New Zealand Shareholders Association Chairman John Hawkins said today that people would continue to be caught up in investment company collapses unless the government made some changes to the Financal Markets Conduct Bill now before the House. He was speaking in the wake of the Ross Asset Management debacle, something he said could be similar in scale to the Madoff ponzi scheme in the USA after adjusting for the size of the capital markets.

Hawkins said that for some reason, politicians and officials seemed to believe that because someone invested $500,000, they were financial experts, something that is patently nonsense in the Associations view.  As both existing and the proposed law stands, these people are effectively automatically opted out of the normal investment disclosure requirements which the Association think is ridiculous. He said the Association was promoting an active opt out arrangement whereby all investors would be required to complete a certificate indicating they understood the protections they were giving up before investing in schemes that did not provide full documentation such as prospectuses.

This “pause and consider” approach should cause wealthy but non expert investors  to think more about their actions while not creating  an unreasonable a barrier for true experts, he said, adding that this approach would not be a cost burden for smaller issuers or closely related parties who were concerned at the potential  expense  of providing full disclosure documentation.

Hawkins said that the average client of Ross Asset Management had more than $500,000 invested and may have been excluded from receiving comprehensive disclosure. If they had that information, it  may have  affected their decision to place money with the company.

Currently, a lot of people end up with large sums to invest following the sale of property, but in time we will have many more cashing in big amounts from KiwiSaver.  It is essential that hard working people, who may have little or no

investment skills themselves, are protected. Legislation needs to be put in place now, rather than trying to paper over the cracks after some future disaster, he said.

Hawkins said the NZSA was appalled that companies like Ross Asset Management who accepted funds from the public apparently did not have to have their accounts fully audited. This is entirely unacceptable and if true, we expect the government to correct this anomaly as a matter of urgency.

He added that no amount of legislation or regulation could ever prevent determined fraudsters, but the Association finds it frustrating that some simple, practical and cost effective protections are proving so hard to have adopted.

John Hawkins

Chairman

021640588

The New Zealand Shareholders Association said today it would vote discretionary proxies it holds in favour of the non binding winding up motion proposed by Elevation Capital. This is due to be put to Marlin Limited shareholders at the company’s annual meeting tomorrow.

Association Chair John Hawkins said that while there had been claims and counter claims around the performance of the company’s external manager, Fisher Funds, the Association believed the real issue related to whether the way that Marlin was structured was in the best interests of shareholders.

On the 17 October, the Elevation Capital motion was notified to the Stock Exchange. On the same day Marlin announced that the management contract with Fisher Funds had been renewed for a further five years. Hawkins said that Marlin claimed that there were no grounds for the independent directors not to renew the agreement, but NZSA legal advice indicates that nothing in the contract prevented the board from obtaining an independent appraisal of the manager’s performance. In our view, this would have been sensible after a five year period, whether or not the Elevation proposal had arisen said Hawkins. He added that 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.

Hawkins said there was clearly potential for a conflict of interest with a representative of the Manager sitting on the board of Marlin. 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 independent directors sit on two other investment companies run by the same manager and this has inevitably led to questions about their independence, he said.

In the circumstances the Shareholders Association believes it is in the best interests of all shareholders that this whole matter should be revisited. The logical way to achieve this is to vote in favour of the non binding winding up resolution. With enough support, Hawkins said he hoped this would result in the Marlin board seeking an outside review to determine the best way forward. Whether this is to wind up the company, modify the existing management arrangements or retain the status quo remains to be seen he said.

Hawkins said that as a result of the issues raised in this case, the Shareholders Association would be writing to NZX. We want them to consider a listing

rule change so that directors holding multiple board seats run by the same external manager will not be deemed independent. This is the case in the UK, he said.

We are also looking at whether it is appropriate that a representative of the external manager should sit on the board of investment companies, he said.

John Hawkins

Chairman

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The New Zealand Shareholders Association announced today that it would not be facilitating public meetings for FPA shareholders.

Hawkins said that today’s announcement of an improved offer, the positive recommendation by the independent directors and the acceptance by a number of large institutions meant the takeover was now bound to succeed.  He said this crystallised the situation for retail investors who will need to decide whether to sell or potentially remain as minority shareholders.

Chairman John Hawkins said that while 75% of those contacting the Association were in favour of having a

forum to exchange views, the total numbers were well short of what was required to justify the cost. The response indicates that most shareholders felt there is enough information available to them. Earlier media articles suggesting wide support for such meetings were clearly not a true reflection of the feeling of the vast majority, he said.

Hawkins said the Shareholders Association would be circulating information to its own members setting out some of the issues they need to consider when thinking about what to do.  Ultimately however, they

would have to make their own decision based on their particular situation and assessment of the options.

John Hawkins

Chairman

021 640 588

The New Zealand Shareholders Association today voiced its approval of the Methven board decision to align director’s fee increases to company profits. The company announced yesterday that there would be no increase unless profits were lifted 20%.

NZSA Chairman John Hawkins said he had spoken with Methven cheap car repairs chairman Phil Lough, and would be sending a formal note to the board applauding the decision. They have set a high hurdle, but clearly this action indicates the directors believe both they and the company are up to the task he said.

The Shareholders Association had been promoting this sort of linkage for a number of years and it was encouraging to see traction being gained. We actively engage with directors around the whole topic

of remuneration and have certainly noticed a considerable change in attitude in the last couple of years, said Hawkins.

He added that the Association had no problem with high rewards for high performance, but remained concerned about the disconnect in a number of cases.

John Hawkins

Chairman

021 640 588

The New Zealand Shareholders Association has welcomed yesterday’s announcement by Abano that its directors will be taking half of their after tax fees in the form of Abano shares for at least the next three years.

Chairman John Hawkins said the Abano policy aligned the director’s interests with those of ordinary shareholders and was an encouraging development that the Association hoped would be taken up by more companies. There are a few at present, but we would like to see this as the norm, he said, noting that companies doing so would meet NZX corporate governance best practice code.

In particular, we like the way the Abano deal has

been structured along the lines promoted by the NZSA. With the shares being purchased on market there will be no dilution effect, and the proposal to buy smaller amounts several times during the year will avoid artificial market price movements said Hawkins. Obviously the Abano

directors will have to ensure the company performs to obtain value from this decision, so we think it demonstrates both their confidence and commitment to the future of the company he said.

John Hawkins

Chairman

021 640 588

The New Zealand Shareholders Association came out today firmly in favour of the NZ Refining Company’s proposal to build a CCR plant at Marsden Point. Calling the initiative “an important strategic step” NZSA Chairman John Hawkins went on to say that he thought retail shareholders would accept some short term reduction in returns in order to gain significant long term benefits.

The $365m upgrade project has been touted as a superior option to a cheaper $105m plant life extension program. Hawkins said the numbers quoted by the company for the CCR upgrade were compelling and there appeared to be limited risk

involved as the technology was well proven. The Association is puzzled why Board approval for the upgrade was not unanimous and is disappointed that the directors concerned have not seen fit to explain their opposition given the very strong business case, he said. Hawkins added that it was very important that all shareholders vote or appoint a proxy, since the project required a 50% shareholder vote of approval to proceed. This decision could well depend on retail shareholders views, he said.

The NZSA believed that Refining had too many oil company appointed directors. These change frequently and add considerable governance complexity and cost, said Hawkins, while questioning what level of contribution short term appointees could bring to the company.  He added that this tended to create the perception that the oil company appointed directors could be conflicted, and may not always act in the interests of all shareholders. Therefore, on principle, the NZSA will not be supporting the election of Mr Wall (BP) or Mr Warrell (Mobil).

While acknowledging that the refining business was near the bottom of the cycle, Hawkins said that given the very disappointing recent shareholder returns, the NZSA could not support fee increases for individual directors. He added that

having been assured by Chairman David Jackson that no increase will be paid this year, the NZSA was prepared to accept the proposed fee pool increase to give headroom for future board composition changes. Hawkins said because of the Board structure in this company, the independent directors have a much higher workload and should have a fee differential. We are encouraged that NZ Refining has already moved some way on this, he added.

John Hawkins

Chairman

ENDS

The New Zealand Shareholders Association today welcomed the guilty verdicts in the Bridgecorp case. NZSA Chairman, John Hawkins said that the type of behaviour Petricevic, Roest and Steigrad had engaged in was in a whole different league to other recent cases.

These were not the actions of people who were well meaning, but inept. Rather, there was deliberate and knowing suppression of the problems facing Bridgecorp for the

express purpose of continuing to be able to extract funds from the public, he

said.

Hawkins said investors were entitled to rely on the people running these private finance companies to act in compliance with the law.  Petricevic, Roest and the others showed a callous disregard for the responsibilities that they had, and no amount of regulation would have prevented this catastrophe. Their attempts to shift blame onto others show that remorse is not a word they understand. They have ruined the lives of many investors who would never have entrusted their money to the company if the truth had been available, he said.

Noting that the judge had found Petricevic and Roest guilty on 18 charges and Steigrad on 6, Mr Hawkins said this indicated a long term pattern of deception which greatly increased the seriousness of the offending. The Judge has made it clear that some defendants are now facing a substantial jail sentence, which is entirely appropriate in this case, he said. Fines of up to $300,000 can also be ordered, but Hawkins said he hoped that a substantial order for reparations would also be forthcoming.

The decision today greatly enhances the opportunity for a civil case to be taken against the directors said Hawkins. Unfortunately, they probably have most of their assets in trusts and it may be difficult to enforce any orders the court makes.

John Hawkins

Chairman

021 640 588

(09) 478 3198

ENDS

The New Zealand Shareholders Association today welcomed the announcement that FMA had filed civil charges against the directors and promoters of Hanover Finance.  It is alleged that statements made in various fundraising documents and advertisements over the 2007/2008 period

were misleading and were untrue.

NZSA Chairman John Hawkins said that investors have long been keen to have allegations against the company tested in court. Today’s announcement was a big step in that direction. The change in regulator from the Securities Commission to the Financial Markets Authority has undoubtedly slowed the process in what has been a very complex investigation, he said.

We understand that the Serious Fraud Office is continuing its investigation into Hanover’s affairs said Hawkins adding that it

remained to be seen whether this separate enquiry would result in other charges being brought

Hawkins said that the Shareholders Association was comfortable with civil rather than criminal proceedings being brought by FMA. Civil penalties can range up to $5m depending on the circumstances, and more importantly, compensation can also be ordered. At the end of the day, investors would like to get some money back and this may be the best avenue said Hawkins. He also noted comments by CEO, Sean Hughes that it was possible further actions could be brought against Hanover by FMA.

Hawkins said the NZSA has been encouraged by the progress made since the formation of FMA. They have been proactive in giving guidance to the market, but when necessary, they are not afraid to use the legal teeth available to them. We think this should give investors a lot more confidence in the markets. He added that the new Financial Markets Conduct Bill now before Parliament will further strengthen the protections available. NZSA has been very active in promoting the investor viewpoint as this bill has been developed. Getting regulation right is critically important now that so many people have Kiwisaver as part of their long term savings plans he said.

John Hawkins

Chairman

021 640 588

ENDS