. But as many economists in the US have been 63 arguing for the last several years, there’s never been a better time for companies to do big

of productive places to put investment capital, then why not give it back to shareholders? There’s no question that the share buybacks and dividend payments pushed for by activists boost stock prices in the short term. But as many economists in the US have been arguing for the last several years, there’s never been a better time for companies to do big capital investment projects. With reasonably low interest rates, it’s been a great time to borrow money. Of course this holds true until the cheap money disappears. According to the Boston Consulting Group, they have recently reported that “a strong, properly compensated management team and governance that adds value are critical to making good on a company’s investment thesis. For managers, it’s necessary to have effective metrics, transparent performance assessment, and meaningful rewards that are linked to sustained value creation over both the short and long term.” We all get those shrink-wrapped proxy ballots in our letterbox. We all know it’s a pain to look at them, one-by-one. But check them out and pay attention. Make sure your company’s executives are always focused, first and foremost, on the creation of value. After all, that’s the definition of shareholder activism. Henri Eliot is CEO of Board Dynamics Copyright ©2014, APN New Zealand Limited

SOURCE: The Manual Of Ideas

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John Sevior and co get ready to rumble at Vealls EGM John Sevior and co get ready to rumble at Vealls EGM

Fund manager John Sevior is among minority investors in Vealls – owner of popular Fund manager John Sevior is among minority investors in Vealls – owner of popular New Zealand ﬁeld Cardrona – to who plan to oppose strenuously oppose New Zealand skiski ﬁeld Cardrona AlpineAlpine Resort –Resort who plan strenuously resolutions put forward at Friday’s extraordinary general meeting in Collins Street. resolutions put forward at Friday’s extraordinary general meeting in Collins Street. Vealls has been majority owned by the Vealls family since it listed in 1951. Chaired by

Vealls has been majority owned by the Vealls family since it listed in 1951. Chaired by octogenarian Ian Vealls , it is looking to sell assets, including its principal holding

octogenarian Ian Veallsitself , it is looking to sellcompany assets, including its principal holding Cardrona, as it transforms into an investment listed on Singapore’s sharemarket. haveitself been asked to vote on the aforementioned asset sales Cardrona, asShareholders it transforms into an investment company listed on Singapore’s and listing at Friday’s EGM. sharemarket. Shareholders have been asked to vote on the aforementioned asset sales

and listing atinvestors Friday’s EGM. The minority have all earned their stripes and include veteran fundies Alan Cobb and Christopher Swasbrook ; former stockbroker Peter Hayman , who now

The minority investors have all earned stripes andFunds include veteran fundies Alan operates Texas-based advisory boutique Anzustheir Capital, and Airlie Management principal, Cobb andSevior. Christopher Swasbrook ; former stockbroker Peter Hayman , who now

operates Texas-based advisory boutique Anzus Capital, and Airlie Funds Management The group will point out that the Vealls family has declined to reveal the price or

principal, Sevior. set by Real Journeys , the preferred bidder on Cardrona. terms and conditions

The other key talking point the fact hasfamily a provenhas track record into Australia The group will point outis that theVealls Vealls declined reveal the price or and New Zealand, but plans to up stumps and reinvent itself as an investor in the

terms and conditions set by Real Journeys , the preferred bidder on Cardrona. Asian region.

The other key talking point fact Vealls has a proven track record The outcome of the EGM is likely is to the be closely watched by many investors given the in Australia names involved. They but are not the types die wondering and are likely to explore and New Zealand, plans to uptostumps and reinvent itself as an investor in the other courses of action if the resolutions are passed. Asian region. Vealls had net tangible asset backing of $11.58 as of June 30, 2013, while the shares last

The outcome the EGM is likelytotoNTA. be closely watched by many investors given the traded at $7.65 –of a 34 per cent discount names involved. They are not the types to die wondering and are likely to explore Total assets stand at $109 million, of which $50.9 million is cash. Cardrona is on the

other courses of action if the resolutions are passed. books at $41.9 million.

The Australian Financial Reviewasset backing of $11.58 as of June 30, 2013, while the shares last Vealls had net tangible

traded at $7.65 – a 34 per cent discount to NTA.

Related Total assets stand at $109 million, of which $50.9 million is cash. Cardrona is on thearticles books at $41.9 million.

Yancoal, Glencore locked in year's biggest mining M&A battle

The Australian Financial Review

3 mins ago

Can bond yields still predict recession?

SOURCE: The Australian Financial Review

Related articles 67

SOURCE: NZX

Investors must tread carefully TIM HUNTER

Last updated 05:00 21/07/2013

Kevin Stent/Fairfax NZ

ON THE MONEY: London-based Kiwi Richard Boon predicted a ‘‘monster bear market rally’’. Four years ago, hedge fund manager Richard Boon was talking about "a monster bear market rally". There was a "once in a generation" opportunity to buy shares, the London-based Kiwi told me. OPINION: Many of the world's sharemarkets at the time were just recovering from a steep plunge triggered by the financial crisis, which reached its nadir in March 2009. Boon was right. In June that year, when the head of Artefact Partners was sharing his views, the S&P500 had already steamed ahead by 40 per cent, but it had more in the tank and didn't stop for a breather until April, 2010, having almost doubled on a year earlier. However, huge moves like that are rare, and it's even rarer for investors to pick them correctly. So are sharemarkets overvalued right now? After some impressive gains over the last year or two some commentators, particularly in America, are arguing that another correction is due. Unfortunately, amid the torrent of argumentative data, it can be difficult for investors to find their feet, although some of it contains entertainingly waspish remarks. A current favourite of mine is this from Australia-based Kiwi investor John McMahon, debunking "real estate nut cases" who say now is a good time to buy property because interest rates are low. "The best time to buy is obviously when interest rates are high, because then property values are likely to be low," he wrote last month. "Low interest rates, all else equal, cause property prices to be high, so why would anyone want to buy when asset values were high? This basic logic escapes followers of the knuckle-dragging property-spruikers." McMahon is a former head of ASB Securities and ex-head of equities for ABN Amro. These days he just runs his own money and keeps a low profile, but he regularly publishes his views and investment performance on his website as a form of discipline. As a result we can see that McMahon's portfolio was heavily weighted to cash last month, as it has been for some time, with about three-quarters of its assets in Australian or US dollars. The weighting reflects McMahon's perception that equity markets are relatively fully valued and his pessimism about the outlook for world growth over the next two years. He could be right. The investment performance he posts on his website is certainly impressive. Another bearish commentator is John Hussman, of US-based Hussman Funds, whose Strategic Growth Fund controls about US$5 billion in assets. Last week his regular market report warned of "overvalued, overbought, overbullish conditions that, from a cyclical and secular standpoint, should probably have [investors] wide-eyed with terror." Amid withering criticism of the Federal Reserve, Hussman wrote: "we remain convinced that recession risk remains palpable" in the US. Hussman has a track record of persistent pessimism, prompting one critic to compare him to a broken clock which tells the right time twice a day. Back in early 2009, when Boon said he was "pounding the table" in enthusiasm for buying shares, Hussman was conceding the possibility of a rally, but only just. SOURCE: Stuff

"The fund does have about 1 per cent of assets in call options essentially to ‘soften' our hedge in the event of a strong market rebound," he wrote, "but that ‘anti-hedge' is more like insurance than expectation." Hussman's fund reports average annual returns since inception in July, 2000, of 4.4 per cent, which seems a bit, well, meh. Not everyone is as downbeat as Hussman. A market view from Wellington fund manager Harbour Asset Management this month discussed the implications of the big economic picture on investment choices. The ﬁrm noted rising volatility and above-average share values, but its reluctance to get too negative shone through. "While we can be concerned about risks such as a slower outlook for Chinese growth, or a further bout of European stress, the fact is that global growth is improving and interest rates are likely to stay low for the foreseeable future," it said. "If we are right and economic growth continues to gradually improve, then both cyclical and growth stocks are likely to continue to out-perform defensive stocks." Harbour's view is a lot less alarming for investors than Hussman's. This doesn't mean it is right, only that it shows more than one way of looking at the world. Which is part of the problem. The macro market view is rarely as clear as it was when Boon was making his big call in 2009 - and even then it was pretty murky. One way to deal with the foggy big picture is to focus close up and look for individual companies that won't run screaming from the slightest economic mouse. Many professional investors take this approach, even if they also consider macro-economics. Chris Swasbrook, at Elevation Capital, for example, doesn't worry too much about what the Federal Reserve or the European Central Bank get up to. "History shows that people have made more money in the stock market by understanding what business they are investing in, than by speculating on what politicians or central banks do," he says. Take Nestle, he says. People see Europe as economically stagnant and politically shaky, but it contains individual companies of global scale, like Nestle. "I'd argue quite strongly it's one of the best managed companies in the world, probably second only to Berkshire Hathaway, and has wonderful franchises." Figuring out which businesses are worth buying is of course not easy, but it's probably easier than ﬁguring out how the world's economic forces will apply themselves. Tim Hunter is deputy editor of the Fairfax Business Bureau. - Sunday Star Times

Cardrona skifield's future uncertain HAMISH RUTHERFORD

· 21:23, Nov 25 2012

HAMISH RUTHERFORD

· 21:23, Nov 25 2012

Cardrona skifield's future uncertain

FAIRFAX NZ

Tourism giant Real Journeys says it has been named as the preferred bidder in the sale of Cardrona Alpine Resort. FAIRFAX NZ

Tourism giant Real Journeys says it has been named as the preferred bidder in the sale of The ownership of one of New Zealand's leading skiﬁelds is up in the Cardrona Alpine Resort.

air after its Australian parent announced a wide-ranging strategic review. The ownership of one of New Zealand's leading skiﬁelds is up in the Cardrona Alpine Resort, situated in the Cardrona Valley between air after its Australian parent announced a wide-ranging strategic Wanaka review. and the Crown Range, is the last major operating asset of Vealls Limited of Melbourne. Cardrona Alpine Resort, situated in the Cardrona Valley between Listed onand thethe ASXCrown since Range, the 1950s andlast controlled by the founding Wanaka is the major operating asset ofVeall family, a seriesofofMelbourne. sales of subsidiary businesses means cash is now its Vealls Limited Listed on the ASX since the 1950s and controlled by the founding Veall largest single asset. family, a series of sales of subsidiary businesses means cash is now its On Friday the company's 88 year-old executive chairman, Ian Veall, 71 SOURCE: Stuff told its annual shareholder meeting that the board of directors

largest single asset.

On Friday the company's 88 year-old executive chairman, Ian Veall, told its annual shareholder meeting that the board of directors believed that continued uncertainty on the financial markets was undermining a strategy to reinvest its growing cash pile in Southeast Asia. "Given this situation, the board considers the time has come to commence a review of its corporate strategies that will encompass all aspects of how they are operating," Veall said. "In short, a comprehensive review." While the statement gave no detail about the board's view of the ADVERTISEMENT review, such language from publicly-listed companies typically opens the door to a breakup or outright sale. Vealls has already come under pressure to address issues with its balance sheet. In February, Christopher Swasbrook, managing director of Aucklandbased Elevation Capital, wrote to Vealls noting its cash pile, urging its chairman to address the gap between its asset value and its market capitalisation. He suggested the company consider returning the cash to shareholders, or for the company to be delisted from the ASX to While statement gaveshareholders no detail about the board's view of the reducethe costs, with minor bought out. review, such language from publicly-listed companies typically opens Cardrona has been a profitable operation. Despite upgrading to highthe door to a breakup or outright sale. speed lifts and building terrain parks and halfpipes in recent years, Vealls hashas already come under pressure address profit issues of with its Cardrona no debt, and generated anto after-tax $4.7 balance sheet. million on revenue of $17.2m in the year ended June 30, 2011. In February, Christopher Swasbrook, managing director of AucklandVealls blamed a weak start to the 2011 ski season for a fall in revenue, based Elevation Capital, wrote to Vealls noting its cash pile, urging in its however the company still generated more than A$2m (NZ$2.5m) chairman address the gap between its asset value and its market the year totoJune 30, 2012. capitalisation. Despite major investment from NZSki, owners of the nearby He suggestedskifields, the company consider returning the cash to Cardrona is Queenstown Coronet Peak and the Remarkables, shareholders, or for thebest company to beskifields delistedand from the ASX holds to among New Zealand's resourced frequently reduce with minor shareholders bought out. nationalcosts, ski and snowboarding competitions. Cardrona has been a profitable operation. Despite upgrading to highBusinessDay.co.nz speed lifts and building terrain parks and halfpipes in recent years, Cardrona has no debt, and generated an after-tax profit of $4.7

FundSource Awards

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FundSource Awards (https://www.fundsource.co.nz/shop/investorhub-login/)

A member of the NZX Group

2012 FundSource Awards (/fundsource-

2012 FundSource Awards

(http://smartshares.ddbdigital.co.nz/typesof-funds) 23 November 2012

awards/)

On Wednesday 21 November FundSource announced the winners of the 2012 Fund Manager of the Year Awards at an evening event at the Northern Club in Auckland. There was a fantastic turnout of Fund Managers and industry professionals who celebrated awards representing excellence in the industry. These awards have been running for 21 years and this year also coincided with the 25th Anniversary of FundSource. FundSource presented nine Awards in 2012, including seven sector Awards, Fund Manager of the Year and KiwiSaver Manager of the Year which all recognise excellence in the industry and their respective sectors.

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(http://info.ﬁnancialexpress.net/bo

OnePath were awarded the Fund manager of the Year and KiwiSaver Manager of the Year, along with 3 Sector Awards: NZ Property, International Equity and NZ Fixed Interest. OnePath have had a signiﬁcant contribution to the industry in 2012. Their performances have been outstanding, and they have displayed strong qualitative attributes across their funds. FundSource congratulates all the winners and ﬁnalists of the 2012 Fund Manager of the Year Awards.

2012 Fund Manager of the Year Winner: OnePath Finalist: TOWER

2012 KiwiSaver Manager of the Year Winner: OnePath Finalist: ASB Group Investments Ltd Finalist: Mercer NZ

2012 Fund Manager of the Year – Cash Sector Winner: ASB - ASB Cash Fund Finalist: TOWER - TOWER Cash Fund

2012 Fund Manager of the Year – NZ Property Winner: OnePath - OnePath Property Securities Fund Finalist: Mint Asset Management - Mint Australia NZ Real Estate Investment Trust

2012 Fund Manager of the Year – NZ Equity Winner: Fisher Funds - Fisher Funds NZ Growth Fund Finalist: OnePath - OnePath New Zealand Share Fund

2012 Fund Manager of the Year – Australasian Equity Winner: Mint Asset Management - Mint Australia NZ Active Equity Trust Finalist: OnePath - OnePath Equity Selection Fund

2012 Fund Manager of the Year – International Equity Winner: OnePath - OnePath International Share Fund Finalist: Elevation Capital - Elevation Capital Value Fund

2012 Fund Manager of the Year – NZ Fixed Interest Winner: OnePath - OnePath Secure Income Fund

2012 Fund Manager of the Year – International Fixed Interest Winner: TOWER - TOWER BondPlus Fund

FundSource is a wholly owned subsidiary of NZX.

SOURCE: FundSource

SOURCE: New Zealand Herald

Former Pike River directors omit miner detail ROB STOCK

Last updated 05:00 11/11/2012

Pike River Coal's former directors, now serving on the boards of listed companies in New Zealand, Australia and India, all neglect to disclose their roles with Pike River in their online biographies. The Pike River directors, whose leadership was damned in the Pike River Royal Commission report, released last week, were paid a collective $1.18 million in fees in the four financial years to the end of June 2010. That failure to disclose has brought a strong reaction from one fund manager. "I struggle to see how they can feel they were willing to accept the fees and now they are quite happy to omit it," Chris Swasbrook from Elevation Capital said. In 2009 a furore was unleashed after it was reported that directors who had served on the boards of collapsed finance companies were failing to mention that in their biographies on the websites of listed companies which they later represented. Then a member of the NZX sub-listing committee which reviews new prospectuses, Swasbrook launched a stinging attack on the likes of Greg Muir, at the time executive chairman of children's clothing company Pumpkin Patch, and others for failing to acknowledge their roles with failed finance companies in public biographies. Muir did not seek re-election to Pumpkin Patch's board the following year, saying despite the company's then "stellar performance" his leadership was drawing attention away from the business itself. Last week Swasbrook extended his disclosure criticisms to former directors of Pike River Coal. On November 19, 2010, an explosion in the underground coal mine, where ventilation systems were found to be inadequate to prevent spikes of the explosive gas methane, killed 29 people. But in the director profiles posted on the websites of the listed companies where they now hold board seats they trumpet only their successes. Pike River chairman John Dow, who held the role from from February 22, 2007 to September 30, 2011, and was paid $80,000 each year, is also chairman of NZAX-listed Glass Earth Gold. He describes himself on Glass Earth's website as: "A geologist with 41 years' experience as a successful greenfields explorer, exploration manager, and mining executive in New Zealand, South East Asia, the United States and Latin America." He goes on to say: "His most recent executive appointment was as chairman and managing director of Newmont Australia Limited, the Australian subsidiary of one of the world's largest gold producers. Mr Dow is a director of the AusIMM and holds various other roles in the mining industry." Nowhere is Pike River mentioned. Swasbrook, who believes markets can function properly only when given full and frank information, said there were no stock exchange rules governing the way directors presented such profiles. A spokesman for Dow issued a statement to say: "All of the director profiles on the website to which you refer are brief summaries that refer to the directors' former roles only in general terms. Mr Dow has never sought to hide his involvement with Pike River. When the tragedy occurred, he went immediately to Greymouth to meet with the families and others and made a number of public statements, including on television. He subsequently gave evidence in person to the royal commission which was widely reported. More recently he was one of three former directors who made a statement following the release of the commission's report."

SOURCE: Stuff

Tony Radford, a director at NZX-listed company New Zealand Oil and Gas (NZOG), was chairman until the end of last month and continues to serve on the NZOG health and safety committee. He was also a director of Pike River from January 27, 1992 to June 10, 2011, and was paid $45,000 a year. His NZOG biography reads: "Tony Radford ACA, is a founding director of New Zealand Oil & Gas Limited, which was established in 1981. Tony used his accounting background to build a career in the petroleum and mining industries. Since retiring as CEO of NZOG in 2007 he has continued as non-executive Chairman of the company. He is also a director of Pan PaciďŹ c Petroleum. Tony is a fellow of the Australian Institute of Company Directors. He is a member of the HSE and Operational Risk Committee." They are not the only ones coy about their Pike River positions. Pike River was part-owned by two Indian companies, Gujarat NRE and Saurashtra. Gujarat is listed on the Indian Stock Exchange, and its director Arun Kumar Jagatramka was on the Pike River board from July 17, 2007 until September 29, 2011. He was paid $45,000 a year, but his biography does not mention Pike River, instead dubbing him "a visionary of rare distinction" trumpeting his work in Australia, but not mentioning his connection to New Zealand. Jagatramka is also a director of Shree Minerals, which is listed on the Australian sharemarket. Again there is no mention of Pike River. Shree boasts a second former Pike River director, Sanjay Kumar Loyalka, who served from November 25, 2009 to September 29, 2011, but he too does not mention Pike River. Saurashtra's Dipak Agarwalla was on the Pike River board from September 26, 2005 to September 30, 2011 and was also paid $45,000 a year, but his ofďŹ cial biography only reveals him to be: "The visionary person who dreamed something different and today the reality is in front of the world. By his sincere dedication, today group reached at (sic) the apex and will climb higher and higher." A spokesman for NZOG said directors would be required to reveal all past directorships an investor would consider material only in prospectuses. "We are required to disclose relevant directorships that affect the shareholders' immediate interests. If there was a prospectus out there we would probably be required to show all sorts of issues of past directorships," he said. The spokesman gave the assurance that just because health and safety at Pike River had been found to be inadequate during a period when NZOG's then chairman was a director, did not mean NZOG was not operating safely. The company was not in operational charge of any facilities, he added. - Sunday Star Times

Former Pike River directors omit miner detail Former PikeNovRiver ROB STOCK · 20:49, 10 2012 directors omit miner detail ROB STOCK

· 20:49, Nov 10 2012

Pike River Coal's former directors, now serving on the boards of listed companies in New Zealand, Australia and India, all neglect to disclose their roles with Pike River in their online biographies. Pike River Coal's former directors, now serving on the boards of listed The Pike River directors, whose leadership was damned in the Pike companies in New Zealand, Australia and India, all neglect to disclose River Royalwith Commission report, released week, were paid a their roles Pike River in their online last biographies. collective $1.18 million in fees in the four financial years to the end of June 2010. The Pike River directors, whose leadership was damned in the Pike River Royal Commission report, released last week, were paid a That failure to disclose has brought strong reaction from fundof collective $1.18 million in fees in theafour financial years to one the end manager. June 2010. "I struggle how they can feel a they werereaction willing from to accept the That failureto tosee disclose has brought strong one fund fees and now they are quite happy to omit it," Chris Swasbrook from manager. Elevation Capital said. "I struggle to see how they can feel they were willing to accept the In 2009 furore was after wasit," reported that directors fees and anow they areunleashed quite happy to it omit Chris Swasbrook from who had served on the boards of collapsed finance companies were Elevation Capital said. failing to mention that in their biographies on the websites of listed companies whichwas theyunleashed later represented. In 2009 a furore after it was reported that directors who had served on the boards of collapsed finance companies were Then member of that the NZX sub-listing committee which reviews new failinga to mention in their biographies on the websites of listed prospectuses, Swasbrook launched a stinging attack on the likes of companies which they later represented. Greg Muir, at the time executive chairman of children's clothing company Pumpkin Patch, and others forcommittee failing to acknowledge Then a member of the NZX sub-listing which reviewstheir new roles with failed finance companies public biographies. prospectuses, Swasbrook launched ainstinging attack on the likes of Greg Muir, at the time executive chairman of children's clothing ADVERTISEMENT Muir did not seek re-election Pumpkin Patch's the following company Pumpkin Patch, and to others for failing to board acknowledge their year, with saying despite the company's "stellar performance" his roles failed finance companies then in public biographies. leadership was drawing attention away from the business itself. ADVERTISEMENT

Last week Swasbrook extended his disclosure criticisms to former directors of Pike River Coal. On November 19, 2010, an explosion in the underground coal mine, where ventilation systems were found to be inadequate to prevent spikes of the explosive gas methane, killed 29 people. But in the director proﬁles posted on the websites of the listed companies where they now hold board seats they trumpet only their

SOURCE: Stuff

spikes of the explosive gas methane, killed 29 people. But in the director profiles posted on the websites of the listed companies where they now hold board seats they trumpet only their successes. Pike River chairman John Dow, who held the role from from February 22, 2007 to September 30, 2011, and was paid $80,000 each year, is also chairman of NZAX-listed Glass Earth Gold. He describes himself on Glass Earth's website as: "A geologist with 41 years' experience as a successful greenfields explorer, exploration manager, and mining executive in New Zealand, South East Asia, the United States and Latin America." He goes on to say: "His most recent executive appointment was as chairman and managing director of Newmont Australia Limited, the Australian subsidiary of one of the world's largest gold producers. Mr Dow is a director of the AusIMM and holds various other roles in the mining industry." Nowhere is Pike River mentioned. Swasbrook, who believes markets can function properly only when given full and frank information, said there were no stock exchange rules governing the way directors presented such profiles. A spokesman for Dow issued a statement to say: "All of the director profiles on the website to which you refer are brief summaries that refer to the directors' former roles only in general terms. Mr Dow has never sought to hide his involvement with Pike River. When the tragedy occurred, he went immediately to Greymouth to meet with the families and others and made a number of public statements, including on television. He subsequently gave evidence in person to the royal commission which was widely reported. More recently he was one of three former directors who made a statement following the release of the commission's report." Tony Radford, a director at NZX-listed company New Zealand Oil and Gas (NZOG), was chairman until the end of last month and continues to serve on the NZOG health and safety committee. He was also a director of Pike River from January 27, 1992 to June 10, 2011, and was paid $45,000 a year. His NZOG biography reads: "Tony Radford ACA, is a founding director of New Zealand Oil & Gas Limited, which was established in 1981. Tony used his accounting background to build a career in the petroleum and mining industries. Since retiring as CEO of NZOG in 2007 he has continued as non-executive Chairman of the company. He is also a director of Pan Pacific Petroleum. Tony is a fellow of the 79 Australian Institute of Company Directors. He is a member of the HSE

Tony used his accounting background to build a career in the petroleum and mining industries. Since retiring as CEO of NZOG in 2007 he has continued as non-executive Chairman of the company. He is also a director of Pan PaciďŹ c Petroleum. Tony is a fellow of the Australian Institute of Company Directors. He is a member of the HSE and Operational Risk Committee." They are not the only ones coy about their Pike River positions. Pike River was part-owned by two Indian companies, Gujarat NRE and Saurashtra. Gujarat is listed on the Indian Stock Exchange, and its director Arun Kumar Jagatramka was on the Pike River board from July 17, 2007 until September 29, 2011. He was paid $45,000 a year, but his biography does not mention Pike River, instead dubbing him "a visionary of rare distinction" trumpeting his work in Australia, but not mentioning his connection to New Zealand. Jagatramka is also a director of Shree Minerals, which is listed on the Australian sharemarket. Again there is no mention of Pike River. Shree boasts a second former Pike River director, Sanjay Kumar Loyalka, who served from November 25, 2009 to September 29, 2011, but he too does not mention Pike River. Saurashtra's Dipak Agarwalla was on the Pike River board from September 26, 2005 to September 30, 2011 and was also paid $45,000 a year, but his oďŹƒcial biography only reveals him to be: "The visionary person who dreamed something different and today the reality is in front of the world. By his sincere dedication, today group reached at (sic) the apex and will climb higher and higher." A spokesman for NZOG said directors would be required to reveal all past directorships an investor would consider material only in prospectuses. "We are required to disclose relevant directorships that affect the shareholders' immediate interests. If there was a prospectus out there we would probably be required to show all sorts of issues of past directorships," he said. The spokesman gave the assurance that just because health and safety at Pike River had been found to be inadequate during a period when NZOG's then chairman was a director, did not mean NZOG was not operating safely. The company was not in operational charge of any facilities, he added. Sunday Star Times 80

SOURCE: New Zealand Herald

Loss-making Marlin under attack Tim Hunter

· 02:35, Nov 01 2012

Tim Hunter

· 02:35, Nov 01 2012

Loss-making Marlin under attack In a sometimes testy annual meeting, the board and manager of $75 million listed investment fund Marlin Global defended their performance in the face of an attack from a shareholder activist. In a sometimes testy annual meeting, the board and manager of $75 After two hours of presentations, shareholders were given million listed investment fund Marlin Global defended theirthe chance to consider a in resolution manager Capital performance the face from of anfund attack from a Elevation shareholder activist. proposing a wind up of the Marlin fund and a return of capital to After two hours of presentations, shareholders were given the chance shareholders. to consider a resolution from fund manager Elevation Capital Elevation Chris Swasbrook theofmeeting Marlin proposingmanaging a wind up director of the Marlin fund and a told return capital to had returned minus 12 per cent since floating and had performed well shareholders. below its equity benchmarks over time. Elevation managing director Chris Swasbrook told the meeting Marlin In that time, Marlin's Funds had fees of well had returned minus 12manager per centFisher since floating andreceived had performed nearly $6.7m, hebenchmarks said. below its equity over time. With the management contractFisher for Fisher due forreceived renewalfees by October In that time, Marlin's manager Funds had of 31, he said, the board should have given shareholders an opportunity nearly $6.7m, he said. to consider alternatives. With the management contract for Fisher due for renewal by October "You send directors a message real significance," said 31, hecan said, the your board should have given of shareholders an opportunity Swasbrook. to consider alternatives. With chairman Alistair Ryan and director Carol Campbell also serving ADVERTISEMENT "You can send your directors a message of real significance," said on the boards of two other investment funds managed by Fisher, "can Swasbrook. you be confident they will consider other proposals that may cause ADVERTISEMENT tension with Carmel Fisher?" he asked. Ryan and Campbell said they consider themselves fully independent. "I'm not scared of Carmel Fisher," said Ryan. "She is a formidable woman, but I have responsibilities as an independent director." Fisher told Swasbrook that Marlin operated in a competitive fund management industry. "Shareholders have been able to consider [investing in] Elevation [funds]," she said. "If they wanted to they would invest with you." In the following question and answer sessions shareholders expressed support for the current management and favourable comments drew applause 83 SOURCE: Stuff from the gathering at a conference room in Auckland's Ellerslie.

[funds]," she said. "If they wanted to they would invest with you." In the following question and answer sessions shareholders expressed support for the current management and favourable comments drew applause from the gathering at a conference room in Auckland's Ellerslie. Earlier in the meeting Fisher's new investment managers running Marlin, Roger Garrett and Manuel Greenland, told shareholders they had reviewed the portfolio of international stocks and found 17 per cent of Marlin's holdings no longer ďŹ tted the investment criteria. "A few bad apples were spoiling the return from a good portfolio," said Greenland. Addressing the fund's performance during the year, Ryan told shareholders the net loss of $12m was disappointing. "There is no getting away from that," he said. But it was important to take a medium to long term view of performance. "We would certainly want the total shareholder return to return to positive territory as a matter of priority," he said. Voting on the resolutions will be released to the stock exchange later today. Marlin shares were trading at 71c on the NZX this morning, a discount to asset value of about 14 per cent. BusinessDay.co.nz

Shareholders Assn queries Marlin manager decision, backs wind-up PAUL MCBETH Âˇ WEDNESDAY OCTOBER 31, 2012 Âˇ ! 7

Shareholders Association chairman John Hawkins

BUSINESSDESK: The New Zealand Shareholders Association, which advocates for retail investors, is questioning Marlin Global's decision to roll over a management contract with Fisher Funds and will back a resolution to wind up the investment company at tomorrow's annual meeting. Chairman John Hawkins says the NZSA's legal advice indicates nothing in the management contract stopped Marlin's board from getting an outside appraisal of Fisher Funds' performance when it came up for renewal and that option should have been reviewed. A review "would have been sensible after a five-year period, whether or not the Elevation proposal had arisen," Mr Hawkins says. "This would have also clarified the conflicting claims from the company, the manager and Elevation which are very difficult for shareholders to compare and sort out." The NZSA will back a resolution by Marlin shareholder Elevation Capital Management, a rival fund manager to Fisher Funds, to liquidate the Marlin portfolio and return capital to investors as a means to press the issue and force an independent review of Marlin's future. Elevation claims Marlin shareholders have been poorly served by the company, which has consistently traded at a discount to its net asset value and underperformed passive funds. Winding up the company offers investors upside of some 15% with a return of some 81 cents, it says. Marlin independent directors Alistair Ryan and Carol Campbell scotched the proposal, saying Elevation is a rival fund manager and had only been a shareholder for a matter of weeks. Fisher Funds' Carmel Fisher said Elevation's hostile approach was aimed at making a one-off gain and investors should be looking for a long-term investment focus. Mr Hawkins says the real issue for Marlin shareholders is the company's structure, which has potential for conflicts of interest with a representative of the manager sitting on the investment company's board. "The recent sudden departure of two experienced and respected independent directors, along with the appointment of a new portfolio manager, had also concerned some shareholders. "The remaining directors sit on two other investment companies run by the same manager and this has SOURCE: independent NBR

portfolio manager, had also concerned some shareholders. "The remaining independent directors sit on two other investment companies run by the same manager and this has inevitably led to questions about their independence," he says. The NZSA will seek a change to listing rules so directors holding multiple board seats operated by the same external manager will not be considered independent. In 2009, Marlin shareholders turned down a bid from investor Gary Cross to change the investment company into an openended managed fund after the gap between its share price and net asset value widened. He and his supporters forced Marlin to order an independent report to look at delisting and restructuring, and said ways the investment vehicle could improve its NAV were through share buy-back schemes, implementing a managed dividend policy or winding up. The shares fell 1.4% to 70 cents in trading today, a 15% discount to the net asset value of 82.35 cents as at October 23 after deducting treasury stock from the buy-back programme. Marlin's five biggest assets are Germany's Biotest, Stratec Biomedical, Wirecard, Israel's Sarin Technologies and US based Orthofix. The company wrote down 80% of its stake in recycling paper company Fook Woo after the Hong Kong-listed firm was suspended from trading amid allegations of fraud. Fook Woo accounts for about 1% of the Marlin portfolio.

" 7 COMMENTS & QUESTIONS Commenter icon key: # Subscriber $ VeriOed

#1 by Anonymous 5 years ago Excellent! % REPLY

SHARE & ' + ) * 0 + 0

#2 by Richard S 5 years ago Nepotism is ripe in New Zealand businesses; especially relating to public funds. Independent reviews should always be an option for the masses, rather than being dictates by those with vested interests. % REPLY

SHARE & ' + ) * 0 + 0

#3 by Anonymous 5 years ago Surely it would be mad to wind up a company that, since inception, has performed 1st out of 29 comparable NZ managers and 1st out of 24 comparable international managers (including lots of big NZ/international names). Marlin was the ONLY ONE to give a positive return (plus 14%). ALL the others were negative (NZ managers averaged NEGATIVE 19%; international managers averaged NEGATIVE 24%). The figures are contained in Marlin's 17 October 2012 letter to shareholders - on the Marlin website. % REPLY

SHARE & ' + ) * 0 + 0

by Greedy piglet 5 years ago in reply to Anonymous Marlin trades at a material discount to net asset backing and performance has been disappointing since inception. It would be mad to roll over the management contract without looking at alternatives. Incompetent independent directors at work here. % REPLY

SHARE & ' + ) * 0 + 0

Fisher is a popular monarch, a charismatic leader with the common touch, and her success generates some jealousy among rival kingdoms.

Shark lunges at Fisher's wounded Marlin

01:51, Oct 30her 2012 However, powers rely on the continued thriving of her subjects and if their fortunes stumble, so too will she.

Shark lunges at Fisher's wounded Marlin

Knowing this, Elevation has attacked Fisher's weak point - the Marlin 01:51, Oct 30 2012 Global listed investment trust. The barbarians are at the gate of Carmel Fisher's kingdom. After expanding the on borders of Fisher control more than $1 billion, Marlin floated the NZX in lateFunds 2007to after raising $103 million in an Queen Carmel's rule is under attack from the Visigoths at Elevation initial public offer at $1 a share. The barbarians are at the gate of Carmel Fisher's kingdom. After Capital. expanding theoversubscribed borders of Fisher control more than $1 billion, The offer was by Funds $33m,to reflecting Fisher's popularity Fisher is a popular monarch, aattack charismatic leader with the common Queen Carmel's rule is under from Visigoths at Elevation and the confidence among investors at thethe time. touch, Capital.and her success generates some jealousy among rival ADVERTISEMENT kingdoms. Fisher is a popular monarch, a charismatic leader with the common However, rely on the continued thriving of her subjects touch, andher herpowers success generates some jealousy among rival and if their fortunes stumble, so too will she. kingdoms. Knowing Elevation has Fisher's weak point the Marlin However, this, her powers rely onattacked the continued thriving of her-subjects Global listedfortunes investment trust.so too will she. and if their stumble, Marlin floated on the NZX late 2007 after raising $103 -million in an Knowing this, Elevation hasinattacked Fisher's weak point the Marlin initial at $1 atrust. share. Globalpublic listed offer investment The offer was oversubscribed by $33m, reflecting Fisher's popularity Marlin floated on the NZX in late 2007 after raising $103 million in an and the confidence investors at the time. initial public offer atamong $1 a share. ADVERTISEMENT The idea use the money to$33m, buy shares in growth companies offerwas wasto oversubscribed by reflecting Fisher's popularity outside Zealand and Australia, by Fisher's specialist and the New confidence among investorsas atselected the time. fund manager, Ken Applegate. If those shares grew in value and generated dividends, the valueADVERTISEMENT of Marlin shares would rise accordingly.

This is a standard model for closed-ended investment companies or investment trusts. Although rare in New Zealand, they are common in Britain. Chalkie generally likes vanilla investment trusts because they confer upon investors the full rights of a shareholder, whereas unit trust investors are typically pawns of a management company. Sometimes investment companies employ their fund managers The idea was to use the money to buy shares in growth companies directly and sometimes they contract an external provider, in Marlin's outside New Zealand and Australia, as selected by Fisher's specialist case Fisher Funds. The ideajob wasoftoMarlin's use theboard money buy shares in growth companies It is the toto oversee the performance of this outside New Zealand and Australia, as selected by Fisher's contract and ensure shareholders' interests are maximised.specialist SOURCE: Stuff

This is highly signiﬁcant in the unfolding events involving Elevation

case Fisher Funds. It is the job of Marlin's board to oversee the performance of this contract and ensure shareholders' interests are maximised. This is highly significant in the unfolding events involving Elevation Capital. The problem for Marlin is that its performance has been generally wretched, starting from its wretched timing in launching on the eve of the global financial crisis. In Marlin's case the $1 listing price was trashed in quick time as the shares sank as low as 60c within months. The extent of the trashing can be seen in the difference between Marlin's share price and the value of its investments. In its annual report for the year to June 2008, Marlin's shares and warrants were priced collectively at 75c while the fund's assets were valued at 94c. This disconnect between share price and asset value is a feature of investment trusts: though shares can sometimes trade at a premium to asset value, a discount is common. If the discount gets large, it can mean the investment market is too dumb to see the real value of the shares, or that the market doesn't think much of the fund manager. Marlin's discount has been persistently big. In 2009 its average discount was a gargantuan 31.7 per cent, triggering much investor angst and calls for the fund to be restructured. Since then the story has improved a little, partly because Marlin has been buying back its own shares. In the last financial year Fisher puts the average discount at 15 per cent, which is merely huge. Dividends, meanwhile, are being paid out of capital rather than income, which merely shrinks the fund further. Chalkie wonders how many investors are aware where their "dividends" are really coming from. But given the underlying performance of Marlin's portfolio, who could blame investors for a lack of enthusiasm? In five years of effort, the fund has struggled to exceed its original asset value of $1 a share and, having chinned the bar as high as $1.17 at last year's balance date, has since given up most of that ground. Among its disappointments, perhaps the most unfortunate is Hong Kong-listed paper recycler Fook Woo, once one of Marlin's biggest

at last year's balance date, has since given up most of that ground. Among its disappointments, perhaps the most unfortunate is Hong Kong-listed paper recycler Fook Woo, once one of Marlin's biggest holdings at about 3.2 per cent of the fund. Last November Fook Woo's shares were suspended amid delays in filing its accounts. The stock has not traded since and it now appears the company may have been victim of fraud - among other things, the company says HK$1.6m (NZ$250,000) and a car have gone astray. The debacle has forced Marlin to write the holding down by 80 per cent. Marlin was aiming to be an "absolute return" fund. Rather than beating a sharemarket index, it aimed to generate returns exceeding the annual change in the 90-bank bill index plus 5 per cent. It is hard to see how the performance resembles the goal. Target annual returns for the last five years were 9.3 per cent, 11.2 per cent, 7.8 per cent, 8.1 per cent and 7.8 per cent. Since launch, Marlin's actual total shareholder return has been minus 12.8 per cent. Although fund managers are adept at finding numbers that paint themselves in a good light, Chalkie reckons you need particularly rose-tinted glasses to see Marlin as anything but a poor performer. Which brings us to Elevation Capital, author of a proposal to terminate Fisher's contract as Marlin's manager, wind up the fund and give all the money back to shareholders. Compared to Fisher Funds, Elevation is minuscule. From its compact and bijou offices in Auckland's Parnell it runs one fund directly, the Value Fund, which has a value of $14.6m. Its other fund offer, the Fund of Funds, invests in three big name overseas funds and has a current value of $11.7m. By comparison, the Value Fund reports a return since inception of 9.05 per cent, while the Fund of Funds reports minus 4.32 per cent. Elevation's main man is fund manager Chris Swasbrook, a cerebral devotee of investment legend Ben Graham and a former partner in Goldman Sachs. As per the Graham model, Swasbrook's modus operandi is to buy undervalued assets and agitate to realise their full value, which fits the move on Marlin to a T.

Goldman Sachs. As per the Graham model, Swasbrook's modus operandi is to buy undervalued assets and agitate to realise their full value, which fits the move on Marlin to a T. Having started buying on September 10 at about 70c a share, Elevation hoped to realise close to the net asset value of 84c through a wind-up of the fund, thus producing a double-digit gain in short order. Alternatively, it thought the Marlin board might like to consider changing managers from Fisher to Elevation. Chalkie reckons this is an entirely appropriate proposal for Marlin shareholders to consider and they are due to vote on it - or at least to the wind-up part - at their annual meeting in Auckland on November 1. Coincidentally, this date is the day after the initial five-year Fisher Funds contract to manage Marlin expires. Swasbrook was aware the contract was up for renewal and contacted Marlin independent director Mark Todd on September 13 to talk about his proposal. Todd resigned three days later. His resignation left just three directors on Marlin's board - Carmel Fisher, Alistair Ryan and Carol Campbell. The latter two are classified as independent. The same three directors comprise the boards of the other two Fisher-managed investment trusts - Kingfish and Barramundi. With Ryan and Campbell collecting directors' fees from three Fisher funds, are they really independent? Had Marlin been a British company, the answer would be no. In 2003, Britain's financial regulator, the Financial Services Authority, considered the issue of investment trust board independence. There is potential for conflicts of interest to arise in the relationship between directors and the fund manager, it said, particularly because investment companies were often created by the fund manager. As a result, "the board needs to be, and be seen to be, independent". Under stock exchange listing rules for British investment trusts, any director who is also a director of another company managed by the same fund manager cannot be classified as independent. Also, the board of an investment trust must be able to act independently of the fund manager. Chalkie reckons Marlin shareholders may want to probe their board's

fund manager. Chalkie reckons Marlin shareholders may want to probe their board's independence at the AGM. Chalkie understands Ryan and Campbell were aware of Swasbrook's proposal by September 28 but continued procedures to renew Fisher's management contract, which were ďŹ nalised on October 17. Marlin told the NZX the renewal followed "a comprehensive review". Ryan told Chalkie the review involved Marlin directors satisfying themselves the manager had carried out its responsibilities under the management agreement. Had they wanted to consider not renewing the contract, an outside consultant would have had to review performance in a process beginning as early as mid-July. Clearly, by the time Swasbrook got involved, the die was cast. Now, you could argue that with Applegate having departed the scene since June and with Marlin's new managers, Roger Garrett and Manuel Greenland, in place only since May and October respectively, the team should be given the chance to turn things around. However, Chalkie reckons the contract renewal was a clear opportunity to give shareholders a proper review of their options and the board failed to take it. You don't have to be a barbarian to think that's not good enough. - Chalkie is written by Fairfax Business Bureau deputy editor Tim Hunter.

Kirks in talks to sell Lambton Quay property <a href="http://tinyurl.com/hamish-rutherford">Hamish Rutherford</a> <br>Business reporter Âˇ 00:41, Oct 29 2012

Kirks in talks to sell Lambton Quay property Kirks in talks to sell Lambton Quay property Lambton Quay property

<a href="http://tinyurl.com/hamish-rutherford">Hamish Rutherford</a> <a href="http://tinyurl.com/hamish-rutherford">Hamish Rutherford</a> utherford">Hamish Rutherford</a> <br>Business reporter Âˇ 00:41, Oct 29 2012 <br>Business reporter Âˇ 00:41, Oct 29 2012 2012

FAIRFAX NZ

ON THE BLOCK: Kirkcaldie & Stains is in advanced talks to sell the Harbour City Centre. FAIRFAX NZ FAIRFAX NZ ON THE BLOCK: & Stains is in NZ advanced to sell the point Harbourin City Centre. Shares in Kirkcaldie Kirkcaldie &FAIRFAX Stains are at talks the highest more than two

BLOCK: Kirkcaldie &selling Stains isits in advanced talks to sellasset, the Harbour City Centre. dvanced talksON to THE sell the Harbour City Centre. years, as it considers major property Wellington's

Harbour City Centre. Shares in Kirkcaldie & Stains are at the highest point in more than two Shares Kirkcaldie & Stains are at the highest point in more than two at theyears, highest point in the more than twomajor asowner itinconsiders selling its property asset, Wellington's The of iconic Lambton Quay department store, which has years, as itCentre. considers majorleases property asset,space Wellington's major property Wellington's Harbour City been asset, loss-making forselling severalitsyears, its retail but owns Harbour City Centre. the Harbour City Centre next door. The owner of the iconic Lambton Quay department store, which has The ownerstore, of the iconic Lambton Quay department store, has n Quaybeen department which has for several years, leases its retail space but owns Onloss-making Friday night, the company issued a short statement to which the NZX been loss-making several leases its retail space butfor owns ars, leases its retail butfor owns therevealing Harbour City Centre next door. itspace had entered into ayears, sale and purchase agreement its the Harbour City Centre next door. or. property assets. On Friday night, the company issued a short statement to the NZX On Friday night, issued aup short statement tofor theits NZXto sued arevealing short statement to the company NZX it had entered into a sale and purchase agreement News of the possible sale sent shares 60 cents or 23.1 per cent revealing ithighest had entered a sale and purchase agreement ale andproperty purchase agreement for itsinto $3.20,assets. the market price in recent years, making Kirksfor theits property assets. biggest riser on the NZX today. News of the possible sale sent shares up 60 cents or 23.1 per cent to News of statement the possible sale sent upbidder 60 cents 23.1 peracent hares up 60 cents or 23.1 per did cent to Friday's not say shares who the was,orbut said sale to was conditional on the buyers' due diligence as well as board and SOURCE: Stuff shareholder approval.

$3.20, the highest market price in recent years, making Kirks the biggest riser on the NZX today. Friday's statement did not say who the bidder was, but said a sale was conditional on the buyers' due diligence as well as board and shareholder approval. There was no mention of the process requiring the approval of the Overseas Investment OďŹƒce and this morning Kirks managing director John Milford conďŹ rmed the possible buyer was a New Zealand entity. Due diligence is expected to beADVERTISEMENT completed by mid-November, with a shareholder vote required within 35 days. Earlier this year Milford revealed said that Kirks was pulling its own retailing operations out of the Harbour City Centre to have all retailing under one roof. In the following months dozens of small businesses - some of which had been in the building for more than two decades - were evicted from the Harbour City Building to make way for Australian-controlled utility Contact Energy to bring contact centre staff in. Late last year Kirks' pulled out of sales talks with a buyer said to be interested in buying its retail operations. Due diligence is expected to be completed by mid-November, with a shareholder within 35the days. Shareholdersvote haverequired been pressuring board of Kirks' to address the fact that its market capitalisation (the number of shares multiplied by Earlier this year Milford revealed said that Kirks was pulling its own the market price) was lower than just the value of its property assets. retailing operations out of the Harbour City Centre to have all retailing under one roof. In its 2011 annual report, Kirks said the Harbour City Centre was worth $46.5m, based on an independent valuation carried out by Bayleys. In the following months dozens of small businesses - some of which had been in the building for more than two decades - were evicted Even after today's share price surge, Kirks' market capitalisation is from the Harbour City Building to make way for Australian-controlled less than $30m. utility Contact Energy to bring contact centre staff in. In 2010 Elevation Capital managing director Christopher Swasbrook Late last year Kirks' pulled out of sales talks with a buyer said to be wrote to Kirks' chairman Falcon Clouston asking him to take action to interested in buying its retail operations. address the valuation gap, raising the possibility of selling the property assets. Shareholders have been pressuring the board of Kirks' to address the fact that its market capitalisation (the number of shares multiplied by This morning Swasbrook said the announcement ''sounded very the market price) was lower than just the value of its property assets. good''. In its 2011 annual report, Kirks said the Harbour City Centre was worth ''Kirkcaldie's is a classic value stock where people have had to be $46.5m, based on an independent valuation carried out by Bayleys. really patient to be rewarded, but it looks to me like they're going to be rewarded with the sale of the asset and potentially subsequent 93 capital return.''

good''. Talk of selling the property assets has raised questions as to whether the department store could survive on its own, however Mr Swasbrook ''Kirkcaldie's is a classic value stock where people have had to be believed the retail business could have a future. really patient to be rewarded, but it looks to me like they're going to be with the sale of theisasset andbut potentially ''It rewarded is an iconic brand. Yes retail tough, I think it subsequent still has a place capital return.'' in Wellington, that would be my view.'' Milford said he would have to address questions of the future of the retail business when Kirks Talk of selling the property assets has raised questions as to whether releases its full year results for the year to August 31 tomorrow. the department store could survive on its own, however Mr Swasbrook believed thecompany retail business could have a future. In April the warned it expected to lose $900,000 during the period, as it warned it would stop paying dividends. ''It is an iconic brand. Yes retail is tough, but I think it still has a place in Wellington, that would be my view.'' Milford said headding would have to The company blamed ''extremely cautious'' shoppers, that the address questions ofon thetrimming future ofthe thepublic retail sector business when Kirks government's focus was affecting releases its full year results for the year to August 31 tomorrow. Wellington. In Aprilthis the month company warned it conďŹ rmed expected toit lose the Earlier AMP Capital was $900,000 putting theduring building period, as it warned it would stop paying dividends. which includes the Kirks' department store up for sale, part of a divestment of $150 million of prime Wellington real estate. The company blamed ''extremely cautious'' shoppers, adding that the government's focus on trimming the public sector was affecting Wellington. Contact Hamish Rutherford Earlier this month AMP Capital conďŹ rmed it was putting the building Business reporter which the Kirks' department store up for sale, part of a Email:includes hamish.rutherford@dompost.co.nz divestment of $150 million of prime Wellington real estate. Twitter: @oneforthedr The Dominion Post Contact Hamish Rutherford Business reporter Email: hamish.rutherford@dompost.co.nz Twitter: @oneforthedr The Dominion Post

Marlin defends Fisher Funds contract Tweet

Listed investment firm Marlin Global has rejected fund manager Elevation Capital’s criticism of its decision to renew Fisher Funds’ management contract before next week’s annual meeting. Friday, October 26th 2012, 10:40AM by Niko Kloeten Elevation is pushing for the contract with Fisher Funds to be terminated and for Marlin to be wound up, claiming this would give shareholders a return of about 81c per share, 14% more than the current trading price of 71c. It will take the proposal to Marlin’s annual meeting next Thursday, after it was rejected by Marlin earlier this month. Marlin independent directors Alistair Ryan and Carol Campbell said Elevation was a rival fund manager and had only been a shareholder for a few weeks, while Carmel Fisher said Elevation was focused on making a one-off gain. Yesterday Elevation published a presentation on its website criticising Marlin for renewing Fisher Funds’ contract: "Why did the independent directors not want to hear from all shareholders as to the future of Marlin Global before reappointing the manager?" It said Marlin is already returning capital to shareholders by paying out more in dividends than what it earns. "There exists better performing and a more diverse range of international equity offerings available to shareholders with more attractive risk/reward profiles,” Elevation said. Marlin Global told the stock exchange this morning that Elevation had misunderstood the terms of the management agreement, the timing for and the factors relevant to the renewal decision. “The Agreement is a contract between Marlin and Fisher and contains specific renewal provisions which must be followed. Renewal of the Agreement is based on Fisher’s delivery of management services according to the Agreement over the initial five year term,” it said. Marlin said there were no grounds for the independent directors not to renew the agreement, and it was prudent for the directors to renew to ensure continuity of management. “The renewal process is set out in the Management Agreement and was completed over a period from late June through to mid-September, prior to receipt of the Elevation proposal,” it said. “The final timing of the conclusion of the renewal process and the receipt of the Elevation shareholder resolution coincided but they were two separate processes. “Nothing in the Elevation resolution would change the renewal process undertaken or the outcome.” Niko Kloeten can be contacted at niko@goodreturns.co.nz

« Advisers to benefit from FATCA deal

SOURCE: Good Returns

Fund managers call for level playing field »

Marlin defends Fisher Funds renewal in face of shareholder revolt PAUL MCBETH Âˇ FRIDAY OCTOBER 26, 2012 Âˇ ! 2

BUSINESSDESK: Marlin Global, the listed investment company that buys international stocks, has defended the renewal of its management contract with Fisher Funds, saying there were no grounds to ditch the fund manager ahead of next week's annual meeting where it faces a resolution to cash up its portfolio. The agreement contained specific renewal provisions that had to be adhered to and the independent directors determined it was prudent to "ensure continuity of management", chairman Alistair Ryan says in a statement. The statement was made in response to shareholder Elevation Capital Management's presentation questioning the decision as it puts forward a resolution at the annual meeting to liquidate the company's holdings and return the cash to investors. "The renewal process is set out in the management agreement and was completed over a period from late June through to mid-September, prior to receipt of the Elevation proposal," Mr Ryan says. "The final timing of the conclusion of the renewal process and the receipt of the Elevation shareholder resolution coincided but they were two separate processes." Marlin's independent directors Mr Ryan and Carol Campbell scotched the proposal, saying Elevation is a rival fund manager and had only been a shareholder for a matter of weeks. Likewise, Fisher Funds' Carmel Fisher said Elevation's hostile approach was aimed at making a one-off gain and investors should be looking for a long-term investment focus. Elevation says Marlin shareholders have been poorly served by the company, which has consistently traded at a discount to its net asset value and underperformed passive indexes. Winding it up offers investors upside of some 15% with a return of some 81 cents, it says. That would let Marlin investors take advantage of better options in the market, which has expanded since Marlin launched in 2007, Elevation said. Marlin is already returning capital to shareholders through its managed dividend policy that pays out more than the investment firm earns, it said. "There exists better performing and a more diverse range of international equity offerings available to shareholders with more attractive risk/reward profiles," the Elevation presentation said. Elevation joined Marlin's shareholding register in September after several director resignations and retirements raised a "red flag" for the fund manager. Marlin's shares traded at 71 cents yesterday, a 14% discount to its October 23 net asset value of 82.35 cents after deducting treasury stock from the buy-back programme. Its five biggest assets are Germany's Biotest, Stratec Biomedical, Wirecard, Israel's Sarin Technologies and US based Orthofix. Marlin wrote down 80% of its stake in recycling paper company Fook Woo after the Hong Kong-listed firm was suspended from trading amid allegations of fraud. Fook Woo accounts for about 1% of the Marlin portfolio.

NBR " 2SOURCE: COMMENTS & QUESTIONS

Elevation Capital questions Fisher Funds' renewed Marlin contract PAUL MCBETH Âˇ THURSDAY OCTOBER 25, 2012 Âˇ ! 5

BUSINESSDESK: Fund manager Elevation Capital is questioning Marlin Global's decision to renew Fisher Funds' management of the listed investment firm ahead of next week's annual meeting, where Elevation is lobbying to wind up the company. Elevation is urging Marlin shareholders to consider why the firm's independent directors backed renewing a management contract before the annual meeting, and with the knowledge of the resolution to wind the company up. The fund manager wants Marlin shareholders to support a resolution at the November 1 annual meeting to end its management contract with Fisher Funds and liquidate the portfolio, saying the expiry of the contract could have offered the lowest termination fee in years. "Why did the independent directors not want to hear from all shareholders as to the future of Marlin Global before reappointing the manager," Elevation asks in a presentation published on its website. Elevation put its proposal to Marlin on October 9 and met with independent directors six days later. The following day Marlin announced the renewal of the Fisher Funds contract, before later publicly announcing Elevation's resolution. Marlin independent directors Alistair Ryan and Carol Campbell scotched the proposal, saying Elevation is a rival fund manager and had only been a shareholder for a matter of weeks. Likewise, Fisher Funds' Carmel Fisher says Elevation's hostile approach was aimed at making a one-off gain and investors should be looking for a long-term investment focus. Elevation denied claims it is a short-term investor, saying the average holding period for an investment is 21 months. It claims liquidating Marlin and selling up would see shareholders get a return of about 81 cents per share, a 14% premium to the current trading price of 71 cents. The fund manager says Marlin is already returning capital to shareholders through its managed dividend policy that pays out more than the investment firm earns. "There exists better performing and a more diverse range of international equity offerings available to shareholders with more attractive risk/reward profiles," the Elevation presentation says. In 2009, Marlin shareholders turned down a similar bid from investor Gary Cross, who sought to change the investment company into an open-ended managed fund after the gap between its share price and net asset value widened. He and his supporters forced Marlin to order an independent report to look at delisting and restructuring, and said ways the investment vehicle could improve its NAV were through share buy-back schemes, implementing a managed dividend policy or winding up. As at October 23, Marlin's net asset value was 82.35 cents after deducting treasury stock from the buy-back programme. Its five biggest assets are Germany's Biotest, Stratec Biomedical, Wirecard, Israel's Sarin Technologies and US-based Orthofix. Marlin wrote down 80% of its stake in recycling paper company Fook Woo after the Hong Kong-listed firm was suspended from trading amid allegations of fraud. Fook Woo accounts for about 1% of the Marlin portfolio.

" 5 COMMENTS & QUESTIONS Commenter icon key: # Subscriber $ VeriLed

SOURCE: NBR

Fisher-managed Marlin Global faces Jght over future from new shareholder PAUL MCBETH · THURSDAY OCTOBER 18, 2012 · ! 9

BUSINESSDESK: Marlin Global, the NZX-listed fund managed by Fisher Funds, which invests in international equities, will be wound up, with capital returned to shareholders if investor and rival fund manager Elevation Capital Management gets it way. Elevation Capital, whose shareholders include Auckland commercial lawyer Andrew Harmos, high-profile fund manager Craig Stobo and founder Christopher Swasbrook, wants Marlin shareholders to support a resolution at the November 1 annual meeting to terminate its management contract with Fisher Funds and liquidate the portfolio. Elevation managing director Mr Swasbrook says that would see shareholders get a return of about 81 cents per share, a 16% premium to the current trading price of 70 cents. He says Mr Marlin has "traded at a persistent and sizeable discount to net asset value" in spite of the board setting up a share buy-back and quarterly dividend policy. "In our opinion, shareholders have little prospect of seeing the current discount close if the status quo prevails," Mr Swasbrook says. The proposal was put to Marlin chairman Alistair Ryan this week and Marlin yesterday announced it had renewed its management contract with Fisher Funds for a further five years before. Elevation cashed in on the sell-down of Salvus Strategic Investments' portfolio last year when it acquired a stake in the listed investment company after the board said it was looking at ways of making a capital return. Salvus shareholders eventually voted in favour of liquidating the portfolio and the company, now called Veritas Investments, is looking at ways to achieve a reverse-listing. Marlin independent directors Ryan and Carol Campbell scotched the proposal, saying Elevation is a rival fund manager and has only been a shareholder for a matter of weeks. "Shareholders are encouraged to look past this short-term opportunism and focus on the unique opportunity Marlin offers them, the underlying and undoubted quality of the manager and the strong results relative to other international equity options that have been achieved in extremely difficult markets," they say. Fisher Funds' Carmel Fisher says Elevation's hostile approach was aimed at making a one-off gain and investors should be looking for a long-term investment focus. In 2009, Marlin shareholders turned down a similar bid from investor Gary Cross, who sought to change the investment company into an open-ended managed fund after the gap between its share price and net asset value widened. He and his supporters forced Marlin to order an independent report to look at delisting and restructuring, and said ways the investment vehicle could improve its NAV were through share buy-back schemes, implementing a managed dividend policy, or winding up. As at October 9, Marlin's net asset value was 83.34 cents after deducting treasury stock from the buy-back programme. Its five biggest assets are Germany's Biotest, Stratec Biomedical and Tom Tailor Holdings, Israil's Sarin Technologies and USA's Orthofix. Marlin wrote down 80% of its stake in recycling paper company Fook Woo after the Hong Kong-listed firm was suspended from trading amid allegations of fraud. Fook Woo accounts for about 1% of the Marlin portfolio. Comments on this story have been disabled because of the potentially defamatory nature of some of them – Editor

SOURCE: NBR

Marlin, Fisher Funds reject Elevation bid Jason Krupp

· 23:36, Oct 17 2012

Jason Krupp

· 23:36, Oct 17 2012

Marlin, Fisher Funds reject Elevation bid Listed investment fund Marlin Global and its manager Fisher Funds are urging shareholders to reject a wind-up bid. They the offer fund fromMarlin New Zealand fundits manager Elevation Capital Listedsay investment Global and manager Fisher Funds are to windshareholders the businessto upreject and return the proceeds to shareholders urging a wind-up bid. doesn't stack up. They say the offer from New Zealand fund manager Elevation Capital Marlin in small cap international stocks Elevation to windspecialises the business up and return the proceeds toand shareholders claims has failed doesn'titstack up. to reach the performance benchmarks stated in its 2007 prospectus. The benchmark was to beat the NZX 90-day bank Marlin specialises small cap international stocks and Elevation bill index by 5 per in cent. claims it has failed to reach the performance benchmarks stated in its Elevation said if shareholders dumped thebeat manager and90-day wound bank up the 2007 prospectus. The benchmark was to the NZX company werecent. likely to receive a payment of 81 cents per share bill index they by 5 per based on its net asset value, rather than the 71c that Marlin shares are Elevation said if shareholders dumped the manager and wound up the currently trading at. company they were likely to receive a payment of 81 cents per share The resolution backed by arather KPMGthan report Marlin commissioned in are based on its netisasset value, the 71c that Marlin shares 2009 to address currently trading the at. trading discount. The adviser recommended the firm start share-buybacks, implement a managed dividend policy, or The is backed by a KPMG report Marlin commissioned in delistresolution and wind-up. 2009 to address the trading discount. The adviser recommended the Elevation Marlin's buybacks quarterlydividend dividendpolicy, policy or had firm start stressed share-buybacks, implementand a managed failed to lift the value, which left winding down as the only recourse to delist and wind-up. tap the underlying value. Elevation stressed Marlin's buybacks and quarterly dividend policy had ADVERTISEMENT failed to independent lift the value,directors, which left as the onlythat recourse Marlin's inwinding a letter down to shareholders was to tap underlying value. have urged shareholders to reject the offer filedthe with the NZX today, on the grounds that they're unlikely to see a return of 81c once costs ADVERTISEMENT are factored in. They note that while the fund had missed its benchmarks in a volatile trading period, it was one of the best performing of the 29 comparable portfolio investment entities investing internationally since inception. They also noted that Elevation Capital has only been a Marlin shareholder for a matter of weeks. "Marlin shares are publicly traded," the directors said in the SOURCE: Stuff statement. "All shareholders are free to buy and sell as they please. There is no need to wind up the company for shareholders to access

shareholder for a matter of weeks. "Marlin shares are publicly traded," the directors said in the statement. "All shareholders are free to buy and sell as they please. There is no need to wind up the company for shareholders to access their capital." Fisher Funds, which manages the assets on behalf of Marlin, labelled the move "opportunistic". It said if the resolution is passed, the board does not have rights to terminate the management agreement except in certain cases such as liquidation or gross negligence. Plus, Fisher Funds said the initial management term - which was due to expire next month - had been renewed for a further ďŹ ve years, a move that wouldn't have been undertaken if Marlin was dissatisďŹ ed with its performance. Shareholders will vote on the non-binding resolution on November 1. A quorum of 75 per cent is needed to pass it. BusinessDay.co.nz

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SOURCE: Sunday Star Times

101

New Zealand fund managers 'world class' Tweet

New Zealanders don't know how lucky they are to have quality fund managers operating in their back yard, according to a top researcher. Tuesday, March 6th 2012, 6:31AM

1 Comment

by Niko Kloeten Morningstar head of research Chris Douglas said the general public may not realise it, but New Zealand's fund management sector "stacks up quite well" internationally, including in comparison with fund managers in Australia. "There are a number of world class fund managers in New Zealand. A number of them have proven themselves in other markets overseas and live in New Zealand for personal reasons and family reasons." Morningstar handed out its Fund Manager of the Year awards last week and Douglas said the sector had come a long way in this country in only a few years. "Rewind five years and it wasn't tax efficient to invest in managed funds, there was very low appetite from investors and there were very few products available," he said. He cited the emergence of new players in the market such as Brook Walter Scott, which won the international equities category, and Elevation Capital, which was a finalist in the same category, as proof of how the market had changed since then. "These new managers are coming to the market because there are more opportunities now and better structures now. "In the last five years there have been dramatic changes from a regulatory, tax and even a products perspective, and investors are being rewarded." Morningstar chief executive, Australia and New Zealand Anthony Serhan said while the Australian fund management industry is much larger, there are some things New Zealand fund managers do better. "One thing New Zealand has always been better at is having a global outlook on investing. New Zealand has probably had a higher willingness to look outside New Zealand for opportunities than Australia has had to look outside Australia." Niko Kloeten can be contacted at niko@goodreturns.co.nz

ÂŤ News Round Up: March 5

Managers warn against more KiwiSaver regulation Âť

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Comments from our readers On 7 March 2012 at 6:47 am Collin said:

While I hope that Mr. Douglas is correct with his comments it is important to point out that Morningstar publishes an annual 102 SOURCE: Good Returns report called the 'Global Fund Investor Experience'. In this report the New Zealand fund management sector is regularly criticised by Morningstar for various practices. In the 2011 edition New Zealand placed last out of 22 countries. Seems like

Skifield owner pressured to return cash Hamish Rutherford

· 16:00, Feb 06 2012

Hamish Rutherford

· 16:00, Feb 06 2012

Skifield owner pressured to return cash The owner of the South Island's Cardrona skifield is coming under pressure from one of its leading shareholders to return cash to shareholders or delist from the Australian Securities Exchange. The owner of the South Island's Cardrona skifield is coming under Christopher Swasbrook, director of Elevation Capital, pressure from one of its managing leading shareholders to return cash to last week wrote toorIan Veall, thethe chairman of ASX-listed Ltd, urging shareholders delist from Australian Securities Vealls Exchange. him to address the gap between the company's assets and its Christopher Swasbrook, depressed share price. managing director of Elevation Capital, last week wrote to Ian Veall, the chairman of ASX-listed Vealls Ltd, urging Swasbrook, whothe hasgap previously for Wellington him to address betweenlobbied the company's assets retailer and its Kirkcaldie Stains to split its retail and property assets, said Vealls depressed & share price. should either return some of its A$37.34million (NZ$48.1m) cash pile Swasbrook, who has previously for Wellington through dividend payments, buylobbied back shares from the retailer market or take Kirkcaldie & Stains toby split its retail and propertyshareholders. assets, said Vealls the company private buying out non-family should either return some of its A$37.34million (NZ$48.1m) cash pile Melbourne-based Vealls is controlled the Veall and has been through dividend payments, buy back by shares fromfamily the market or take listed on the ASX since 1950s. the company private bythe buying out non-family shareholders. A series of disposals means Cardrona Alpine whichand it acquired Melbourne-based Vealls is controlled by the Resort, Veall family has been in 1990, is its only remaining operating asset. listed on the ASX since the 1950s. Nestled the Crown Range between Wanaka andwhich Queenstown, A series near of disposals means Cardrona Alpine Resort, it acquired Cardrona among New Zealand's best resourced skifields and in 1990, isisits only remaining operating asset. frequently holds national ski and snowboarding competitions. Nestled near the Crown Range between Wanaka and Queenstown, ADVERTISEMENT The operation is also highly profitable. upgrading highCardrona is among New Zealand's best Despite resourced skifieldsto and speed lifts holds and building terrain parks and halfpipes in recent years, frequently national ski and snowboarding competitions. Cardrona has no debt, and generated an after-tax profit of $4.7m on revenue of $17.2m in the year ADVERTISEMENT ended June 30, 2011. Vealls did warn shareholders late last year that a late start to the 2011 ski season would affect profits for the current period. Swasbrook, who owns 190,000 shares in Vealls, said his call for cash to be returned did not reflect a criticism of how Vealls was managed. Its directors had successfully handled a series of disposals of Australian assets, while managing to keep Cardrona profitable in the face of stiff competition in the region, mainly from NZSki, the owners of Coronet Peak and The Remarkables near Queenstown. However, there appeared to be no strategy to reinvest other than in 103 Cardrona, which was profitable enough to fund its expansion through

SOURCE: Stuff

of Coronet Peak and The Remarkables near Queenstown. However, there appeared to be no strategy to reinvest other than in Cardrona, which was profitable enough to fund its expansion through cash flow. "You've got to be fair and reasonable to them, that they've done a good job, but the bottom line is carrying 75 per cent of the market cap in cash is probably a little bit too conservative," Swasbrook said. The company's net tangible assets are A$10.49 per share according to its last report, and its shares last traded at A$5.20. A receptionist at the head office of Vealls said no one was able to comment on the letter. The Dominion Post

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Kirkcaldie & Stains takes steps for sale Hamish Rutherford

· 19:53, Jan 29 2012

Hamish Rutherford

· 19:53, Jan 29 2012

Kirkcaldie & Stains takes steps for sale

FAIRFAX NZ

STRUGGLING TO DRAW NEW CUSTOMERS: As a retail business Kirkcaldie & Stains has been losing money for about ﬁve years. FAIRFAX NZ

STRUGGLING TO DRAW NEW CUSTOMERS: As a retail business Kirkcaldie & Stains has been Kirkcaldie is preparing to hire brand experts to try to put a losing money & forStains about ﬁve years.

price on the 149-year-old Wellington department store, amid signs of progress towards a sale. Kirkcaldie & Stains is preparing to hire brand experts to try to put a Chairman Falcon Clouston will this week hold a second withof price on the 149-year-old Wellington department store,meeting amid signs John Chandler, thea investment banker representing unnamed progress towards sale. investors who have indicated they wish to buy the landmark retailer. Chairman Falcon Clouston will this week hold a second meeting with While Chandler the declined to comment week on whether an John Chandler, investment bankerlast representing unnamed indicative offerhave for Kirks was being prepared, and Cloustonretailer. have investors who indicated they wish to buyhethe landmark been exchanging emails over Christmas and the investors are said to While Chandler declined to comment last week on whether an still have a "keen interest" in the assets. indicative offer for Kirks was being prepared, he and Clouston have Clouston said last week that if the talks appeared to be progressing he SOURCE: Stuff to hire a branding expert to attempt to establish what the 105 expected business is worth.

was clear athat the interest" main value in a assets. sale would be intangible, and still have "keen in the difficult to define. Clouston said last week that if the talks appeared to be progressing he ADVERTISEMENT expected to hire a branding expert to attempt to establish what the business is worth. While as a company Kirkcaldie & Stains has large and profitable commercial property assets, these do not include the main building in Lambton Quay in which the retail business operates. As a retail business Kirks has been losing money for about five years. While Clouston believed more of the cost of management time should be charged to the property business than was currently the case, it was clear that the main value in a sale would be intangible, and difficult to define. ADVERTISEMENT

"The big thing is the goodwill value of the brand, and what's that worth? A 150-year-old icon company like Kirks. I don't know," Clouston said when asked if he had an idea of the store's value. Kirkcaldie & Stains holds its annual shareholder meeting at the Wellington Club on February 14. The chairman wants to update shareholders on whether a deal is likely. The NZX-listed company has been inching towards a separation between its retail and property assets for months, with Elevation Capital writing to the board last year noting that the book value of the property assets was greater than the company's market capitalisation. Chandler's interest became public inof early Kirks "The big thing is the goodwill value the December brand, andwhen what's that managing director John icon Milford discovered that some ofknow," the worth? A 150-year-old company like Kirks. I don't company's major shareholders including Ronstore's Brierleyvalue. – had also Clouston said when asked if he – had an idea Sir of the been contacted. Kirkcaldie & Stains holds its annual shareholder meeting at the Clouston conceded holding with wants Chandler effectively Wellington Club on that February 14. meetings The chairman to update invited all possible bidders, although so far no rival interest had been shareholders on whether a deal is likely. forthcoming. The NZX-listed company has been inching towards a separation "You would think and thatproperty if there are other out there, it between its retail assets forpotential months, people with Elevation would bring them out board of thelast woodwork a bit." Capital writing to the year noting that the book value of the property assets was greater than the company's market capitalisation. At their ﬁrst meeting in December, Clouston said he wanted Chandler to reveal who the investors an indication whatKirks they Chandler's interest became were, publicgive in early Decemberofwhen might be prepared to pay, and what the long-term plans for the managing director John Milford discovered that some of the business were. It isshareholders expected that Chandler Sir willRon go someway company's major – including Brierley –towards had also meeting the demands, although no ﬁrm offer is expected this week. Wellington 106

SOURCE: Good Returns

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Key players discuss Kirkcaldie sale HAMISH RUTHERFORD

Last updated 05:00 21/12/2011

Kirkcaldie & Stains has taken the first tentative steps towards a sale of its department store with a brief meeting with potential buyers. Chairman Falcon Clouston and managing director John Milford met JC Capital director John Chandler in Wellington yesterday, to discuss whether Kirkcaldies' Lambton Quay department store could be put up for sale. Chandler approached Kirkcaldies on Thursday on behalf of a group of unnamed investors about whether it would consider selling its retail business. The interest became public when it became clear that some of the NZX-listed company's shareholders had also been contacted directly, forcing a market announcement. Clouston said yesterday's meeting was preliminary, with no discussion of price or disclosure of who JC Capital was representing. "He's going to come back towards the end of January about who he is, and who's behind it." While Clouston told Chandler the company had made no decision about whether it would consider a sale, he told the former ANZ banker that the January meeting should also indicate what the investors might be willing to pay. "I've got to do the best thing for shareholders." Kirkcaldies' profits are driven by its commercial property assets, with the department store struggling in difficult retail conditions. A major shareholder, Elevation Capital, wrote to Clouston in February urging him to consider that the company be split, or its retail or property business be sold, in a bid to address the undervaluation of the company. Yesterday Elevation's managing director, Christopher Swasbrook, said while he could not understand JC Capital's motivation for making the deal public, he believed a sale could add value to the business. - BusinessDay.co.nz

SOURCE: Stuff

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Kiwifruit growers to merge Jason Krupp

· 20:39, Nov 10 2011

Jason Krupp

· 20:39, Nov 10 2011

Kiwifruit growers to merge Listed kiwifruit growers Seeka Kiwifruit Industries and Satara Cooperative plan to merge in a bid to boost liquidity on the share market and shore the companies up against impact of the Psa bacteria Listed kiwifruit growers Seeka Kiwifruit Industries and Satara Coaffecting orchards. operative plan to merge in a bid to boost liquidity on the share market and shore companies companies up against said impact the Psa bacteria The Bay ofthe Plenty-based in aofstatement today the affecting orchards. deal will see Satara shareholders swap 3.14 of their NZAX-listed shares for one Seeka share, with the ratio calculated on the relative The assets Bay ofof Plenty-based companies in a statement today the net each company. The dealsaid is conditional on gaining deal will see Satara shareholders swap 3.14 of their NZAX-listed approval from Satara's shareholders. shares for one Seeka share, with the ratio calculated on the relative net assets each company. The deal is companies conditionaldetermined on gaining to "Seeka andofSatara are two like-minded approvaland from Satara's survive thrive in theshareholders. current environment," said Seeka chairman Kim Ellis. "Seeka believes that the amalgamated company will be well "Seeka andto Satara are the two impacts like-minded determined positioned weather of thecompanies outbreak of PsaV." to survive and thrive in the current environment," said Seeka chairman Kim Ellis.growers "Seeka believes that Island the amalgamated company willlast be year well Kiwifruit in the North have struggled over the positioned to weather the impacts the outbreak of PsaV." as Psa bacteria, also known as vineof canker, swept through orchards, forcing owners to destroy their vines in a bid to limit its spread. Kiwifruit growers in the North Island have struggled over the last year as Psa bacteria, alsoforced knowntoaswritedown vine canker, Satara was recently its swept assetsthrough by $4.5 orchards, million due forcing ownersoftothe destroy their vines in a bid to limit said its spread. to the impact Psa outbreak. Meanwhile Seeka net profit for the year to December 31 may fall by as much as 17 per cent compared Satara was recently to in writedown its $10.6 assetsmillion by $4.5tomillion due to the previous year,forced coming at between $11.6m. to the impact of the Psa outbreak. Meanwhile Seeka said net profit for the year to December 31merged may fallentity, by as much 17be per cent compared The companies said the which as will headed by Seeka to theexecutive previous Michael year, coming in will at between $10.6processing million toon $11.6m. chief Franks, concentrate the most efficient sites with the best coolstore configuration, allowing it The"realise companies saidcapacity" the merged which willThe be headed Seeka to surplus andentity, pay down debt. Board ofbySeeka chiefinclude executive Michael Satara Franks,director, will concentrate processing on the will an existing Hendrik Pieters. most efficient sites with the best coolstore configuration, allowing it to "realise surplus capacity" and pay down debt. Boardwill of Seeka The company said that post amalgamation SataraThe growers have will option includeto ancontinue existing to Satara director, Pieters. the operate underHendrik the same terms and conditions recently agreed with Satara for the 2012 packing season, or elect to choosesaid Seeka's packing charges for Satara 2012. From 2013 onwards, The company that post amalgamation growers will have all of continue the amalgamated offered theand same thegrowers option to to operateentity underwill thebesame terms packing charges. conditions recently agreed with Satara for the 2012 packing season, or Satara shares were unchanged yesterday at 55 cents, having last 109 traded in May, with Seeka shares also unchanged at 92 cents, having

SOURCE: Stuff

packing charges. Satara shares were unchanged yesterday at 55 cents, having last traded in May, with Seeka shares also unchanged at 92 cents, having last traded on November 8. BusinessDay

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BusinessDay

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Germans in $137m T&G deal Nick Krause

· 16:00, Nov 10 2011

Germans in $137m T&G deal Nick Krause

· 16:00, Nov 10 2011

Turners & Growers, the NZX-listed fruit and vegetable marketer, had been courted by several parties before yesterday's $137 million offer was signed. Turners & Growers, the NZX-listed fruit and vegetable marketer, had Munich-based giant BayWa, a trading and services giant, has been courted by several parties before yesterday's $137 million offer announced it intends making a full takeover offer for 100 per cent of was signed. T&G, which values the company at $216.5m. Munich-based giant BayWa, a trading and services giant, has BayWa has reached agreement to take the 63.46 per cent stake held announced it intends making a full takeover offer for 100 per cent of by Sir Ron Brierley's Guinness Peat Group. It is offering to buy out the T&G, which values the company at $216.5m. remaining shareholders at the same price of $1.85 a share but the offer is has not reached conditional on othertoshareholders accepting. BayWa agreement take the 63.46 per cent stake held by Sir Ron Brierley's Guinness Peat Group. It is offering to buy out the A GPG spokesman told BusinessDay that BayWa was open to not remaining shareholders at the same price of $1.85 a share but the necessarily owning 100 per cent of the company. But one of the key offer is not conditional on other shareholders accepting. conditions of its offer – BayWa's desire to have majority control – would satisfied by shareholding alone. was open to not A GPG be spokesman toldGPG's BusinessDay that BayWa necessarily owning 100 per cent of the company. But one of the key GPG said others expressed interested in its T&G stake after it conditions of its offer – BayWa's desire to have majority control – conducted a strategic review of the company, the outcome of which would be satisfied by GPG's shareholding alone. was announced in February. GPG said others expressed interested in its T&G stake after it "It became clear there was enough interest in the business to run a conducted a strategic review of the company, the outcome of which traditional sales process albeit confidentially because you don't know was announced in February. where these things are going to lead," said the company spokesman, who did notclear wantthere to bewas named. "It became enough interest in the business to run a traditional sales process albeit ADVERTISEMENT confidentially because you don't know "BayWa was an interested party. There said werethe other partiesspokesman, interested where these things are going to lead," company in thedid company during process during the last six months. Their who not want to bethe named. approach and presentation of offer led us, as the major shareholder, ADVERTISEMENT to assess that it [BayWa's price] was a reasonable deal for GPG shareholders." Chris Swasbrook, managing director of Elevator Capital Management which is one of the minority shareholders, said his company intended accepting the offer. Its Capital Value Fund has a 0.63 per cent position in T&G built up since January 2009 at an average cost of $1.35 a share. "We'll just accept and move on. Sometimes it's just better to move on 111 in these situations and that's our plan."

SOURCE: Stuff

since January 2009 at an average cost of $1.35 a share. "We'll just accept and move on. Sometimes it's just better to move on in these situations and that's our plan." It was unlikely the offer would be increased, he said, or that a competing proposal would emerge. The offer is conditional on approval from the Overseas Investment Office and the German Federal Cartel Office. It is understood BayWa executives intend to meet T&G before the formal offer is sent out, which has to happen within the next 30 days. GPG first bought into T&G in 1994. In June it announced at its annual meeting in Auckland that it would begin an orderly sell-down of its assets and return the money to shareholders. GPG said it had an investment portfolio worth $1.28 billion as of September 2010, not including thread maker Coats, an unlisted British-based company 100 per cent owned by GPG. In June, it said T&G was one of its largest investments and was "a great deal more valuable than is currently recognised in the share price, and it is by no means alone in that respect amongst our holdings". The other holdings include a 35 per cent stake in insurer Tower, three investments in Australia and a large brewery asset in Britain. BayWa Deal Munich-based BayWa agreed to buy GPG's 63.46 per cent stake in T&G for $1.85 a share. The offer price represents a 9 per cent premium to the closing share price of $1.70 on November 9. There is no minimum acceptance condition. BayWa is an international trading and services company operating in the core fields of agriculture, building materials and energy. In its fruit business unit, the group is the largest supplier of pipfruit from organic production. In the 2010 financial year BayWa, listed on the Frankfurt Stock Exchange, had total revenues of euro 8 billion and euro 228m ebitda. Turners & GrowersT&G, New Zealand's leading distributor, marketer and exporter of premium fresh produce, was founded in 1897.

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Exchange, had total revenues of euro 8 billion and euro 228m ebitda. Turners & GrowersT&G, New Zealand's leading distributor, marketer and exporter of premium fresh produce, was founded in 1897. It has about 1400 staff and is listed on the NZX. Sales of $599m in 2010. Its core business is in the export and domestic sale of apples, kiwifruit, tomatoes and other produce. It owns FloraMax, New Zealand's largest specialist ďŹ‚ower auction company within Auckland, Wellington and Christchurch. It is unique to Turners & Growers in that it is the only division that auctions product. BusinessDay

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Kirks' days may be numbered 'Chalkie'

· 16:00, Nov 08 2011

Kirks' days may be numbered 'Chalkie'

· 16:00, Nov 08 2011

It is no coincidence that those two veteran investment knights of the realm Sirs Ron Brierley and Selwyn Cushing have both ended up prominently positioned on the share register of Wellington institution Kirkcaldie & Stains. that those two veteran investment knights of the It is no coincidence realm Sirs Ron Brierley and Selwyn Cushing have both ended up Cushing and positioned his son David 17.1 per cent of company. Brierley prominently on hold the share register of the Wellington institution has 5.7 per&cent. The two knights, ex-Brierley Investments colleagues, Kirkcaldie Stains. may have noticed that Kirkcaldies runs a department store, but Chalkie in a peripheral Mere What lured Cushingreckons and his only son David hold 17.1 way. per cent ofdetails. the company. Brierley them was the indefinable scent that has been driving them both for has 5.7 per cent. The two knights, ex-Brierley Investments colleagues, years – the whiff of undervalued may have noticed that Kirkcaldiesassets. runs a department store, but Chalkie reckons only in a peripheral way. Mere details. What lured Kirkcaldies hasindefinable existed since 1863. It has is inextricably linked with them was the scent that been driving them both for Christmas shopping for Wellingtonians in the way that Smith & years – the whiff of undervalued assets. Caughey's is for Aucklanders and Ballantynes for those in Christchurch. Kirkcaldies has existed since 1863. It is inextricably linked with Christmas shopping for Wellingtonians in the way that Smith & But Kirkcaldies seen better days. In the year August Caughey's is forhas Aucklanders and Ballantynes fortill those in it slumped to a $54,000 pre-tax loss compared with a $1.37million pre-tax profit Christchurch. the year before. But Kirkcaldies has seen better days. In the year till August it slumped In current form theloss company has been on NZX since 2001 to its a $54,000 pre-tax compared with listed a $1.37million pre-tax profit and has more than 1300 shareholders. Because of various the year before. restructurings and redevelopments, Kirkcaldies has not actually owned the building its name has in Lambton Quay many years. In its currentthat formbears the company been listed onfor NZX since 2001 and has more than 1300 shareholders. Because of various Seeing this as aand weakness, the company in 2001has bought the adjacent restructurings redevelopments, Kirkcaldies not actually owned Harbour City Centre retail building for $29m. the building that bears its name in Lambton Quay for many years. ADVERTISEMENT This allowed more space for the department store to expand and Seeing this as a weakness, the company in 2001 bought the adjacent provided a source of rental income – $4m to $5m a year – to back up Harbour City Centre retail building for $29m. the retail arm. The strategy has worked. The rental income has been strong and has helped supportADVERTISEMENT the whole business.

The company decided not to treat the building as an investment property, but instead value it as a ﬁxed asset. Kirkcaldies' 2011 ﬁnancial accounts valued the building at $23.26m. However, directors cited independent valuations suggesting that once current earthquake strengthening and refurbishment of the building was completed, it would have a market value of $48.65m. SOURCE: Stuff

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So, to put this into language that Brierley and Cushing most deﬁnitely

cited independent valuations suggesting that once current earthquake strengthening and refurbishment of the building was completed, it would have a market value of $48.65m. So, to put this into language that Brierley and Cushing most definitely understand, there is $25.4m of hidden value not currently recognised in Kirkcaldies' accounts. Kirkcaldies' official stated net tangible assets per share figure – theoretically what shareholders would each get if the company cashed up all its assets – is $1.81. But that "hidden" $25.4m of property value alone equates to $2.48 for each of the 10.25m Kirkcaldies shares on issue. Add that to the stated net tangible assets value and you have a potential actual value of $4.29 per share – compared with a current share price of just $2.72. Did someone say undervalued assets? What is likely to happen next seems fairly obvious. The two sirs will almost certainly campaign to "unlock the value" of that property investment. Chalkie reckons Kirkcaldies has seen this one coming for a while. The Cushing family started buying Kirkcaldies shares in 2004 – though the buying has really stepped up in the past two years. A glance at previous Kirkcaldies annual reports suggests that Brierley has probably had a significant slice of the company since at least 2006. He only breached the 5 per cent public disclosure level in September this year. In the event the first public call to do something about unleashing the unrealised value in the property actually came from another Kirkcaldies investor, Elevation Capital, earlier this year. Kirkcaldies to date has been non-committal. Chairman Falcon Clouston told BusinessDay in September that no decision had been made. However, work was going on within the company that would make a splitting out of the property easier. "I'm not saying we're breaking the company up, but we're really tidying everything up," he said. The biggest shareholder in Kirkcaldies is a company called LQ Investments. It bought its 19.4 per cent stake for $5.8m in 2006. Chalkie does wonder if this acquisition was a defensive move encouraged by Kirkcaldies, aware even then of the looming presence of the Cushings and Brierley. Among those involved in LQ are Marc Lindale, Brian Fitzgerald and Graham Jackson. In 2006 all of them were senior executives for the

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of the Cushings and Brierley. Among those involved in LQ are Marc Lindale, Brian Fitzgerald and Graham Jackson. In 2006 all of them were senior executives for the now collapsed Strategic Finance group. What their attitude to a sale or separation of the property interest would be is not clear, though given that their stake is currently worth about $350,000 less than they paid for it, they may too now be of a view that getting direct value out of the property investment is the way to go. Chalkie reckons Kirkcaldies will be under pressure to put forward measures at its next annual meeting, probably in February, to either propose a splitting of the company or a sale of the property. If the company doesn't itself propose this then your columnist reckons Brierley and the Cushings themselves will push for it. If the board is not responsive, it is probable the two sirs could muster enough voting support to get control of the board and push through their plans anyway. Your columnist reckons that Brierley and the Cushings would probably favour a straight-out sale of the property followed by a – presumably hefty – capital return to shareholders. Then they would presumably take their leave. Chalkie reckons the Cushings alone, having paid about $4.6m for their stake, could easily reap a profit of $3m to $4m. But what would happen to Kirkcaldies after the property is divested? Its retail business is faced with diminishing returns. Ten years ago the store had annual turnover of $35.4m. If you inflation-adjust the 2001 revenue figure it should have translated to sales of about $46.4m a decade on. But actual sales in 2011 were just $35.9m. In 2001 the retail arm had after-tax earnings of $2.1m. This year there was a $465,000 loss. Over the same period dividends have plummeted from 35c a share to just 5.5c a share. The gross yield for shareholders has dropped from around 7 per cent to about 2 per cent. The 2001 decision of Kirkcaldies to buy the Harbour City Centre was a prescient one. Owning the building has insulated the whole Kirkcaldie business. But without the property? Chalkie reckons there might be a broader issue here that goes beyond Kirkcaldies. Has commercial logic now reached a point where every business is simply seen as something to be broken up and the profits from that process pocketed? If so, is that how the country as a whole will ultimately grow? Surely there is room to accept that a company might not make as much money short term running an ongoing department store

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ultimately grow? Surely there is room to accept that a company might not make as much money short term running an ongoing department store business as it can flogging its commercial property – but just maybe that is OK sometimes. Maybe a business doesn't always have to go down the path that simply puts a short-term bulge in shareholders' wallets. Perhaps there is room for longer-term objectives. The Kirkcaldies shareholders will do what they feel they have to do. But unless surplus money is left in the company after any sale of the property – and frankly it is hard to imagine Brierley and Cushing agreeing to that – then Kirkcaldies department store may soon find itself right up against the tide. Perhaps it could be sold as a going concern and become part of another retailing group, retaining the name and appearance of a stand-alone business. But Chalkie reckons once the property assets are sold then the days of Kirkcaldies might actually be numbered. Some people are likely to get even richer along the way. Wellington and the country as a whole could be poorer. - David Hargreaves is a former Fairfax business reporter and columnist now writing freelance. Chalkie's name is derived from the people who used to "chalk" up the share prices on trading floors before the market went electronic. The Dominion Post

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SOURCE: Sunday Star Times

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SOURCE: Stuff

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SOURCE: Sunday Star Times

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SOURCE: Sunday Star Times

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Delegat's higher bid backed MARTA STEEMAN

Âˇ 16:00, Nov 12 2010

Delegat's higher bid backed MARTA STEEMAN

Âˇ 16:00, Nov 12 2010

Delegat's Wine Estate has lifted its takeover bid for Oyster Bay Marlborough Vineyards (OBV) to 208c, and received the backing of independent directors. Delegat's Wine Estate has lifted its takeover bid for Oyster Bay But the 208c Vineyards is well short of the grape the grower's 486c Marlborough (OBV) to Marlborough 208c, and received backing of net tangible asset backing a share, which was released with its annual independent directors. result for the year to June 2010. That is the amount shareholders would if well the company wasMarlborough wound up with assets sold for the But thereceive 208c is short of the grape grower's 486c values in theasset accounts and aliabilities repaid. net tangible backing share, which was released with its annual result for the year to June 2010. That is the amount shareholders The Delegat's bid is company being made atwound a low point in the history would receive if the was up with assets sold of forthe the local industry withand wine prices and vineyard values falling. valueswine in the accounts liabilities repaid. The largest shareholder behind Delegat's, family The single Delegat's bid is being made at a low point inthe theCushing history of the with 4.19 per cent, was not giving the higher price a ringing local wine industry with wine prices and vineyard values falling. endorsement yesterday. The single largest shareholder behind Delegat's, the Cushing family David Cushing said was "it isnot a step in the direction" after Delegat's with 4.19 per cent, giving the right higher price a ringing announced it was raising the offer from 180c to 208c. Oyster Bay endorsement yesterday. shareholders are offered as an alternative one Delegat's share for every Bay share. David Oyster Cushing said "it is a step in the right direction" after Delegat's announced it was raising the offer from 180c to 208c. Oyster Bay Christchurch estate agent Rankin has 3 per cent andfor could shareholders real are offered as an David alternative one Delegat's share not beOyster contacted yesterday but like the Cushings he regarded 180c as every Bay share. "too light". Christchurch real estate agent David Rankin has 3 per cent and could ADVERTISEMENT Cushing said he would beingbut reading theCushings independent appraisal of the not be contacted yesterday like the he regarded 180c as offer by Grant Samuel and Associates very carefully when it was "too light". released next week and he intended to speak with other shareholders ADVERTISEMENT with sizeable stakes in Oyster Bay. Some of the independent appraisals used several assumptions that could play a critical part in the outcome of what was a fair price to pay. "I just want to have a critical look at it," Cushing said. Oyster Bay has a long term supply agreement with Delegat's which takes all its grapes, an advantage Cushing said, when other vineyards have had to leave grapes on the vine because of an oversupply. Delegat's set up Oyster Bay in 1999 through a public offer of shares and it now supplies 25 per cent of Delegat's grape needs. SOURCE: Stuff

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have had to leave grapes on the vine because of an oversupply. Delegat's set up Oyster Bay in 1999 through a public offer of shares and it now supplies 25 per cent of Delegat's grape needs. The independent directors of Oyster Bay, 55 per cent owned by Delegat's, unanimously recommended acceptance. They are chairman Sandy Maier, Ruth Richardson and Mark Peters. They hinted that it had taken a lot of work to achieve the increase in price and there were robust discussions with Delegat's over how Oyster Bay was valued. The lift in price "follows several exchanges of views with Delegat's around appropriate valuation metrics which resulted in Delegat's raising the cash component of its takeover offer from 180c per OBV share to 208c per OBV share," the independent directors said. Maier said the company would release its target company statement along with an independent appraisal next week to help shareholders make their decisions. The target company statement would contain the full details of the independent directors' decision to recommend acceptance, he said. The independent directors approached Delegat's last month after a review of the company's capital structure by First NZ Capital which presented a number of options for the company. Delegat's has fought a ďŹ ve year battle with maverick winegrower Peter Yealand over control of Oyster Bay and settled in July with a 180c a share deal with him for his 4.8 per cent stake. Another shareholder, Elevation Capital, said last week in a newsletter to investors in its funds that Delegat's saw an opportunity when Oyster Bay's share price was weighed down by bad news about the wine industry. Elevation fund manager Chris Swasbrook said he would be prepared to buy more Oyster Bay shares in a deeply discounted right issue that could be used to clear Oyster Bay's debt. Swasbrook said the 180c offer valued Oyster Bay's land and vineyards at $61,000 per hectare when the annual accounts for the June 2010 year implied a value of $112,473 a hectare. Swasbrook said the deal was a test for the independent directors and in his view "a case study for either the right way to act for minority investors or the wrong way to act." Two weeks ago Delegat's paid more than $2m for the Marlborough 123 23-hectare Gravitas winery in receivership. That implies it paid more

investors or the wrong way to act." Two weeks ago Delegat's paid more than $2m for the Marlborough 23-hectare Gravitas winery in receivership. That implies it paid more than $86,950 a hectare. BusinessDay

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For whom the merger bell tolls By ROB STOCK

· 16:00, Feb 06 2010

For whom the merger bell tolls By ROB STOCK

· 16:00, Feb 06 2010

Elevation Capital's Chris Swasbrook.

In the blue corner, the conservative directors of sleepy South Island Elevation Capital's Chris Swasbrook. building society CBS Canterbury. In the red corner, a cabal of Auckland investors with an eye for opportunity. In the blue corner, the conservative directors of sleepy South Island Chris Swasbrook, wearing red, hasIncome outcorner, swinging. Criticising the building society CBS Canterbury. the red a cabal of Auckland CBS management for for "inertia and the lack of any clear strategic investors with an eye opportunity. direction", the Elevation Capital fund manager has lost patience and is demanding a better deal for shareholders. Chris Swasbrook, wearing red, has come out swinging. Criticising the CBS management for "inertia and the lack of any clear strategic "The current returns to shareholders currently direction", the Elevation Capital fund are manager hasunacceptable lost patience and and is we have yet to see clear evidence on how proﬁtability can be CBS Canterbury's Gary Leech. demanding a better deal for shareholders. restored," he said. "The current returns to shareholders are currently unacceptable and Sparked report in the Sundayon Star-Times that Australian we have by yetato see clear evidence how proﬁtability can be community bank Bendigo had registered trademarks for "New Zealand restored," he said. Community Bank", Swasbrook fears Ashburton-based CBS Canterbury, formed from the merger of the Canterbury Building Society and Loan and Building Society in early 2008, risks being gazumped from overseas. "What concerns us is that the opportunity that we see for CBS in creating a New Zealand-owned bank servicing numerous communities 127 SOURCE: Stuff within New Zealand looks set to be taken away from us, by an

CBS Canterbury's Gary Leech.

Sparked by a report in the Sunday Star-Times that Australian community bank Bendigo had registered trademarks for "New Zealand Community Bank", Swasbrook fears Ashburton-based CBS Canterbury, formed from the merger of the Canterbury Building CBS Canterbury's Gary and Leech.Building Society in early 2008, risks being Society and Loan gazumped from overseas. Sparkedconcerns by a report the the Sunday Star-Times Australian "What us isinthat opportunity thatthat we see for CBS in community bank Bendigo had registered trademarks for "New Zealand creating a New Zealand-owned bank servicing numerous communities Community Bank", Swasbrook Ashburton-based CBS within New Zealand looks set tofears be taken away from us, by an Canterbury, formed from the of theinertia Canterbury Building to Australian corporation, due tomerger the board's and reluctance Society and Loan and Building Society in early 2008, being engage in meaningful merger discussions to begin to risks create requisite gazumped fromcompete overseas. scale to better in the market," Swasbrook said. "What concerns us is that opportunity we see for CBS in Cross The merger Swasbrook hasthe in mind is with that the unlisted Southern creating New Zealand-owned servicing numerous Building a Society and his outburstbank appears designed to get communities CBS within New Zealand looks set to be taken away us,Cantabrians, by an Canterbury's shareholders, predominantly loyal from elderly to Australian due to the board's and reluctance to start askingcorporation, questions of their board, whichinertia he believes has to change engage in meaningful merger discussions to begin to create requisite as it lacks the experience and skill set to grow the business. scale to better compete in the market," Swasbrook said. Swasbrook, who has a stake inADVERTISEMENT both companies, has a clear end game. The merger Swasbrook has in mind is with the unlisted Southern Cross He envisions CBSand Canterbury, withappears its loandesigned book of almost $500 Building Society his outburst to get CBS million mainlyshareholders, residential mortgages, combining with Southern Crossto Canterbury's predominantly loyal elderly Cantabrians, to create a listed company withboard, $100m of equity and $1has billion of start asking questions of their which he believes to change loans. as it lacks the experience and skill set to grow the business. ADVERTISEMENT The result would "rerate" the value of his investments upwards and the combined entity could raise more capital to expand further â€“ perhaps using the Bendigo Bank model of providing banking services through branches opened by and owned by local communities.

CBS shares currently trade on the NZAX secondary board at around $3, down from highs of $6 in 2006, valuing it at about $36m, despite having net assets of just over $50m or $4 a share. 128

Southern Cross shares are trading at just 45c on a grey market run by

CBS shares currently trade on the NZAX secondary board at around $3, down from highs of $6 in 2006, valuing it at about $36m, despite having net assets of just over $50m or $4 a share. Southern Cross shares are trading at just 45c on a grey market run by sharebroker Forsyth Barr, a huge discount to their net asset backing of $1.03 a share, and valuing it at just over $23m. Swasbrook insists that "setting the first domino falling" with a merger of the two companies could potentially knock others over, prompting other building societies like the fiercely independent mutuals Napier, Hastings and Wairarapa to join up, and perhaps even SBS, the country's only mutual bank. CBS Canterbury's chairman Gary Leech would not outline the longer term strategy for the society, but said the board continued to discuss some key ideas: seeking a banking licence, becoming "Canterbury's bank", expanding into other regions, in addition to the idea of a merger with Southern Cross. "Nothing's off the table in terms of our strategy for the future," Leech said. "But we are a tad conservative and I think that has served us well. "We don't aspire to be like the big four banks. We believe we have a prominent part to play in the next tier of finance in New Zealand and the communities in which we are. If we were to move to being a bank it would be quite different from the main banking groups," he said, professing admiration for the Bendigo Bank community banking model. "If we didn't have an aspiration to get a banking licence, then I agree we might be failing," he said, but "we are still in the middle of putting together a merger. The financial crisis put speed bumps in front of us. We haven't bedded down the current merger. To have tried to put another merger together in the middle of the financial crisis would have been suicidal. It would have been dangerous." Swasbrook and Southern Cross chief executive Bob Smith say CBS Canterbury would need greater scale to cope with the demands of being a bank, and that could provide a catalyst for its board to sell the idea of a merger to its smaller shareholders. But Smith said it was up to CBS to take the initiative. "We do believe consolidation would be a good thing for the industry, but it is really a CBS decision. It is not our decision." He remained hopeful though. "I believe we will see some moves this year. The direction is now

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He remained hopeful though. "I believe we will see some moves this year. The direction is now becoming clearer as to the environment and I think there is a great opportunity for healthy locally owned banks." The decision really does lie with the predominantly South Island shareholders – any merger would have to be approved by 75% of CBS Canterbury's shareholders, but no shareholder can vote more than 10% of the company's stock. Most of them got their shares for free when the two societies listed on the NZAX, says Swasbrook. They are not natural shareholders, see their shares as a bonus, do not understand their value or the return they should be getting, says Swasbrook. CBS Canterbury has no plans to begin that discussion just yet, though Leech said the board would consider a response to Swasbrook's criticism. "CBS is not blinded by parochialism or has blinkers on to the real world," Leech said, arguing CBS's profitability problems had been the results not of bad debts, but wild interest rate fluctuations during the financial crisis. He said CBS would remain conservative as that was the best longterm strategy. He also recalled the troubles that led to Southern Cross taking a shareholding. It acquired the stake from Property Finance Group, a listed finance company part-owned by private investment consortium Oceania & Eastern, which owns 28% of Southern Cross. The implication is clear. North Island money does not always know what's good for it, by contrast to a steadier South Island outlook. "We have done pretty damn well through the financial crisis," said Leech. THE MAJOR PLAYERS SOUTHERN CROSS BUILDING SOCIETY Founded in 1923 60 North Island agencies It has equity of $52m, $276m of loans and $358m of deposits. In June 2007 it was converted into a shareheld society in a carpetbagging orchestrated by private investment company Oceania & Eastern. The shares are not listed. CBS CANTERBURY Created by the merger of Canterbury Building Society and Loan & Building Society in February 2008 CBS was founded in 1875 as the Ashburton Permanent Building and Investment Society. It listed on the NZAX alternative130 sharemarket in July 2004. Loan & Building Society was founded in 1893. In

Oceania & Eastern. The shares are not listed. CBS CANTERBURY Created by the merger of Canterbury Building Society and Loan & Building Society in February 2008 CBS was founded in 1875 as the Ashburton Permanent Building and Investment Society. It listed on the NZAX alternative sharemarket in July 2004. Loan & Building Society was founded in 1893. In November 2003 it listed on the NZAX. CBS Canterbury has equity of $50.6m, a $439m book of mainly home loans, and $466m of deposits. It has branches in Ashburton, Rangiora and the Christchurch suburbs of Riccarton and Sydenham. Sunday Star Times

ÂŠ 2017 Fairfax New Zealand Limited

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SOURCE: New Zealand Investor

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SOURCE: Sunday Star Times

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SOURCE: Stuff

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Tainted directors not wanted By ROB STOCK

· 15:00, Nov 21 2009

By ROB STOCK

· 15:00, Nov 21 2009

Tainted directors not wanted

Pumpkin Patch chairman Greg Muir.

One of Patch the sharemarket's own prospectus watchdogs has called for Pumpkin chairman Greg Muir. directors who served on collapsed finance companies to be banned from holding directorships in listed companies. One of the sharemarket's own prospectus watchdogs has called for Chris Swasbrook, a member of thefinance NZX sub-listing committee which directors who served on collapsed companies to be banned reviews new prospectuses, "a line in the sand must be drawn" if from holding directorships said in listed companies. investors were to regain trust in the market. Chris Swasbrook, a member of the NZX sub-listing committee which In a letter to prospectuses, investors in his Elevation fundmust this month, he if reviews new said "a line Capital in the sand be drawn" said: "It iswere my view and Itrust have in conveyed this to the NZX – that any investors to regain the market. director association with a finance company/fund failure that saw In a lettersuffer to investors in hiscapital Elevation Capital month, he of investors permanent losses whilefund theythis were a director said: "It Diligent is should my view and that IHihave conveyed this to the – that any Goodman, and mean Eastern Fi director Richard Bettle. the entity those directors are not NZX eligible for NZX director association with a finance company/fund failure that saw listed company directorships." investors suffer permanent capital losses while they were a director of He also accused directors airbrushing the entity shouldsome meanlisted that company those directors are of not eligible fortheir NZX pasts. company directorships." listed "I have been dismayed recently to see that it seems those who have been on the board of finance companies which have seen investors suffer `permanent capital loss' feel that they can omit such important details from their CV.

SOURCE: Stuff

"I personally question why a company that was seeking outside

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Goodman, Diligent and Eastern Hi Fi director Richard Bettle.

He also accused some listed company directors of airbrushing their pasts. Goodman, Diligent and Eastern Hi Fi director Richard Bettle.

"I have been dismayed recently to see that it seems those who have been on the board of finance companies which have seen investors He also`permanent accused some listed company directors ofomit airbrushing their suffer capital loss' feel that they can such important pasts. details from their CV. "I have been question dismayedwhy recently to see that it seems those who have personally a company was seeking outside been on the board of finance which seen investors investor capital would want a companies director that had have any (present or suffer `permanent loss' feel that theygiven can omit such important former) associationcapital with finance companies in a large majority details of casesfrom theytheir wereCV. nothing more than Ponzi schemes – but I guess it reflects on what one can only describe as a dire lack of talent." "I personally question why a company that was seeking outside ADVERTISEMENT investor would wantfrom a director hadcompanies any (present or There arecapital several directors failed that finance holding former) association with finance companies in athat large majority directorships in listed companies, and it doesgiven appear not all are of cases they were nothing Ponzi schemes – but I guess it being entirely upfront aboutmore theirthan pasts. reflects on what one can only describe as a dire lack of talent." Pumpkin Patch chairman Greg Muir previously served as chairman of ADVERTISEMENT the troubled Eric Watson and Mark Hotchin-owned Hanover Group, though his biography on the Pumpkin Patch website fails to mention it. It does list other past roles with The Warehouse, Lion Nathan and Tourism New Zealand. Hanover has warned investors that it is no longer realistic to expect to get all their capital back, with a figure of around 70 cents in the dollar more realistic. Muir said there was no logic to Swasbrook's call, saying the duties of a finance company director under law were the same as a director of an NZX company, but he denied he was papering over his past. "My profile has been such that hiding it would be a futile exercise. There's been no attempt to hide it. It's been removed [from my CV] because it is no longer current." He said it was common practice not to list all past directorships.

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past. "My profile has been such that hiding it would be a futile exercise. There's been no attempt to hide it. It's been removed [from my CV] because it is no longer current." He said it was common practice not to list all past directorships. Richard Bettle is a director of listed firms Goodman Property Trust, Diligent and Eastern Hi Fi, but while his biography on the Goodman and Diligent websites mentions a long list of roles, it excludes a directorship of Dominion Finance, which looks likely to return a mere 10 to 25 cents in every dollar that mum-and-dad debenture investors put into it. Bettle denied he was trying to hide it, and in prospectuses he was careful to ensure it was there, as in the new bond prospectus for the property trust. "Whenever we have gone out looking for dough, I have been open about it," Bettle said. "I'm not trying to hide it, not that I want to highlight it." He didn't want to comment on Swasbrook's stance, but added he had had many corporate roles. "This [Dominion Finance] is the first one to go south." The biography of NZ Windfarms director Wyatt Creech similarly does not mention his directorship of Blue Chip, either in its latest annual report, or on its website. Not every director is so reticent about their finance company links. Ruth Richardson is a director of Syft Technologies, but makes no secret in its latest annual report that she's also a director of the disastrous IMP Diversified Income Fund. Similarly, Denis Thom, chairman of Kirkaldie & Stains, reveals his chairmanship of Strategic Finance, a company which has admitted that, of its $534 million of loans, just $325m looked collectable. Sunday Star Times

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SOURCE: The Independent

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SOURCE: Sunday Star Times

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14 AUGUST 2008

News

Elevation on attack over Satara return DENISE MCNABB

Criticism of the performance of the kiwifruit industry has re-emerged since talk of a mega-merger between the largest players was raised by the Independent last week. The idea of one large organisation has met with mixed reactions. Several smaller growers have contacted the newspaper to defend the performance of the labour-intensive industry, saying it is much better than that of the big packhouse businesses. Elevation Capital, the largest shareholder in postharvest co-operative Satara, has been vociferous in its attack on the co-op’s performance and believes the only way it can survive is through consolidation. The boutique New Zealand investment manager has 1.9m shares (6%) in Satara. Managing director Chris Swasbrook said this week the value destruction in the co-op had been significant and all stakeholders, not just his firm, needed to demand improved governance. ‘‘If returns still do not improve – consolidate across the industry,’’ he said. ‘‘Management and boards in the pack-house industry have continued to invest in infrastructure despite declining OGR (orchard gate returns) over the past five years.’’ Satara increased its net debt from $8 million in 2004 to $22m in 2007 despite OGR declining from $4.32 a tray in 2004 to $3.13 a tray in 2007. Swasbrook said his company had invested in Satara because it believed the industry had a lot of value that could be unlocked. He said the only way this could be achieved was by major consolidation. He said the industry ‘He [Swasbrook] appears to have was intensive with little empathy for the kiwifruit a lot of money tied industry or its growers and is up in plant and determined to achieve his objective machinery. purely for the benefit of Economies of Elevation Capital.’ scale on that front Satara chairman Andrew Fenton could be achieved by reducing those costs through merged entities. ‘‘We have to stop all export duplications. Capital is precious and we have to fight for our place on the international stage.’’ Swasbrook said Satara’s board had continued to invest in an orchard division to increase pack-house volumes at considerable cost to all shareholders when the division continued to incur losses. ‘‘Whenever an industry or a company with overcapacity embarks on a campaign to secure volumes by leasing or growing their own crop this should raise a red flag to the capital providers. ‘‘Satara is a text-book case in value destruction. The chairman and a large percentage of the present board have presided over the destruction of more than $8.7m in pre-tax value to shareholders via the orchard division losses between 2004 and 2007 alone.’’ Satara chairman Andrew Fenton responded to some of Elevation Capital’s criticism when he told the annual meeting in May that while there was no escaping the reality of the kiwifruit business environment, it was a time ‘‘for cool heads and careful decisions’’. ‘‘It is not time to turn the company upside down,’’ he said. He was critical of Elevation Capital for slating not only himself but also the company it had invested so heavily in. Yet, he said, Satara had met Elevation’s investment criteria and it continued to invest in it. ‘‘He [Swasbrook] appears to have little empathy for the kiwifruit industry or its growers and is determined to achieve his objective purely for the benefit of Elevation Capital.’’ Fenton said an improvement in OGR of $1 a tray would ensure most growers were viable, but added Satara was in a strong position to weather the downturn of increased costs. While 2007 was one of the best performances to date operationally, the co-op had cushioned cost increases from suppliers by not fully charging them on. Fenton said Elevation Capital knew the hybrid cooperative structure of Satara from the time it first started buying shares several years ago. He said it had confirmed it supported a capital structure that inherently discounts the value of the shares

Buying a new car? You won’t drive away thinking you’ve just done a hot deal, only to discover you’ve just

’’

SOURCE: The Independent

Mixed reactions over forming one large organisation.

compared to asset backing because grower shareholders control 60% of the votes in the company. A poll of shareholders at the meeting rejected bids by Elevation for changes, including getting rid of a shareholder cap of 10% and selling the business if a specified return on assets was not achieved. Shareholders also rejected an increase in director remuneration.

been done. That’s Our Price Promise. Most car companies give discounts to try to sell more cars. You can get 15% - 20% pretty easily. But it’s nowhere near the discounts given to the really high volume car buyers. The car companies just won’t give you the discount given to the top 15 or so car buying companies in New Zealand who have between 300 and 3,000 cars each. And it’s the discount to these companies that gives you the “I lost 30% when I drove it out the door” sinking feeling. It costs you a lot of money. We know, we used to run our business in the traditional way too. At Honda, we’ve recognised that you deserve respect and that everyone should pay the same transparent best price. So we set the price of a new Honda at the best value for money we can deliver on and hold it as long as we can, and we don’t budge on this price. Not even for the big guys. It’s called Our Price Promise, and since we introduced it in 2000 there has been a signiﬁcant improvement in the affordability and resale values of every new Honda we’ve sold. Our Price Promise gives you certainty that you won’t lose thousands of dollars unnecessarily because of big discounts given to the lucky few. It means when you choose to sell your Honda it will be worth more, and you won’t wake up to discover you have just been done. To ﬁnd out more about the positive effect Our Price Promise is having on the car market, call us today on 0800 255 666, go to www.honda.co.nz or visit a Honda agent.

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SOURCE: Mercantile Gazette

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SOURCE: New Zealand Farmers Weekly

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Editor’s Choice

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Apr 2008

Thu 17

Unhappy ending

Super union targets kids with tax money Union trio plans merger and recruitment drive

Musical chairs

Ben Thomas

Battle for Omaha

Omaha Beach’s future is being fought out in court over a computer entrepreneur’s plans for an 800-home village Page 38

Trading places

China’s sorted – now it’s time for Japan and Korea to start talking seriously about trade with New Zealand Page 47

Finance success

Commerce Minister Lianne Dalziel might not have sung a song but the annual Infinz awards was a good laugh all the same. Find out who won what Page 52

NBR Online Exclusive News: Fisher & Paykel closes Dunedin factory www.nbr.co.nz/article/430-jobsgo-fps-dunedin-factory Seccom awakes from its slumber www.nbr.co.nz/seccom Turkey steps into the Pacific www.nbr.co.nz/pacific

NBR Special Report Transport and Logistics

Fund seeks big changes at Satara Sarah McDonald

The film company that produced The Chronicles of Narnia goes to court over a collapsed marquee Page 8 State-owned Orcon picks up 1600 rural customers as Telecom hands over its wireless broadband Page 10

www.nbr.co.nz

A new militant “super-union” covering the service sector wants government funding for teaching workplace rights in schools, as part of a push to unionise a new generation before it even gets to the workforce. The established Service and Food Workers’ Union (SFWU) and National Distribution Union (NDU), and the upstart Unite union are jointly applying for cash from the Employment Relations Education fund, a $2 million fund for unions and business groups to access to provide training in workplace relations. Employers and Manufacturers’ Association (Northern) employment relations manager David Lowe said the fund was meant to be for existing employees and the EMA would be surprised if funding approval was granted by the minister. Usually the training is provided to members, although the scheme provides that it must be made publicly available. The three unions are expected to merge later this year into a single union with over 55,000 members. That will make it the largest private sector union, and expand the influence of the militant Unite union. Unite boss Matt McCarten, who

UNITED UNION: The merger is likely to expand Unite chief Matt McCarten’s influence represents many teenaged employees of recently unionised fast food outlets, has been busy establishing workers’ clubs at high schools around Auckland. He previously signalled to NBR that he intended promoting a kind of portable union membership that young people retain even when they are not working in the industry. NDU secretary Laila Harre has made similar statements since the unions began negotiating. And by merging with NDU and SFWU, members of each union will find they can remain active within the union as they change jobs in the high-turnover service sector. It’s a move the unions hope will increase union density, which gives them more power to bargain favourable terms for members. The name of the game for unions is numbers. Unite has been especially successful at bringing new blood into the union movement by moving into new areas like fast food and

call centres. Mr McCarten claims the union signed up 1000 new members in 10 days in March, after concluding a new collective agreement with Restaurant Brands. The merger will also eliminate turf disputes between the unions, particularly the SFWU and Unite, which previously clashed over casino staff at Sky City. There is some nervousness in the Labour party about the impending merger. The SFWU is one of five unions affiliated to the Labour Party, but it’s understood Mr McCarten and Ms Harre, former co-leaders of the Alliance party, are opposed to the new union having such formal ties. That would cost the Labour party around $16,000 of the roughly $50,000 it receives each year from union affiliation fees. The SFWU also made a donation of $20,000 to Labour for the 2005 election but its more important role is as a source of organisation and activists for the party in campaigns.

The board of NZX-listed kiwifruit co-operative Satara is under siege as a disgruntled shareholder pushes for a host of radical changes. Fund manager Elevation Capital has called for Satara’s long-serving chairman Andrew Fenton to resign and wants the board to investigate the possibility of selling the company. The resolutions were included in agenda notes for Satara’s next annual meeting, to be held on April 29. Elevation said it was unimpressed with Satara’s hefty capital expenditure programme and poor performance in the past financial year. The kiwifruit packing house operator posted a weak result in 2007, with its earnings before interest, tax and rebate falling 17% despite an increase in both kiwifruit trays packed and revenue. The rebate to growers fell from 28c per tray to just 10c and the dividend for “investor shareholders” – the shareholders who are not growers – dropped from 5c to 3c per share. The most controversial resolution is likely to be Elevation’s call for Mr Fenton to step down in the next year. He has been chairman for 16 years. Mr Fenton said he welcomed Elevation’s contribution and had no problem with what it was trying to achieve. To page 3

ECONOMICS

FINANCE

Overlooking inflation

Hanover flexes muscle as $30m tug of war goes to court

Much of the debate about housing affordability confuses basic facts about the true cost of mortgage finance, according to public policy researcher Andrew Coleman. He says standard measures of housing affordability based on headline mortgage rates overstate the true financing cost by about 50%. The miscalculation stems from “hidden” savings due to the effect of inflation, recognised by economists as “mortgage tilt.” Page 21

An acrimonious relationship between Hanover Finance and a US-based property developer is back in the High Court this week as the parties wage war over a $30 million debt. Expatriate Kiwi Mark Cooper has received funding from Hanover for more than five years to develop a series of property projects in California. Three went off without a hitch but the last two are now the subject of a stoush, involving legal action in both New Zealand and the US.

BUSINESS DECISIONS MADE ON YOUR DOORSTEP.

Mr Cooper filed a statement of claim in the High Court at Auckland on Wednesday alleging a long list of transgressions including breach of contract; breach of fiduciary duty; misrepresentation and interference with contractual relations. Hanover chairman Greg Muir said the allegations were completely without merit and Mr Cooper was attempting to use the media to sway Hanover into a settlement. Page 5

Growing businesses need a bank that understands the local market. So The National Bank has over 180 dedicated Business Banking Managers in over 50 locations throughout New Zealand. People who know local business and have the authority to make decisions on the spot. To get in touch with your local Business Banking Manager, call 0800 16 88 88 or visit www.nationalbank.co.nz. It’s all part of the service.

the national bank of new zealand, part of anz national bank limited.

SOURCE: NBR

NBB 1039

145

The National Business Review /

April 18, 2008

TELECOMMUNICATIONS

Cabletalk may look for exit Amy Williams Lossmaking Cabletalk is hopeful it can retrieve some value from its troubled telecommunications contracting business. The company is today due to reveal the result of discussions with a potential partner for its telco business Astute. Shares in Cabletalk tumbled to 3c this month after the company announced it had lost a key contract with TelstraClear in the South Island.

Its stock has taken several hits since trading at a high of 52c a year ago. Cabletalk chairman Ross Keenan said the company is “still alive” and the board was still in discussions with a potential partner. “The shift in emphasis has had to be to see what we can retrieve from the telecommunications side,” Mr Keenan said. He said the potential partner had requested a confidentiality agreement be extended from Monday to

the end of this week. “I’ve agreed to that because we’re pretty close to reaching a sensible agreement on some aspects of the business.” The company is handing over its South Island business to Downers, which won the TelstraClear contract. About 40 staff will transfer from Cabletalk to Downers by the end of this month. The change is a signal to Cabletalk that it is likely to lose TelstraClear’s North Island work when its con-

tract comes up in October. Cabletalk specialises in the backup and delivery of telecommunication services and TelstraClear is its main customer. The company also has an electronic security system service called Fortlock. Cabletalk’s major shareholders are a group of investors listed in the New Zealand Central Securities Depository who hold 19.8%; Ross Watton who holds 16.8% and the company’s managing director Peter Wilson who holds 3.8%.

WINE

Vavasour’s savvy rescue Marlborough’s Vavasour Wines has been forced to buy back thousands of cases of product, including its world champion 2006 sauvignon blanc, after its Australian distributor went belly up. Receivers moved on Evans & Tate just three weeks after Vavasour had shipped more than 30,000 bottles of wine across the Tasman. Vavasour chief executive Peter Scutts had to negotiate with receivers to buy back the company’s seized wine, at a cost of $130,000, even though it had never been paid for the shipment.

Mr Scutts said the company bought the wine to protect its brand from a fire sale receivers’ auction. “It’s far too good a wine to watch it being virtually given away to the Aussies,” he said. Almost 3,000 half-cases of Vavasour’s 2006 sauvignon blanc, along with pinot noir, pinot gris and riesling will now be sold at discount prices online at blackmarket.co.nz. This gives wine buffs another shot at buying the sold-out sauvignon, which won the sauvignon blanc trophy at the 2007 London International Wine & Spirit Competition.

governance was improved. “The status quo of poor corporate governance and falling returns is unsustainable for both growers and investors.” Satara has a complicated hybrid co-operative capital structure with transactor shares held by growers and investor shares traded on the NZAX. One of Satara’s largest transactor shareholders, Simon Dickie, said while he didn’t share all of Elevation’s views, he agreed there was a need for fresh thinking and improved governance.

He did not support Satara’s capital expenditure programme, which had financed the construction of a new facility in the Bay of Plenty. He said it didn’t produce a result in terms of volume, throughput or quality to justify the huge capital cost. He said there was a need for rationalisation in the industry and Satara should shape up or ship out. “If they can’t get this thing going properly they should hand the reins over to someone who can,” he said.

FROM PAGE 1

Fund seeks radical change at Satara But, he said Satara was working in an industry that was regulated and hard hit by foreign exchange rates – issues that were out of the board’s control. “It’s farming, it’s cyclical and sometimes investors need to understand that when they invest,” Mr Fenton said. “I’m confident that the shareholders, who are in the main growers, will understand what the company is trying to do on their behalf.” Elevation Capital managing director Chris Swasbrook said Satara’s board was not

adequately protecting and enhancing the company’s financial position. In 2007 Satara spent $11.4 million on capital expenditure and more than doubled its net debt to $22 million. “For a company that has seen a large drop in returns and has a market capitalisation of just $16.3 million, such expense and debt levels are inappropriate,” Mr Swasbrook said. “It is time for a change at Satara to ensure the company achieves its full potential, delivering growers an improved orchard gate return

and all shareholders an adequate return on assets,” he said. M r Sw a s b ro o k s a i d Elevation was not seek-

ing change to the hybrid co-operative nature of the company. The key priority, he said, was to ensure performance and corporate

ON THE AGENDA Elevation Capital resolutions include: that directors receive 50% of their remuneration in Satara shares, and management receives 50% of performance-based remuneration in shares; the company be put up for sale or merger if it does not achieve a return on assets of above 5.5% this year; that all directors should retire each year and stand for re-election; and the board forms a sub-committee to look at rationalisation options, including takeover offers. The resolutions require 50% or more support to succeeed

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THE NATIONAL BUSINESS REVIEW

February 15, 2008

WEALTH MANAGEMENT

Cash poor, asset-rich dairy farmers picked to reinvest Retiring debt or moving up to the next level are among their options Mark Peart In some parts of New Zealand society, stereotypes abound of dairy farmers as greedy, profligate spenders whose idea of a bad year is only being able to buy one BMW instead of two. Rabobank New Zealand general manager Ben Russell, who has a more balanced and intimate knowledge than those who perpetuate these stereotypes, rejects them. Reports of soaring international commodity prices and forecasts by dairy giant Fonterra of increased payouts to suppliers help fuel the stereotype, which Mr Russell says couldn’t be more inaccurate. “Dairy farming over a number of years has been very tight. Dairy farmers have been the classic assetrich, cash poor farmers.” Mr Russell says this means they are sitting on assets that are worth a lot of money but don’t have the capability to be frivolous with their cash.

BEN RUSSELL: ‘Who would begrudge them an overseas holiday or upgrading the car? They work bloody hard’ Since 2002 milk payouts have consistently been at a level where dairy farms have only just broken even. This is the first “good year” in quite a while, where farmers have the prospect of good profits, Mr Russell says. They have “a couple” of options as to how they manage that profit. Much depends on where they want the excess to go. “If they’re happy with the current size of their business and they’re really just looking to maximise their

profits into the future, the smartest thing they could do would be to retire some debt,” Mr Russell said. “That will lower their interest costs and it will leave more money for them to spend on whatever they want to, or to invest.” “If on the other hand, they’re looking to continue to expand their business, then they should certainly consider investing the profits in either lifting the productivity of their current farm, or possibly borrowing further and increase the scale of their existing business,” Mr Russell says. Some Rabobank clients are using their profits to retire debt, while others are using their windfall to improve their on-farm profitability, through regrassing of pasture, improving herd quality, or increasing fertiliser application. One Rabobank client, a dairy farmer in the southern Waikato, has recently brought in an equity partner and bought three dairy farms adjoining their existing property. “They’re going to the next level in terms of scale and size,” Mr Russell says. There was no “one-size-fits-all” about what dairy farmers were going to do with their increased payout. He was adamant Rabobank

saw few instances of dairy farmers spending it in a profligate way. “By and large they invest in pretty responsible ways. And to be honest, who would begrudge them an overseas holiday or upgrading the car? They work bloody hard and they deserve the success they get as far as I’m concerned.” “Dairy farmers didn’t just wake up in the morning and be wealthy dairy farmers.” “They’ve borrowed money, they’ve invested large amounts of capital in most cases, and they’ve worked really hard.” “There’s been plenty of years where for all that work they’ve got either a zero return or a negative return,” Mr Russell said. “We wish them all the best in terms in terms of having a couple of good years.” Mr Russell says Rabobank expects the strong commodity cycle will continue to produce favourable conditions for dairying for some time. “We also think there’s a reasonable expectation that New Zealand dairy prices will ease over the next couple of years. “Perhaps this year and next year they’ll be close to the levels they are now but beyond that our general expectation is that they’ll come

back a little – they won’t stay high for ever.” Fonterra said in December it was lifting its forecast payout for the current season by 50c, from $6.40 to $6.90 per kilogram of milksolids. The new forecast comprises an increased milk price of $6.70 and the value component remains at 20c. Fonterra chief executive Andrew Ferrier said the co-operative was just beginning to see signs of some of the expected supply response to the record commodity prices. “In particular we’re seeing growth in US skim milk powder production. We think this will factor into the market over the short to medium term and will bring a gradual softening to the market,” Mr Ferrier said. However, structurally the market is much stronger than it has been, he said. “There is a very strong global demand for grains, in particular the large amounts of grains going into biofuels. This is putting upward pressure on global farming costs, which in turn is pushing up global food prices, including dairy,” Mr Ferrier said. “Combine this with the weak US dollar and we believe the long-term outlook for dairy prices will be well above traditional averages,” he said.. Mr Russell said farm input prices have definitely increased: “World fertiliser prices have soared, fuel prices are very high, and there is ongoing wages growth.” While industry fortunes were “not quite as rosy” as they were being portrayed in some quarters, what farmers were spending was largely circulating in the New Zealand economy, Mr Russell said. “That’s good for everyone.”

PIEs keep those bears at bay

Socrates takes a wiser, wider approach to investment

Duncan Bridgeman

Neville Bennett

High-net-worth investors should be reaping the benefits of the new Portfolio Income Equity (PIE) regime, introduced last October. Eligible PIEs such as unit trusts and superannuation schemes have now become much more competitive, as alternative means of accessing securities. “The changes are significant,” Elevation Capital Management managing director Christopher Swasbrook said. In particular, PIEs will be limited to tax on interest and dividend income at 33c, falling to 30c on April 1, 2008; and will collect and pay income tax at that rate or lower on behalf of their investors. This means 33% and 39% taxpayers will be better off. Investors also benefit from a safe harbour regime on New Zealand equities and certain listed Australian equities, which exempts investors from any capital gains tax. Further, all other equities fall under the fair dividend rate (FDR) regime and are effectively taxed on a deemed return of 5% a year – a superior position to the old regime, which taxed all returns. Mr Swasbrook said the PIE regime suited a wider range of clients including professional investors, trusts and companies, which previously had invested directly on capital account.

SOURCE: NBR

This is because they would no longer be tainted by activities within the PIE safe harbour. “I also strongly believe that the portfolio tax changes will accelerate moves to greater transparency of portfolio performance since the focus of managers will be increasingly shift to net returns. “I expect more competition in our marketplace, which is positive for investors and the changes will reveal the innovators in our industry. “Those participants who do not recognise the potential shift in the market will be tomorrow’s financial dinosaurs.” Craig Stobo, chairman of fund manager Elevation Capital, who was commissioned by the government in 2004 to review the country’s portfolio income taxation system, said the new regime should encourage people to invest at home, a move that would improve the liquidity of New Zealand’s financial markets. The PIE system carried several benefits but the consequences of not complying were harsh, Mr Stobo said. “If you exceed any of those PIE boundaries, the IRD compliance framework means you suffer. The onus is on the fund managers to stay with the minimum number of stocks and the arms length basis of the fund and the vehicle. “Breach any of those and you’re out of PIE.”

Many investment funds prosper only in bull markets. They wither in bear market years. There is a small band of market-savvy funds that accept that markets are cyclical. Their philosophy is to make money irrespective of bull and bear phases. In New Zealand, the Christchurch-based Socrates (www.investing. co.nz) is delivering: its performance unit trust has an audited 16% gross (12.4% net) growth rate for the year. It is the leading performer when compared to similar funds listed by Morningstar. Its gold and metals unit trust is flourishing as gold hits record heights. It owns physical gold, silver and platinum. Moreover, it has gold in every portfolio, including income. This turbulent period is therefore proving very profitable for the Socrates stable. Socrates management anticipated the credit crunch and US recession; and designed suitable funds. Socrate’s newsletter in April 2007 boldly said “we expect a recession in the US within 12 months.” Not many other investors were picking that. The same newsletter also presciently forecast a falling stock market,”set off by the US housing collapse and vast debt underlying it.” The Dow Jones was set to burst through 14,000 at the time, and bears were laughed at. Socrates made other accurate key assumptions:

■ the US dollar falling against its competitors ■ long-term commodity boom, particularly in gold and metals but also food and materials ■ declining equity markets but opportunities in commodities ■ be light on stocks, heavy in commodities in this cycle. ■ growth switching from US and Europe to Asia and South America ■ rising oil prices ■ a switch to alternative energy ■ opportunities in water ■ kiwi dollar weakness The funds have other strengths. Managing director Charles Drace understands cycles. As a certified financial planner, he has created and retained a large, loyal clientele because he has guided them successfully through more than 30 years of market volatility. None of his clients lost money in the 1987 crash. Mr Drace recognises the need for the prudent defence of value. In most cases, equities in the fund have stops. If they fall 10-15%, they are sold. This is sometimes profitable as falls are insured by put options. As non-performing shares are dropped, Socrates is rare in that it is does not carry significant unrealised losses. There are four PIE-compliant units, each with a clear mandate. The income fund performs exceptionally well with a return of 8.72 % gross a year since inception. There is an exciting sustainable and water

unit trust designed for long term capital growth. This leaves two fascinating units, both unique. The gold and metals unit trust is designed to give investors a wide exposure to these commodities. It has a broad-based basket, comprising cash, ETFs (exchange traded funds) and equities. It is unique in holding claims on physical metals. About 42% at present is in gold ETFs. The trader, usually a huge bank, backs each fund with gold. They can be sold at any time in Australia, London or New York. Also there are silver and platinum ETF’s. The shares include BHP, Newcrest, and Newmont. The fund returned 10.3% this year. The performance trust’s gross return this year is 16.6%. With little exposure to New Zealand, its assets are under-valued by the current exchange rate. Its assets are in Australia, Asia, Canada, Emerging Europe, the UK and South America. The assets are mostly equities, with a strong portfolio of high-yielding sovereign bonds. The adviser and broker for many trades is Jyske Bank of Denmark. ABN Amro Craig also act as brokers. The fund is exposed to commodities, especially gold, gas and oil but it also includes shipping and water. Disclaimer: Neville Bennett is a director of Socrates ON THE WEB ■ www.investing.co.nz

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City investors call for Satara to raise returns

SOURCE: New Zealand Farmers Weekly

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Elevation lifts off with long/short fund New boutique manager Elevation Capital launched one of the first New Zealand-domiciled long/short funds last week. Good Returns Wednesday, 14 February 2007 By David Chaplin

It is understood the Elevation Capital Multi-Strategy Fund finished its first round of fund-raising and began trading last week after putting out a prospectus last November. According to the prospectus, the Multi-Strategy Fund “is an alternative investment fund that will take both long and short positions, primarily in securities of listed companies”. The prospectus says its principal investments will be in Australia and New Zealand with leverage limited to 150% of the fund’s net asset value. Elevation, headed by former Goldman Sachs JBWere broker, Christopher Swasbrook, also lodged a master trust document with the Companies Office last November indicating it planned to roll out a number of other funds. The group is chaired by former head of BT NZ, Craig Stobo, with Andrew Harmos and Stephen Smith also listed beside Swasbrook as directors. It is unclear how much money was raised for the Multi-Strategy Fund but with a minimum investment of $250,000 it appears targeted at high net worth individuals. While long/short managers have been relatively common for some time in other established markets such as Australia and the US, until last year it was virtually impossible to short-sell companies listed on the New Zealand Stock Exchange. In July 2006 a law change removed a tax impost for lending New Zealand shares to short-sellers opening up a new avenue for both international and local fund managers. It is understood a number of institutions such as the New Zealand arms of ING and Goldman Sachs JBWere are currently developing stock-lending programs. Elevation may be one of the first New Zealand-based funds to take advantage of the new short-selling opportunities but at least one other local manager, Logic Fund Management has run a long/short strategy since 2005. Logic, formed by Gregory Marshall, is a small boutique fund currently managing several million dollars of private money under a global long/short approach with macro-themes of energy depletion and climate change.

SOURCE: Good Returns

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