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KPMG report 'misleading' over cost of Marlin delisting and restructure: investor

Friday 2nd October 2009

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A shareholder-ordered report into delisting and restructuring money manager Marlin Global Ltd. is “incomplete, inaccurate” and “misleading,” says the investor whose newspaper ad campaign gathered enough support among shareholders to force the investigation.

The KPMG report was ordered after shareholder Gary Cross secured the support of 5% of shareholders to consider recreating NZX-listed Marlin as an open-ended managed fund. 

Marlin, the investor in overseas shares managed by Fisher Funds Management, has suffered a widening gap between its listed share price and the net asset valuation of the company's assets.  

Still, Marlin chairman Rob Challinor says it’s nothing more than “a storm in a teacup” and that Cross, who owns 0.9% of Marlin, will have every opportunity to address shareholders at their annual meeting at the end of the month. 

“Gary is a substantial shareholder and he is entitled to his view,” Challinor told BusinessWire.

“We’re happy to work with him and we want to close the gap – it’s just not practical while the warrant holders have an interest.”

The report didn’t make any firm recommendations, but shied away from delisting Marlin from the NZX, and suggested that removing the fund’s limit on units issued will probably be too expensive.  

Cross says the report is misleading and shouldn’t have been distributed to shareholders.  The “most glaring and obvious omission” was the lack of a comparison with Fisher Funds’ International Growth and Premium International Funds, which both started at the same time as Marlin.

He rejected the report as “incomplete” and “inaccurate”.  “This is not the report the 5% of shareholders voted for – it’s not a true representation of what was asked for,” Cross said. “They [the board] haven’t done the best by shareholders at all.”  

In July, Cross took out newspaper ads promoting his idea to convert the company’s publicly listed shares into units which would change hands at their net asset value to remove the gap between the stock’s price and the NAV.

The stock slipped 3.5% to 83 cents today, below the Sept. 30 NAV of $1.04, and has consistently traded at a discount to NAV since its October 2007 IPO.  Earlier this week, Cross tried to stop the distribution of the report to shareholders and questioned the independence of Challinor in a letter.

“That you as an independent chairman can propose sending this incomplete, misleading report to shareholders is simply staggering, and to my mind clearly calls into question your independence and/or judgement,” he said in his letter.  

Challinor reiterated his independence as chair and said the objections raised by Cross were peripheral issues to the report. “It was an independent report in my view and to call it misleading was wrong,” he said.   

The KPMG report weighed up the costs and benefits of retaining the status quo and following Cross’ proposal, finding more benefits in favour of the current structure. It estimated the direct cost to change the fund into an open-ended vehicle, excluding the cost of buying our warrant holders’ rights, to be between $1 million and $4 million.

Other ways the company could improve its NAV are through share buy-back schemes, implementing a managed dividend policy, or winding up Marlin, and it recommended the “board investigate all options to reduce or close the NAV discount” if shareholders choose to reconsider Cross’ idea once the warrants have expired.

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