2005

NEW ZEALAND IN 2010 − WHERE WILL WE BE?

NEW ZEALAND INC. SPEAKS

ACCELERATE YOUR WEALTH CREATION

ABN AMRO LAUNCHES WARRANTS

1
Issue One 05
 4 CHANGING PERSPECTIVE
Mark Weldon
Chief Executive Officer, NZX

7 PERSPECTIVE
7 WANTED
Dr. Alan Bollard
Governor, Reserve Bank of New Zealand

8 INNOVATION
Brian Ward
Chief Executive Officer, NZBio

10 THINK LOCAL, ACT GLOBAL

Mark Franklin
Chief Executive Officer, Vector

11 A LUST FOR
ENTREPRENEURSHIP
Geoff Ross
Chief Executive Officer, 42 Below

12 CREATING THE ENVIRONMENT

FOR WEALTH CREATION
Bill Day
Chief Executive, Seaworks Ltd
Cover image;

Battle of San Romano, Paolo Uccello, 1445c. 13 A CULTURE OF SUCCESS

Uccello was a key figure in the development of Ian Narev
perspective, along with architect Brunelleschi who Managing Partner, McKinsey & Company
first developed the methods of portraying three
dimensional space. Uccello’s works were seen as ‘essays 14 BUILDING BETTER
in perspective’ and he represented the views of many
artists of the time. These include the sculptor Donatello,
BUSINESSES
Brian Gaynor
painter Masaccio and Alberti, who wrote a Treatise ‘On
Business Columnist, New Zealand Herald
Painting’ in 1435, documenting the method of using
mathematical or single vanishing point perspective.
15 SAVINGS
Lance Jenkins
The Battle of San Romano currently hangs in the Ufizzi Gallery Managing Director and Chief Executive Officer,
in Florence. Goldman Sachs JBWere (New Zealand)
2
17 SUSTAINABILITY AND Welcome to the first edition of OPEN for 2005.

INTEGRITY In this edition, we are delighted to be able to bring

Peter Townsend
you the views of some of New Zealand’s business
leaders on where they want to see the New Zealand
Chief Executive,
economy in 2010. We have called the edition
Canterbury Employers’ Chamber of Commerce
Perspective, and are featuring on our cover Uccello’s
Battle of San Romano. This image helped people to
18 SELF DETERMINATION, see how perspective actually worked – by making
SELF RELIANCE things further away appear smaller.
Dr. Roderick Deane The link to our edition and the economy in 2010 is
Chairman, Telecom quite simple, things that are far away – and may appear
small – can approach with rapidity. Moving towards
the future, and towards elements that are approaching,
19 BUILDING A NATION ON is a much smarter perspective than retreating.
PRIDE AND PASSION On reading each article you should gain some insight
Chris Moller
into what “NZ Inc” thinks is on our immediate
Chief Executive Officer, New Zealand Rugby
horizon. You will also notice that some common
Union themes emerge. Opinions seem to centre on
productivity, growth, building a culture of success
20 PRODUCTIVITY = POWER and ‘taking it to the world’. The opinions are diverse
Scott St John on what political and economic structures need to be
Chief Executive Officer, First NZ Capital in place, but united on the attitudes and mindsets
that will build an economy that is robust and well
21 FROM THE HEARTLAND geared to face our future.
Here at NZX, we are both challenged and excited
22 ABN AMRO INSTALMENT by the perspectives portrayed in this edition. We
see our role, as a provider of capital to companies
WARRANTS and investment opportunities to New Zealanders,
Aaron Milne as being an integral part of the solution. Our focus
Director, ABN AMRO Equities New Zealand Ltd has been – and will continue to be – on ensuring
our marketplace environment and operational
24 DIRECT MARKET ACCESS infrastructure is world class and capable of growing
Adrienne Quinn to keep up with the emerging potential of NZ Inc,
NZX Participant Relations Manager in their mission to take on the world.
We hope these Perspectives will offer you a fresh
26 SMARTSHARES LAUNCHES insight into the great potential of New Zealand
businesses and how we can work to ensure we are
SAVINGS PLANS creating the right environment for success.

27 NZX OPERATING METRICS

28 MARKETPLACE
Melissa Jenner
33 Q1-05 UPDATE NZX Communications

33
 CHANGING
PERSPECTIVE
MARK WELDON
C H I E F EXECUTIVE OFFICER, NZX

The New Zealand business mindset has traditionally been that ownership is immaterial
and it makes no difference whether New Zealand ends up as an economy fuelled by
ownership, or by income. There may have been a blip in time when ownership versus
income could be viewed as a distinction without a difference, but that time is gone.

It is a truism that, for there to be any material increase
in our standard of living, New Zealand companies must
develop lasting competitive advantage in global markets
and, crucially, the benefits of that competitive advantage
must accrue here.
To determine what needs to be done to make the New
Zealand economy great in 2010 we therefore need to focus
on what will give New Zealand businesses the best possible
chance to develop advantages that will win globally. It is
my belief that in 2010 sustainable competitive advantage,
and hence real economic returns, will for countries
outside China/India/Brazil be driven almost entirely by
intangible assets like brand, patents and design, whether
in children’s clothing, vodka or tourism. To me, creating
these intangible assets, and ensuring that they are owned
here, should be the single goal of our private and public
economic planning over the next decade.
The economy is a complex system like the human body.
This article focuses on what I believe will get the economic
body of New Zealand competing and winning on a global
level. A sick or unhealthy body can not run and leap. A
healthy and fit body can do all sorts of amazing things.
Basic health – savings and deeper capital markets
Right now the body of New Zealand, the economy, is pretty
healthy, as can be seen in most of the numbers. To keep it
healthy over the medium term, however, a change of diet will
be required. At the bottom of the economic food pyramid,
the base that maintains the heart pumping, is savings.
Improved savings outcomes will pump blood into both the
household balance sheets and company fortunes.
The main structural change needed, which is currently
being debated and addressed at the policy level, is to
create individual long-term savings accounts for all New
Zealanders, with contributions primarily coming out of
workplace earnings. As a recent quote in The Economist
stated, “[in] New Zealand, personal savings rates are
negative as people borrow to consume more than they
earn”.
Workplace superannuation needs to be introduced and be
made to work. For success, three things are needed:
• a minimum level of compulsion,
• incentives available for those who choose to save
beyond the compulsory amount, and

4
• a very simple framework that people can use easily and It is my bet that small countries with homogenous
be confident in. workforces will fall rapidly down the OECD ladder over
Based on numerous conversations, a plan that involved a the next 20 years compared to countries that effectively
mix of a targeted tax cut of about 1-1.5 cents in the dollar leverage diversity. An experiment conducted by a group
with an extra 1.5-3 cents directed from each person’s pre- in New York is instructive. Groups of business people
tax earnings into individual savings accounts, alongside a were clustered together to develop recommendations
range of incentives for workers to contribute further pre- on series of hardcore business issues. Similarly, groups
tax earnings on a matched basis by employers, would be of non-business people from wide ranging backgrounds
almost universally well received. While it would cost the (think Navy Seal plus fine arts major) were put together.
Government purse, it will result in a much healthier nation This latter group argued more, was much less affirming
at both the individual and company level as we position of how brilliant each other was, but got to much more
ourselves for our future. creative and insightful
If these actions are taken, recommendations.
households will be able Groupthink is the opposite
to provide for retirement, of creativity.
education and the passages Ultimately immigration
of life where individuals should both fill needs and
have no earning power and create opportunities. For
must use their individual example, immigration
balance sheets to get them from China will grow our
through. Productive business knowledge of that market
investment will also increase and, through informal
and, importantly, the suite networks, result in
of intangible assets that substantial trade. Similarly
will deliver us competitive with Brazil, which is
advantage will also increase
another of the world’s major
significantly. We have seen
economies that is hard to
the growth of a local savings
penetrate without local
pool fuel all of these positive
knowledge. New Zealand,
effects in Australia and in a
with its time zone position
myriad of other counties. It
between Asia and America,
will happen here.
is ideally situated to use
Strength and fitness significant immigration as
– growing the size and a strategic tool to deliver
diversity of the workforce a larger and more diverse
labour pool that in turn
With a healthy heart, the economy can start to grow some
delivers much stronger trade and innovation outcomes.
muscle. For me growing muscles is about getting our
labour pool right. There is no question that lack of labour Apart from trade and innovation outcomes, scale has its
availability and the right skill base is the biggest risk to our own virtues for our companies and their workers. New
medium term economic fitness. Zealand companies exhaust their local market quicker
New Zealand needs both greater mass and diversity in our than their competitors and thus can be forced to sell their
workforce to create the right environment for increased source of competitive advantage (their intangible assets)
productivity and core growth. Independent of any “political much too cheaply. A larger population, even a population
correctness” arguments there are sound economic reasons of 5 million (about the same size as greater Sydney),
to believe that, in a world where intangible assets and would create a much stronger base for our businesses
the ideas that create them are key, diversity is critical to and the conditions so that we could keep the benefits of
economic outcomes. success here.

5
Performance – dominating global slivers and ownership
Dominating global slivers
With a strong heart and good overall strength, the New
Zealand economy will be able to compete and win. For New
If we continue to sell companies offshore, those learnings
and beliefs will never occur and we will end up as a call
centre that can’t compete with the 2.5 billion people in
India/China/Brazil. Unfortunately, as a recent Grant
Thornton Global Business survey shows , New Zealand 1

Zealand, winning means that we develop deep expertise business owners have the highest expectation of a change
and become distinctive in a series of global slivers, niches in ownership over the next 10 years of any country globally.
and products where we can own and set pricing for a good Learning how to succeed cannot be found in a book and,
part of the category. Current New Zealand examples while it is intangible, it is very real. A good analogy from
would include Fisher & Paykel Healthcare, with its sport is the different approach of the Australian cricket
dominant global market share in high end medical devices team (winning) versus the New Zealand cricket team
for specialist situations, and luxury outdoor/beauty tourism (playing). The core skill difference is not technical ability,
(e.g. Blanket Bay, Huka Lodge). but the knowledge of how to win.
More broadly, these slivers could be product and In business the analogy is obvious. New Zealand companies
expertise, and should be consistent with an evolved New continually innovate and create amazing products. But,
Zealand brand which is based unfortunately, that is where we
on a much broader notion of mostly leave it. Unless we own
national distinctiveness than “The economy is a the wins, and build on those, there
just rugby and the outdoors. won’t be much real change. To do
This “NZ 2010” brand should complex system like the that we need to start a virtuous
have elements of Sir Edmund circle based on ownership.
Hillary (independent), 42 Below/
Karen Walker (cool and edgy),
human body. A sick or Ultimately I want to see New
Zealand as a country with a
Weta/Peter Jackson (creative)
and our ex-pats and business
unhealthy body can not distinctive reach right across
the globe, with the benefits of
stories like Fletcher Building,
Michael Hill and Pumpkin Patch run and leap. A healthy ownership coming back to New
(international and successful). Zealand, and each and every

Going forward we should aspire

and fit body can do all New Zealander participating in
the benefits of those outcomes.
to be the Swiss watch model,
where Swiss watches have
sorts of amazing things.” To achieve this, it is critical to get
savings and labour right and have
competitive advantage mainly
an ownership mindset. New Zealand can develop lasting
by virtue of being Swiss. Film is a good example. Real
sources of competitive advantage. What matters most is
success would mean that our individual brands (e.g. Peter
getting the settings right so that we can own the success in
Jackson, Richard Taylor/Weta) have been joined by others
New Zealand, and as a country, own the benefits of lasting
and created a national brand with a long-run competitive
competitive advantage.
advantage and global value proposition.

Ownership
Apart from ownership of intangible assets generating the
real wealth, ownership of these assets in itself creates a
Mark is the Chief Executive of NZX, and works closely
priceless intangible asset: the knowledge, of how to win.
with management to implement the Board’s strategies.
This knowledge, along with institutionalisation of success Mark is also a Director of Smartshares Limited and
and building a country where business success is in our Chairman of Link Market Services Limited.
DNA, creates a virtuous circle of knowing how to win and
achieving it. 1
Grant Thornton Global Business Survey, released April 2005

6
PERSPECTIVE
NZX asked ”NZ Inc” (a selection of business
leaders in New Zealand) to give their perspective
on where they see the economy in 2010.
Contributors were asked their views on three main issues:
1. What would they like to see the economy of New Zealand
like in 2010?
2. What in their opinion, would need to change, for this to
become a reality?
3. How would these changes impact the economy?
Those who chose to give their views have been asked to be
as open and honest about them in the interests of providing
the market some insight into what could be. Their views are
published unedited.
Contributions are from:
• Dr. Alan Bollard, Governor, Reserve Bank of New Zealand
• Brian Ward, Chief Executive Officer, NZBio
• Mark Franklin, Chief Executive Officer, Vector
• Geoff Ross, Chief Executive Officer, 42 Below
• Bill Day, Chief Executive Officer, Seaworks
• Ian Narev, Managing Partner, McKinsey & Company
• Brian Gaynor, Business Columnist, NZ Herald
• Lance Jenkins, Managing Director & Chief Executive
Officer, Goldman Sachs JB Were
• Peter Townsend, Chief Executive, Canterbury Employers’
Chamber of Commerce
• Dr Roderick Deane, Chairman, Telecom New Zealand
• Chris Moller, Chief Executive Officer, New Zealand Rugby
Union
• Scott St John, Chief Executive Officer, First NZ Capital
In addition, we asked a selection of New Zealanders their
views on the same topic. These range from an 18 year old
graduate to a retired Police Officer.
NZX would like to thank all those that took the time to
document their perspectives. We appreciate your candour
and are challenged by your views.
WANTED
RESILIENT BROAD BASED GROWTH
D r. A L A N B O L L A R D
GOVERNOR, RESERVE BANK OF NEW ZEALAND
What are the top three things that will need to change for
the New Zealand economy to be where you would like it to
be in 2010?
I could get all technical about this, but in simple terms my
top picks are:
• Increase labour productivity from roughly 1.5% p.a. to
roughly 2% to keep growth strong.
• Get a good Doha WTO trade round, or failing that, get
a NZ-US Free Trade Agreement.
• Increase our country’s overall savings rate in the
medium-term.
What would need to happen in order to facilitate these
changes?
• Deepen our capital markets to work for New Zealand
firms.
• Don’t let our labour markets get increasingly inflexible.
• Private sector managers need to make quality decisions.
• Households need to invest in financial instruments
other than housing.
How would these changes impact the economy?
They will help us get resilient broad-based growth, at
least equivalent to Australian levels, plus a good level of
economic stability. Many of the other things that we want
for New Zealand will follow from this.
Dr. Alan Bollard is currently Governor of RBNZ. His
previous positions include Secretary to the Treasury,
Chairman of the NZ Commerce Commission and
Director of the NZ Institute of Economic Research. Dr.
Bollard has also written a number of books on the New
Zealand economy and worked as an economist in the
UK and South Pacific.
The views represented in this article are the express views of the author, and do not
necessarily reflect the views of NZX.
7
 INNOVATION
A POWERFUL ECONOMIC DRIVER
BRIAN WARD
CHIEF EXECUTIVE OFFICER, NZBio
New Zealand will become recognised as an originator of
businesses, products and services that are elegant, smart, and
distinctive. Our companies will rely on innovation in their
products and services, business processes and models, and
position themselves carefully within global value chains to
maximise returns. As a consequence, intellectual property
will become more and more important. The recent growth
of the New Zealand economy has come more from increased
labour utilisation than from increased productivity. Future
growth must come more from increased productivity, and
innovation will help to make this happen.
The rise of the high performance exporter
Export-based companies will outperform other business
categories; they will have a strong focus on growth and
increasingly be publicly listed. Recent New Zealand
economic growth has been driven more by domestic demand
than by overseas demand (i.e. exports). Future growth needs
to be driven more by satisfying overseas demand.
Success will come from reaching outside of New Zealand
early, with a determination to partner wisely and often.
New Zealanders are famously self-reliant, but we can
do better by working with international partners, whilst
maintaining our enterprising spirit.
Innovation is the most powerful economic driver
There is no shortage of good ideas. New Zealanders, and
particularly those involved in the biological sciences, are
internationally recognised as originators of world class
basic and applied research. We could do even better if
public R&D investment rose from just below 1% of GDP
to OECD norms of between 2% to 5% of GDP.
8
Currently, the most severe constraint to exploiting our
existing innovations is a lack of funds to move projects from
discovery to the ‘investor ready’ stage. The Government
needs to apply serious public financial commitment to this
stage, as its international counterparts have done.
The private sector also has a role to play. Funding for
early-stage companies in New Zealand is presently very
limited. A relatively low portfolio allocation to high risk
asset classes limits funding for new ventures, and in a
small market individual company setbacks can have
an inordinate influence on market sentiment. Success
will breed success, but it is also a numbers game. In the
meantime, we need to back ourselves and feed more
private capital into the pipeline.
The rise of the high performance exporter depends on New
Zealand moving beyond just recognising the importance
of building exports, to targeting niche opportunities that
are high growth and high margin, where we can stake
a claim as world leaders. Niche businesses within the
life sciences stand out in this regard. Fundamental to
this development is deeper insight by Government and
businesses into opportunities of genuine competitive
advantage where there are accessible channels to market.
The Government’s “Growth and Innovation Framework”
has begun to address this question.
Further progress is dependent on an entrepreneurial
partnership between the public and private sectors and
an acceptance on both sides that the way forward is
uncharted territory with uncertainties and risks, but if
we are intent on lifting our economic performance then
we must act with conviction. Government leadership is
“New Zealand will become recognised as an
originator of businesses, products and services
that are elegant, smart, and distinctive.”
necessary to create an operating environment that favours
high performance exporters. These companies need to
have the opportunity to be on an equal footing with their
international competitors and realise their full potential.
If this means favouring high performance exporters over
other businesses, so be it.
The taxation system also needs adjustment to facilitate
the development of high growth companies. Their future
value as taxpayers will more than compensate for early
concessions. Regulatory and compliance requirements
must be streamlined because this is an overhead that
diverts resources from building the business. Within the
private sector, we need to improve our ability to aggregate
resources, build on individual and collective strengths,
and create critical mass.
Leveraging international partners
In the global marketplace there are very few areas where
New Zealand can hope to dominate the entire supply
chain, particularly given our distance from major markets.
To grow companies quickly and capture the value of new
technologies, New Zealand companies will need to be
excellent at entering markets quickly and concurrently.
Our companies need to develop the networks, skills and
experience to be among the world’s best at executing
sophisticated partnering arrangements to leverage
distribution channels, profile, insight and new business
options. Much of this responsibility falls to industry, with
its clusters, networks, partnerships and collaborations, but
government departments like the Ministry of Economic
Development and New Zealand Trade and Enterprise
are pivotal, bringing to bear their resources, skills and
business-strengthening capabilities.
Economic Impact
The economic benefits from these changes will be
significant. The private sector wins through greater
export revenues, higher growth, higher margins, higher
value added products and services, enhanced competitive
advantage, greater scale and better paid jobs.
The Government wins through increased taxation revenue
which means there is greater capacity to improve publicly
funded services New Zealanders value, like better
healthcare, education, social services, and environmental
management. In addition, the economy will also have a
broader base from which to grow in the future.
Brian Ward is currently the CEO of NZBio, New
Zealand’s biotechnology industry organisation. Over
the last 20 years he has worked in a wide range of roles
in the area of life sciences, both in New Zealand and
internationally.
The views represented in this article are the express views of the author, and do not
necessarily reflect the views of NZX.
9
THINK LOCAL, ACT GLOBAL
MARK FRANKLIN

CHIEF EXECUTIVE OFFICER, VECTOR

As a nation we need to ensure there is real openness for linked to business efficiency if they are to contribute to
investment. At present, there is no framework in place the country’s future success.
to give international investors long-term confidence
These changes will enable New Zealand to improve our
and certainty. We talk about the country being open for
place in the world and to enjoy a better standard of life.
investment, but too often contradict that by our reaction It is going to be difficult to move up from being in the
to proposed investments. bottom half of the OECD’s wealth index. But we can
We also need to continue to have a flexible labour market do this or, at least, have it as an objective. Hope is not a
structure, giving people greater freedom in the way good strategy.
they balance their work and life By making these changes, we
but without undermining the
efficiency of operations.
“New Zealand has to decide should be able to better compete
in the world, and we will become
In my opinion New Zealand whether we move proactively more innovative as a country. At the
is becoming over-regulated as or reactively, whether we moment individuals
we are full of innovative
but, because of our
increasingly there is a perception
that law and policy will solve lead the way and control our regulatory environment and lack
everything. This needs to change of flexibility in the labour market,
and the issues of regulation versus own destiny, or whether we innovation is not encouraged.
We also need to become more
competition need to be better are simply pulled along.” attractive to overseas skilled
understood.
labour given we are now operating
To a certain extent, these changes will occur by osmosis in a highly competitive world labour market.
as the world moves on. But New Zealand has to decide
whether we move proactively or reactively, whether we The country would also benefit from opening up
lead the way and control our own destiny or whether we investment opportunities and being an active player in the
simply are pulled along. global economy, with far greater control over our future and
economic wellbeing than if we try to resist and regulate
New Zealanders are generally aspirational, but we need to our way out of the global realities.
back up those aspirations with effective action. We need
to start acting as part of the global economy and have a
more thoughtful view about the balance of nationalism Mark Franklin was appointed CEO of Vector in 2003. He
has a Bachelor of Electrical Engineering from Sydney
versus harmonisation with Australia. We need to recognise
University and has extensive experience in the energy
the long term benefits of opening up opportunities to and technology sectors in New Zealand, Australia
international investors. and Japan. His previous leadership roles include
Chief Executive of Orion Energy in the Hunter Valley
There also needs to be a considerable change in attitude (Australia) and Asia Pacific General Manager of IBM
regarding labour reform and regulatory activity. Regulatory GSA for utilities.

control is a breeding ground for potential inefficiency, and I

The views represented in this article are the express views of the author, and do not
believe any regulatory or labour reforms need to be closely necessarily reflect the views of NZX.

10
 A LUST FOR
ENTREPRENEURSHIP
GEOFF ROSS

CHIEF EXECUTIVE OFFICER, 42 BELOW

A healthy economy in simple terms is one that is selling

more than it is buying. A wealthy economy is one that is
selling frickin heaps. To make this happen the three fingers
that the Government needs to pull out are as follows:
• Fast Start Tax Break for future exporters. The toughest
time for any export business is the start. Upfront costs
have been met but economies of scale are yet to be
achieved. So how about giving start up companies tax
incentives based on their overseas earnings growth
instead of just punishing them for being productive.
The 0-10 million tax break would make New Zealand
companies the fastest out of the blocks in the world.
• Encouraging a vibrant capital market. It’s a truth – a
strong capital market is a necessary pillar for a strong
economy. If all New Zealanders were active in our
capital markets a huge amount of fuel would be added
to our businesses. So let’s get Kiwis away from relying
on selling their house to fund their retirement and
encourage them to be active in the sharemarket by not
taxing gains made on investments of any sort.
• Education and having more Bill Gates/Rupert
Murdochs per capita. In a typical effort to compensate
for our size, New Zealand often uses the expression
‘more per capita’. ‘We won more Golds per capita at the
Olympics’ or ‘We have more mobile phones per capita’.
Well, into our country’s mindset we need to breed a
lust for entrepreneurship, and a New Zealand culture
that wants to create the next Microsoft or Newscorp.
We should be creating companies that are big on the
world stage, not just companies that are ‘quite big for
New Zealand’.
Let’s start by not paying teachers such crap money. Give
teachers the incentives and the resources to start teaching
our kids to reach for the stars. The ‘Spark’ programme at
“We should be creating
companies that are big on
the world stage, not just
companies that are ‘quite big
for New Zealand.”
Auckland University does this really well. And there’s no
reason their teachings can’t be formalised into the school
curriculum. Let’s stop copping out by using that ‘per
capita’ phrase.
Also, lets get rid of OSH and any other hopeless
Government bureaucracies gone crazy. And start selling
New Zealand to the world on more than just mountains
and movie sets. You actually can have a bloody good time
here, it’s a fun, energetic place and a great place to party.
We wouldn’t have a ‘Brain Drain’ if the brains were given
a good reason to stay.
Geoff Ross started distilling vodka in his Wellington
garage in 1996. He sold his first bottle in 1999. 42
BELOW has now won Gold in the World Spirits Awards
and Gold at many other competitions. 42 BELOW is in 10
countries worldwide, and this list is growing. The Ritz
London, Beverly Hills Hotel, LA and more than 4,500
of the best bars worldwide now stock 42 BELOW. 42
BELOW is listed on NZX, and has over 40 staff placed in
key markets worldwide.
The views represented in this article are the express views of the author, and do not
necessarily reflect the views of NZX.

11
CREATING THE ENVIRONMENT
FOR WEALTH CREATION
BILL DAY
CHIEF EXECUTIVE, SEAWORKS LTD

In 2010, I want to see a productive and growing economy
that creates opportunities and prosperity for all New
Zealanders. Economic growth is not an end in itself, but
it is the key to lifting living standards. It is only through
economic growth that our country can afford higher wages,
good schools, first-class health care,
better environmental protection,
as well as opportunities for future “The private sector must
generations.
2010 is not far away. To build the
be the main engine of
foundations for a stronger economy,
we need to think well beyond 2010.
economic growth, and
As the experience of the 1980s
and 1990s has shown, it can take
the Government must
years before the beneficial effects
of policy reforms are felt in the
play a supportive role.”
economy. Equally, it takes time for
the adverse effects of poor policy
decisions to filter through.
First, we need to put in place a policy environment
that encourages innovation, entrepreneurship and
wealth creation. The recipe for this is well known: clear
property rights, a sound judiciary, good general laws,
low taxes, a flexible labour market and a generally light
level of regulation. The private sector must be the main
engine of economic growth, and the Government must
play a supportive role. Unfortunately, we have seen too
many policy decisions take us backward in recent years
– employment law, business regulation, taxation, welfare
policies, to name just a few.
Second, we need strong and effective legal and political
introduction of constraints on the growth in government.
This could occur through a regulatory constitution and tax/
spending limitations in the Fiscal Responsibility Act.
Finally, we need to develop our human capital. We cannot
compete with other countries on
the basis of our size or natural
resources. But New Zealand can
compete with our minds and our
creativity. Our education system
has served us adequately in the
past, but we need to aspire for
much more. We need higher
expectations, less regulation of
education providers, changes to
the way teachers are paid and
rewarded, and more choice and
competition across all levels.
New Zealand is small and isolated. A good policy
framework can provide us with an important source of
competitive advantage over other nations. We also need
a change in attitudes, so that we become a nation that
celebrates business success.
Bill Day is the owner and Managing Director of
Seaworks Ltd, a specialised maritime company with a
head office in Wellington and a branch in Dubai. Bill
studied law at university along with a BA and MBA. He
is also Vice Chairman of the New Zealand Business
Roundtable.

institutions. MMP has been in place for almost ten years.

The views represented in this article are the express views of the author, and do not
It is time to review the system. I would also like to see the necessarily reflect the views of NZX.

12
A CULTURE OF SUCCESS
IAN NAREV
MANAGING PARTNER, MCKINSEY & COMPANY
Our economy in 2010 harnesses the benefits of our small
size, rather than laments its shortcomings. It shows that we
can reduce the friction among different stakeholders that
occurs in larger economies. We can build trust and focus
around a national vision that looks outward towards New
Zealand’s opportunities in the global economy.
Three specific changes will stand out:
• Four or five of our companies will have expressed
the aspiration to be ‘global leaders’, and will be well
down the path to achieving their goal. Each will have
identified a slice of the global economy in which it
can have competitive advantage, have developed
and commercialised unique intellectual property in
that slice, and be building the other intangible assets
necessary to achieve global pre-eminence, including
global networks, talent, management disciplines and a
high performance culture
• We will have a vibrant private equity market that
efficiently matches foreign and local capital to
innovative start-up ventures in New Zealand. Foreign
venture capital will be easier to attract as a result of the
burgeoning successes of our global leaders
• We will have successfully negotiated critical free trade
agreements, which unlock opportunities for our global
leaders
To facilitate these changes, we will need an underlying
culture that celebrates the early successes of the global
leaders and supports the next wave of global aspirants.
The culture will be based on a justified belief that the
spoils of success will be shared and enjoyed throughout our
communities. The starting point will be a common vision
for how our companies can capture global opportunities.
The vision must be shared by business leaders, capital
providers, the government and its agencies, labour,
educational institutions, the media and the community
at large. Each must understand its own role, and feel
“The catalyst for
the common
vision is leadership.”
accountable for achieving it. Each must also trust the others
to play their part. The catalyst for the common vision is
leadership. The vision emerges through a concerted effort
from a small but inclusive group of leaders that listen to
each other, bring the same level of analysis and discipline
to microeconomic and management issues as the New
Zealand Institute is bringing to macroeconomic issues,
and have the mana to build support for the vision among
their peers.
Five years will be too soon to see major changes. But leading
indicators of the underlying health of the economy will be
clear. The hallmark will be an all-time high in confidence,
that brings with it employment growth, a continuation
of the trend for our top expat talent to return, increased
demand for locally produced goods and services, increased
foreign direct investment and a thriving NZX (a plug for
the editors of this publication).
Ian Narev is the Managing Partner of McKinsey &
Company’s New Zealand office, and one of the Asia-
Pacific leaders of McKinsey’s global strategy practice.
Ian spent the first four years of his McKinsey career
in New York, after undertaking postgraduate studies
in international law at Cambridge University and New
York University.
The views represented in this article are the express views of the author, and do not
necessarily reflect the views of NZX.
13
BUILDING BETTER BUSINESSES
BRIAN GAYNOR
BUSINESS COLUMNIST, NEW ZEALAND HERALD

The main drivers of wealth and economic growth in a free The only really successful offshore acquisition by a New
enterprise society are business people and their companies. Zealand company, prior to Fletcher Building’s recent
With this in mind a number of developments are required moves in Australia, was Lion Nathan’s purchase of
if New Zealand is to improve its economic performance National Brewing. The Australian brewer was owned by
over the next five years. These include; the troubled Bond Corporation and Lion Nathan was able
to acquire it at a large discount to underlying value.
• Our top corporate leaders need to create great
companies instead of selling out and retiring to their New Zealand companies - Michael Hill International
yachts, golf courses or overseas is a good example - have been more
retreats at a relatively early age. “Our top corporate successful when they have adopted an
• Directors and management should organic growth strategy.
adopt a more measured and long-
leaders need to create
Shareholders also need to take a more
term approach to growth. The great companies instead proactive stance towards management
widely adopted big bang strategy
has not been successful, particularly
of selling out and retiring issues. It would be far more rewarding in
the longer term if shareholders changed
offshore. to their yachts, golf the management of a poorly performing
• Shareholders should play an active courses overseas retreats company instead of selling out to the
role in ensuring that companies first foreign buyer.
achieve their full potential. They at a relatively early age.”
should also have a longer-term The development of successful,
perspective and reject opportunistic bids from overseas internationally orientated companies, would be a huge
bidders. boost to the New Zealand economy because they would
One of the biggest problems with the New Zealand economy act as an inspiration and role model to the remainder of the
is that we are not creating enough great companies. We don’t business community.
have businessmen with the ambition of Rupert Murdoch of These successful commercial enterprises are the key
News Corporation or Frank Lowy of Westfield. to the future success of the New Zealand economy
Many of our successful business leaders are content as in a free enterprise environment it is private sector
to retire while still in their business prime. This is the companies, not the Government, which creates wealth
equivalent of a successful sports coach rejecting a national and economic growth.
position after achieving provincial success. Warren Buffett
and Rupert Murdoch, who are both 74, are still creating
wealth yet most of our successful entrepreneurs have
much more modest goals. In addition to being a business columnist for the New
Zealand Herald, Brian is Executive Director of Milford
Our directors and management also need to take a more Asset Management and Director of The New Zealand
realistic approach to growth, particularly overseas. Too many Investment Trust plc. Brian studied for B.Comm (Econ)
companies have adopted the big bank approach, namely at the National University of Ireland.

the debt financed acquisition of a large overseas company,

The views represented in this article are the express views of the author, and do not
instead of a more measured internal growth strategy. necessarily reflect the views of NZX.

14
 SAVINGS,
INVESTMENT AND OWNERSHIP
LANCE JENKINS
MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER,
GOLDMAN SACHS JBWERE (NEW ZEALAND)
When NZX first asked me to put together some brief
comments on a perspective for New Zealand, I was initially
reticent. As someone who has been living in New York City
for the past nine years I wasn’t sure I could be so bold as to
put across a point of view. (I have been back in New Zealand
for four months.) However on reflection, a fresh set of eyes
and new perspectives as to how we approach business or
the way we do things, can be genuinely helpful.
As a preface to my comments I believe New Zealand is a
one of the greatest places in the world. I am excited to be
back, but like any business or country, there are always
things we can do better to improve our lot as a society.
After careful consideration, I felt it was worthwhile to
focus on those issues that:
• I had either observed overseas or
• I felt I had some insight into (from my time spent in
New York).
Three key issues emerged, when thinking about
opportunities for New Zealand:
• The challenge of creating a culture of savings and
investment
• Creating a culture of self reliance, and
• Celebrating our successes, our leadership and our
entrepreneurs.
There has been a good deal of discussion around these
issues, but the need for an investment and savings culture
within New Zealand stands out as arguably one of the
greatest requirements for growth for our country.
As someone who has spent the last nine years living in the
USA, (despite press reports of a mass exodus out of NZ,
I am excited to say I returned to New Zealand with my wife
and two children in January of this year) I saw first hand
the benefits of incentivised retirement plans, investment
plans and savings plans that are very much a part of the
American psyche. Savings, Investment and Ownership
are concepts that are embraced in the USA and it is no
accident that the US is also one of the richest nations in
the world. It is part of their cultural thread and US business
and Government understand that.
While the Government and opposition are currently
talking about an “ownership society” the concept of a
savings programme for New Zealanders seems to me to be
a key requirement for future growth. David Skilling and
the NZ Institute have done some very interesting work
around this issue, and while not wanting to steal their
thunder, their belief that New Zealanders as a whole need
to embrace ownership and savings as concepts to be taken
from the cradle to the grave are ideals we should all be
focussed on.
While we need a safety net for the less fortunate within
our society, most of us function best when we feel we
have an ownership stake in society. Ownership does not
necessarily mean home ownership (of course it can) but
the idea that we have some “skin in the game” via savings
or investment is a notion that motivates the majority of us
to do better and to stretch ourselves. In doing so, we not
only create benefit for ourselves and our families, we also
create a better New Zealand. After years of solid growth
in New Zealand, we need to use this current period to
develop a culture of savings, investment and ownership. If
not now, we will have lost an opportunity that is unlikely
to repeat itself for many years.
15
By way of example, one of the great wonders I was
able to witness while living in the US was the power of
retirement savings and the culture of investment that not
only increased the wealth of that country (as those savings
and investments were able to be used productively by
businesses), but also I saw first hand the wealth created by
retirees and the benefits they were able to enjoy.
My wife, Melissa, grew up in Cape Cod, Massachusetts,
USA, and comes from a very modest background (as do
I). Her father was an electrical lines repairman who spent
most of his life working for the local electric utility, Cape
Cod Electric, retiring two years ago as a lines foreman for
that company. What was remarkable to me was seeing
the wealth that her father had accumulated throughout
his working life. This was a guy who probably earned no
more than $50,000 in his best year, but who at the age of 60,
through investing and saving throughout his working life
now owned his home outright, and had a portfolio of stocks
and bonds worth approx $1 million. In addition he had sent
his child to a private university in Rhode Island, USA (if
we think our university fees are bad in New Zealand, they
are nothing compared to private universities in America!).
Clearly saving and investing throughout one’s life does allow
even the average earner to create wealth for themselves,
and allows business to productively borrow those savings in
order for the country as a whole to grow and expand.
I use the example because often, when we think about
savings and ownership, we assume it is for the wealthy,
and clearly this is not the case. By encouraging young
participants in our workforce to set aside income now and
not consume it, the outcome for the individual and for the
country is a large net positive. By creating a culture that
understands the basic benefits of investing and saving
throughout our working life is a something our country
must do in order for New Zealand to grow productively.
My second issue fits nicely with the creation of a savings
and investment culture. It is the issue of creating a culture
of self reliance. New Zealanders have long held a belief of
self reliance and entrepreneurship, however while we are
certainly doing well in this country, there does appear to
be an underlying belief that the Government should be
our first port of call for any issues we face.
The reality is the Government should always be the call
of last resort and that if we truly believed in a culture of
self reliance, then that would be the case. My concern for
New Zealand is that we as a society are all too willing to
16
look to Government for relief in terms of benefits or other
government handouts, instead of first looking at the source
of the problem. Throwing money at an issue without fully
understanding what is causing the problem is never the
long term solution and it is up to us as individuals (not
Government) to find our own solutions. As I have stated
earlier, we need to have a safety net for those who are less
fortunate, however a safety net is what it should remain,
it should never become a crutch. Government has an
important role to play in encouraging behaviour that adds
to New Zealand and our economy, and business should
work closely with Government to achieve that outcome.
It is an important leadership role for Government to create
outcomes that reward behaviours, and that benefit – not
detract from – the economy. With an unemployment rate
of 3.5%, we have a fantastic window to work on this ideal.
Finally I would add while the tall poppy syndrome is
slowly being removed from our thinking, we need to do
everything we can do to celebrate our successes, learn
from our mistakes, and encourage our leaders in business,
society, and Government to make the tough decisions. As
I have discovered in my previous role of managing our
Goldman Sachs JBWere New York office and now working
with the leadership team in New Zealand, it is always the
hardest and toughest decisions that need to be answered
in order for business to continue to grow and develop.
By celebrating success and by rewarding leadership we
develop a society that can take on the best.
We need to be careful not to become too comfortable
with our current solid economic state and we should take
this opportunity to plan for the long term. By creating
ownership and investment cultures, by creating a culture
of self reliance and by celebrating success, leadership and
entrepreneurship, we plant the seeds for long term success
for our country. Speaking personally, it is fantastic to be
back in a country that appears poised to make the tough
decisions to ensure continued growth of our nation and I
feel privileged to be part of it.
Prior to moving into the role of Managing Director
and CEO of Goldman Sachs JBWere (New Zealand) in
January 2005, Lance Jenkins was President of Goldman
Sachs JBWere (New York) and has been a partner of
Goldman Sachs JBWere since 1999. Lance received
an MBA from New York University (Stern School of
Business) and has LLB and BCA degrees from Victoria
University of Wellington.
The views represented in this article are the express views of the author, and do not
necessarily reflect the views of NZX.
SUSTAINABILITY AND INTEGRITY
PETER TOWNSEND
CHIEF EXECUTIVE,
CANTERBURY EMPLOYERS’ CHAMBER OF COMMERCE
What are the top three things that will need to change for the New
Zealand economy to be where you would like it to be in 2010?
• A significant shift across New Zealand with respect to
an understanding of the linkage between sustainable,
profitable business, community wellbeing and individual
welfare. Business success and people who are successful
in business need to be appreciated and lauded. We need
a platform of sound and stable public policy on which to
build an environment conducive to business success.
• Ensuring that as many New Zealanders as is possible
are in useful, productive, well-paid work so that we can
better harness the human resource capacity, increase
productivity and sustainably grow the economy at
a rate that will markedly increase per capita income.
This will enable us to better apply technology to our
natural capital to create value.
• Do a lot better in respect to our infrastructure and
utilities supply. Overcome the issues of increasing
congestion in our cities, improve the road/rail/shipping
between our cities and ensure that we have adequate
supplies of reasonably priced electricity and water to
support our growing economy.
What would need to happen in order to facilitate these changes?
• Every politician at a local and central Government
level must prioritise working on an environment that
will encourage sustainable, profitable business. We
need to eliminate the cringe syndrome in New Zealand
with respect to business and we need to ensure that
businesses are operating on a platform of sustainability
and integrity so that good business practices are seen to
be the norm in this country. We also need to celebrate
our business successes.
• We need to encourage family-friendly workplaces and a
flexible, high quality labour relations environment. We
must reinforce a real commitment to, and belief in, good
educational outcomes and celebrate the importance of
productive work in our economy. We must ensure that
there is provision for continuous upskilling and training
for all employees and that linkages between educational
institutions and businesses are improved markedly.
• We need to start thinking about infrastructure issues
strategically and long-term plans need to be developed
with regard to provision of efficient transport. It’s
time to get real about the future of electricity supply,
transmission and conservation in this country and
develop a workable long-term plan. With respect
to water we need to ensure the tension between
hydro-electric generation, irrigation, recreational, the
enhancement of rivers, industrial use of water and
town supply are worked through in the best interests
of the overall community and we need to look at the
tradability of water rights.
How would these changes impact the economy?
• Understanding the role that business plays in sustainable
economic growth and what the raising of our per capita
income will mean to all of us will reinforce the chance
for business to succeed. The connection is compelling;
it is just not understood.
• New Zealand is lagging in terms of its productivity
and its per capita income. We must break out of the
position of being a low wage economy if we are to offer
a reasonable standard of living to all of our citizens.
Increasing the contribution to the economy, made by
human capital, is fundamental.
• No economy can grow on suspect infrastructure. There
is not much point talking about innovation and future
growth if the wheels are falling off your infrastructure.
Peter Townsend has been the Chief Executive of the
Canterbury Employers’ Chamber of Commerce since
1996. Peter also holds several corporate directorships
and is heavily committed to a range of community
groups and initiatives in this region that are in harmony
with the objectives of the Employers’ Chamber.
The views represented in this article are the express views of the author, and do not
necessarily reflect the views of NZX.
17
SELF DETERMINATION, SELF RELIANCE
D r. R O D E R I C K D E A N E
C H A I R M A N, TELECOM NEW ZEALAND
What are the top three things that will need to change for the
New Zealand economy to be where you would like it to be in
2010?
• Deregulation rather than re-regulation.
• Lower taxes and reduced size of government.
• Upgraded social policy (education, health, social welfare).
What would need to happen in order to facilitate these changes?
• Government stops pretending it has all the solutions
for all our problems.
• More self determination, more self reliance.
• More market oriented solutions.
How would these changes impact the economy?
• Greater productivity growth arising from restoration of
flexibility and adaptability.
18
• More vibrant, faster growth economy.
• Better solutions to social challenges.
We also need to solve our massive infrastructure problems
(e.g. roading and electricity), which essentially need more
market oriented solutions. These currently constrain
growth and increase risks for the private sector.
Dr. Roderick Deane is currently Chairman of
Telecom, Fletcher Building Limited, ANZ National
Bank Limited, Te Papa Tongarewa (the Museum of
New Zealand) and the New Zealand Seed Fund. Dr.
Deane is also a Director of the Australian companies,
Australia and New Zealand Banking Group Limited
and Woolworths Limited.
The views represented in this article are the express views of the author, and do not
necessarily reflect the views of NZX.
 BUILDING A NATION ON

PRIDE AND PASSION

C HR I S MO L LE R
C H I E F E X E C U T I V E O FFIC ER , NEW ZE AL AND R UGBY UNIO N

From the outset I plead guilty to parochialism and bias,

given the organisation that I represent; however, I fervently
believe that New Zealand must change its attitude to
hosting major international events.
The economic impact of hosting, for instance, Rugby
World Cup 2011 would be to generate hundreds of
millions of dollars of net foreign exchange earnings for the
country and create a further multiplier effect right through
the New Zealand economy. In addition it would provide
the opportunity to showcase New Zealand to the world.
Following the 2000 Olympics, Sydney became, and still is,
the event capital of the world.
But it is about much more than just money and PR. It
concerns our national psyche and identity – our pride, our
passion and our belief in ourselves as a nation to achieve In summary my top three things that need to change for
the impossible. the New Zealand economy to be where it should be in
In all aspects of life, if we had an attitude of shooting for 2010 are to:
the stars, but only landed on the moon, our achievements • embrace event management with a passion,
as a country and the resultant flow on effect through the
• adopt a “can do” attitude as country through harnessing
economy, would be staggering. Indeed it would be a virtuous
all aspects of our national identity and
circle of achievement generating wealth, of reinvesting part
• ensure our education system assists the youth of today
of that wealth to achieve again at even greater heights,
to become the leaders of tomorrow.
which in turn would produce more wealth and so on.
Against this background the single most important
ingredient for successfully bidding for and winning the Chris Moller took up the position of CEO of the New
right to host major events is a “can do” attitude. As the Zealand Rugby Union on 30 January 2003. Prior to this,
adidas by-line says “impossible is nothing”. It also requires Chris was the Deputy Chief Executive of Fonterra and
Managing Director of NZMP. Chris is a graduate of
central and local government to take a leaf out of the book Victoria University of Wellington and has also attended
of Mayor Kerry Prendergast and her fellow Wellington the London School of Economics and the Advanced
City colleagues to recognise that the benefits of event Management Programme at INSEAD in France.

management principally flow to the host country and cities,

The views represented in this article are the express views of the author, and do not
with the event itself typically breaking even at best. necessarily reflect the views of NZX.

19
PRODUCTIVITY = POWER
SCOTT ST JOHN
CHIEF EXECUTIVE OFFICER, FIRST NZ CAPITAL
The growth of a nation’s wealth is determined by
productivity. This involves working smarter, and getting
more out of our resources. This could be promoted by
creating incentives to train workers, apprenticeships, and
tax deductibility for worker training. New Zealand also
needs the best ideas and technology the world has to offer.
Trade distortions should be removed, and immigration
policy should have a greater bias towards skill based
targeting. Higher productivity growth would deliver
stronger economic growth, with less inflation pressure,
creating a richer nation overall.
Strengthen Incentives
To Move From Welfare To Work: The OECD recently
recognised this as a priority for New Zealand. Too many
New Zealanders rely on public income support, and are
receiving mixed signals as to how to emerge from this
reliance. This is largely achieved via tax policy. As it
stands, the difference between workers increasing their
take home pay, and potential loss of welfare support is not
compelling enough. A higher workforce participation rate
must also be achieved. New Zealand’s aging population
will see labour force growth moderate. Arresting this trend
is important for growth.
20
Infrastructure
Years of under investment needs to be corrected.
Government recognises this, however the imperative of
change must be maintained. In particular, transport and
energy must be addressed. The regulatory framework
should be re-evaluated to look for bottlenecks to progress.
Is the Resource Management Act working effectively, or
is it an unconstructive influence? Labour bottlenecks can
be remedied through immigration and training incentives.
Private sector investment, or government/private sector
joint ventures should be welcomed. As a consequence, the
economy and businesses would run more smoothly.
Savings and Asset Accumulation
Encouragement of Savings in New Zealand currently has
some traction. The work of The New Zealand Institute
on household savings or the lack of, has highlighted the
importance policy as a lever to promote savings. The
Government is embracing the issue with the Stobo report
on taxation of investments, and the Harris report on
workplace savings. These both appear likely to receive
attention in the May budget.
Most particularly, New Zealanders must reduce their
reliance on offshore capital. Higher quality savings, with
better asset allocations should see the savings directed to
areas it is needed most. The consequence of this is to grow
the overall wealth of the nation.
Scott was appointed Chief Executive Officer of First NZ
Capital in 2002. His experience in the finance industry is
extensive and includes roles as a Senior Equity Analyst,
Equity Salesman, Head of Equity Sales and Head of
Equities. Scott joined First NZ Capital’s predecessor
company CS First Boston in 1993 following seven years
at Hendry Hay McIntosh.
The views represented in this article are the express views of the author, and do not
necessarily reflect the views of NZX.
FROM THE HEARTLAND
THE VIEWS OF NEW ZEALANDERS
“In five years time I will have graduated with a commerce degree
majoring in finance, and a physics degree. Also I will have a
student loan which I will be looking to start paying off. I will be
faced with the decision of going overseas and gaining experience
or staying in New Zealand and begin paying off my student loan.
For me to want to stay in New Zealand the New Zealand economy
must be in a strong position. For me, this would mean businesses
must be expanding and looking to employ young graduates. Also
the Government must ensure there are incentives for young
graduates to stay in New Zealand between now and 2010 to help
strengthen the economy. Good, well paid jobs for young graduates
will only come when New Zealand businesses are doing well and
expanding. Also, for me, I am interested in investing money in the
stock market. I will be faced with a decision on which economy
to invest my money in. For me to choose New Zealand in 2010 it
will be its past performance which I will be basing my opinion on.
If between now and 2010, the New Zealand economy does well it
will gain the attention of young investors like myself.
So, for me, the three important things New Zealand needs to
do between now and 2010, are to ensure young graduates are
encouraged to stay in New Zealand and work off their student loan,
New Zealand businesses do well and expand to create well paid
jobs for young graduates and also for the New Zealand economy
to be a good healthy option for young investors to invest in.”
Montague Hare, Commerce & Science Student, Canterbury University,
18 years.
“I’m an investor in equities because I believe the stock market can
provide a good return for someone like me, with a long-term view.
But I’m also a member of the community I live in, and my take on
the economy reflects that. I love the fact that New Zealand has one
of the lowest unemployment rates around. It means my neighbours,
my friends and I are more likely to have decent jobs – and the
confidence to put some money into savings and investments.
In the future, I’d like to see our full employment goal broadened
to include a real push for more productivity and higher skills – so
companies can afford to pay better wages as well as delivering decent
profits. I believe our success depends on our ability to build value
through innovation and great New Zealand brands that can take on the
world. Commodities are important, but only as the raw ingredients. I’d
love to see us develop an economy that reflected that.”
Matt Bostwick, Marketing Communications Manager, 31 years.
“Here is my wish list for New Zealand in 2010;
• The number of current MP’s reduced to at least half the
present number
• A complete overhaul of WINZ, with only the legitimate
beneficiaries being catered for
• A substantial reduction in overseas debt
• A severe reduction in compliance costs
• An ANZAC currency scheme for use by New Zealand and
Australia
• A realistic, but much cheaper, Defence Force
• An independent traffic department with its own budget
• A criminal justice system operating with sensible sentencing
culture
• An overhauled and properly administered employment
contracts process.”
Bill Brien, former Police Officer, Chairman of Wellington Museums
Trust.
“New Zealand is all about people and places. We have to do all we
can to ensure we keep our talent here and keep them motivated
to be clever and inspiring. We must ensure we are creating a
country and economy that will provide young people a place
to live, work, and a place that is competitive with international
standards. This is about protecting our future.
Our people create products and places for New Zealand to
attract world currency. Let’s make sure we think about the
‘brain drain’ and work hard to afford the right opportunities to
young New Zealanders so they want to stay here and build great
companies.”
Dianne Jones, Gardener, 53 years.
“New Zealanders have to “think bigger”. Transport,
telecommunications and energy production all need some serious
attention if we want to keep our economy growing. Control of this
crucial infrastructure needs to be brought back into New Zealand
and appropriate public money invested to ensure future economic
growth is not constricted.”
Davin Murdoch, Business Owner, 38 years.
21
ABN AMRO INSTALMENT WARRANTS
A VEHICLE FOR ACCELERATING WEALTH CREATION

AARON MILNE
DIRECTOR, ABN AMRO EQUITIES NEW ZEALAND LTD

Much has been written of New Zealand retail investors’ enduring love affair with
real estate. Whilst exploring some of the reasons for this popularity, this article will
also look at whether ABN AMRO Instalment Warrants can offer the same potential
for accelerating wealth creation.

The father of modern security analysis, Ben Graham, stated

Investor A Investor B
“An investment operation is one which, upon thorough
analysis promises safety of principal and an adequate Purchase Price of Property $200,000 $200,000
return. Operations not meeting those requirements are
Equity Invested $200,000 $50,000
speculative.”1 With this in mind, we can explore the
Bank loan $0 $150,000
relative merits of investing in real estate against equities.
Registered Value (after 3 $231,525 $231,525
The case for investing in residential real estate is well years)
understood by New Zealand retail investors and is
evidenced by nominal house price inflation of 10% pa Return on Equity Invested* 15.7% 63.1%
since 1963.2 Aside from steady capital returns, what are the
* For simplicity, the return calculations above ignore any funding costs
other factors that make real estate so popular with New associated with the loan, as well as the effects of rental income.
Zealand retail investors?
Probably the single most important factor is an appreciation It is also relevant to consider the unique tax environment
that leverage is an integral part of any strategy for creating in New Zealand. The example above does not take into
wealth. The potential to generate significantly higher account funding costs, however it is important note the
investment returns through the use of leverage is best deductibility of interest costs incurred in generating
demonstrated using a simple example. assessable income. This, coupled with the absence of a
capital gains tax in New Zealand, has led retail investors
Assume two investors purchase a similar residential rental
to embrace the notion of negatively geared investment
property for $200,000, however one investor borrows
properties.
$150,000 to help fund the purchase. Further, assume both
properties appreciate 5% pa for the next three years. As Interestingly, investor willingness to borrow is matched
outlined below, Investor A earns a 15.7% return on the by the willingness of banks to lend against residential real
$200,000 equity they have invested. Investor B however estate. In conjunction with record low interest rates, these
earns a 63.1% return on the lesser amount of $50,000 they factors have helped fuel the property boom in New Zealand
have invested. and other developed countries over the past few years.

22
The question at this point is whether the principles
outlined can be applied just as successfully to leveraged
investing in the equity market? The good news is yes,
and Instalment Warrants have been designed with these
concepts in mind.
The recent introduction of Instalment Warrants offers retail
investors access to one of the most popular investment products
in Australia. Since January 2001 to mid 2004, turnover growth
in Instalment Warrants listed on the ASX has been 63% pa
with turnover now exceeding $2.1 billion pa.
Similar to purchasing residential real estate with only
partial capital outlay and borrowing the rest, Instalment
Warrants allow investors to buy blue chip NZX shares by
way of two separate payments. In practice, the investor
pays approximately half the value of the share up-front
and borrows the rest from the Instalment Warrant issuer.
As with any loan, the investor is liable for interest costs
which in the case of Instalment Warrants are paid up front
and represent a part of the initial payment.
The popularity of Instalment Warrants in Australia can be
explained by the following factors:
• Leveraged exposure to the share price of the underlying
equity
• Full entitlement to dividend and imputation credit
income (for only partial capital outlay)
• Full deductibility of interest costs for tax purposes.
Unlike Australia, however, New Zealand investors are
generally not liable for capital gains tax on the sale of
Instalment Warrants.
• Built-in downside protection arising from the fact the
investor does not have to repay the loan regardless of
the underlying entity share price performance.
As noted, the test for any investment should be safety of
principal plus the likelihood of an adequate return. To this
end, it is imperative that investors focus on established
blue chip companies operating in healthy industries. To
borrow a real estate analogy, blue ribbon areas tend to
experience less volatility in a downturn but also perform
more strongly in an upswing. The same principle generally
applies to equities.
New Zealand equities have posted gross average annual
returns of 12.8% since 1932. Due to the lack of directly
comparable figures in New Zealand, it is difficult to make a
case that long run equity returns exceed those of residential
real estate. Research findings overseas, however, confirm
that equities typically outperform other asset classes such
as property, bonds and cash over the long term.
The high gross dividend yields on offer in the New
Zealand equity market are amongst the highest in the
world, with 8% – 10% gross dividends not uncommon.
As a consequence Instalment Warrants will typically be
positively geared, meaning dividend income will exceed
the funding costs. In this light, it is interesting to consider
that average rental yields are seldom above 5% once
maintenance costs, rates, insurances, management fees
etc are taken into consideration.
To conclude, the purpose of this article is not to detract
from investment in residential real estate. For the reasons
outlined above, it is has proven a compelling investment
class in a New Zealand context. Rather, leverage and
specifically Instalment Warrants issued over NZX
shares should be viewed as an equally powerful tool for
accelerating wealth creation. Importantly, often with
superior returns.
1
Ben Graham & David Dodds (1934) Security Analysis
2
Mary Holm (1998) The Real Story: Saving and investing, now
inflation is under control (commissioned by the RBNZ)
3
ASX (September 2004) – Investment Strategies Using Instalment
Warrants
4
ABN AMRO Research (May 2005) In the long run…..2004 Update
The views represented in this article are the express views of the author, and do not
necessarily reflect the views of NZX.
23
DIRECT MARKET ACCESS (DMA)
ADRIENNE QUINN
NZX PARTICIPANT RELATIONS MANAGER
Liquidity, as everyone knows, is the lifeblood of markets.
A recent review of global markets, conducted by NZX,
indicates that a significant level of liquidity is driven
by investors and traders who use Direct Market Access
(DMA). DMA was introduced into New Zealand by
NZX in August 2004 and provides accredited DMA NZX
Firms with the ability to offer both existing clients and
a much broader range of new clients, both domestic and
international, the opportunity to place orders directly into
the New Zealand marketplace.
In order to introduce DMA, NZX has made a significant
technology and regulatory investment. To date 10 NZX
Firms have been accredited and the trading volumes are
starting to grow. Figures quoted in our Market Update on
page 29 show that 24.5% of all trades in March came from
orders placed through DMA.
The following outlines more information on this
exciting market enhancement and how NZX expects
this will develop and grow the overall liquidity of our
marketplace.
What is DMA?
Up until late last year NZX Trading Participants, or more
specifically a FASTER Dealer, would have to key in orders
to a proprietary NZX Trader Workstation (TWS) in order to
get orders into the Market. This is a manual process which
is both slow and limiting in terms of volume and capacity.
With DMA, NZX Trading Participants are now able to
place orders to buy and sell shares and other securities
directly into the New Zealand market, via specially
designed software applications. This software is technically
confirmed by NZX in order to confirm its technical
efficiency in the market. (The software application can
reside on the desktop of an NZX Advisor working within
an NZX Firm, or on the desktop of a client authorised by
the firm to have direct access to the markets.)
24
Who uses DMA?
DMA is used by a variety of market participants and
investors to enter orders into the market and to access
information directly from the trading engine. NZX Firms
are able to provide many of their institutional and even
larger retail customers with the ability to enter orders
straight into the NZX trading engine, without human
intervention.
What are the benefits?
NZX believes the benefits of DMA are very large in terms
of growing market participation, overall liquidity and
increased information flow. The most immediate benefit
will be an increase in the diversity of market participation.
DMA enables direct trading activity and participation
from a wider range of retail and professional participants
which has, until now, not been available. For example,
National Bank recently formed an alliance with First
NZ Capital Securities to implement DMA for their retail
banking customers. This means that any order placed
into the National Bank online share trading platform by
banking customers can now be automatically submitted
straight to market via a DMA application as opposed to
being manually routed into the market by an individual
working for an NZX Firm.
What are the risks? If an order comes directly from a
customer, who monitors the order flow?
The order is monitored by an accredited DMA Dealer
within a participating NZX Firm. The Dealers and Firms
have undertaken tests with NZX to demonstrate they
are technically proficient in using DMA and are bound
by the NZX Participant rules relating to DMA. NZX is
able to monitor order activity and flow, and if there are any
concerns, NZX has the ability to turn off the access to the
NZX Trading System via the DMA application until the
issues are resolved.
Why would an investor or fund manager want to switch What is an Independent Software Vendor (ISV)?
to DMA when they already have a good relationship with An ISV provides technically conformed software to NZX
their NZX Advisor?
Participants, to enable DMA. The role of an ISV is to
There is no need for the relationship between the investor provide varying features and functionality to enhance
and their NZX Advisor to change that much due to the trading. NZX currently have two accredited NZX ISVs
introduction of DMA. NZX Firms will simply be able to (IRESS and SecuritEase).
execute orders more quickly and easily on behalf of their
clients, through having multiple inputs for market orders. Will we see more ISVs entering the NZ Market?
NZX Firms will also, at their discretion, be able to give NZX would like to see more ISVs develop open interfaces
some clients authorisation to enter orders directly into the solutions to NZX, especially those from overseas
market. marketplaces which will facilitate more international
order flow. ISV applications play a critical role in offering
Who is using DMA applications?
an entire product suite to help NZX, NZX Firms and the
Since the introduction of DMA in August 2004, 10 of trading community work smarter.
NZX’s 16 Trading Participants have now been accredited
to make use of DMA within their firms. These Firms are: To ensure that all ISVs software is compliant, NZX
mandates that ISV applications undertake a technical
• CitiGroup Global Markets (NZ) Limited conformance to meet the minimum requirements defined
• ABN AMRO New Zealand Ltd by NZX to support DMA.
• Macquarie New Zealand Ltd
• Goldman Sachs JBWere (NZ) Ltd
• First NZ Capital Securities Limited
• Forsyth Barr Ltd For more information on DMA trading, please contact
• Deutsche Bank Securities New Zealand Ltd Adrienne Quinn, NZX Participant Relations Manager,
• Direct Broking Ltd at adrienne.quinn@nzx.com
• UBS New Zealand Ltd
• ASB Securities Ltd
How many trades are implemented via a DMA
application?
One quarter (24.5%) of all trades on NZX markets in
March 2005 were the result of orders placed through a
DMA application. NZX expects this to continue to rise as
Participants increase their use of DMA trading facilities.

What other countries have DMA? Did NZX look at these

examples?
Most exchanges globally take advantage of Independent
Software Vendor (ISV) applications. All the exchanges
NZX researched when preparing to bring DMA to the
New Zealand market had seen positive results on the back
of DMA implementation and overall growth in liquidity
and participation.

25
 SMARTSHARES
LAUNCHES SAVINGS PLAN
Over the last 18 months there has been a growing
level of discussion on New Zealanders’ savings habits.
especially regarding our rate of savings and our attitudes
towards savings.
A recent survey of all Smartshares investors revealed
a great deal of interest in saving directly into the
sharemarket in a simple and easy manner. Most investors,
especially those with little time or money, find it difficult
to make regular investment decisions. Finding a solution
was a ‘no brainer’ for the Smartshares team who recently
launched the new Smartshares Savings Plan across all
the products - TENZ, MIDZ, FONZ and MOZY.
The plan enables investors in Smartshares to make
monthly contributions directly into Smartshares at no
cost.* The minimum contribution is just $50 per month
with the flexibility to stop, restart, increase or decrease
savings amounts at any time.
One of the great advantages for first time investors
is that it provides a low cost, easy way to invest in the
sharemarket. It allows people to decide in advance how
much they want to save, pay by direct credit into the
Smartshares fund of their choice, and forget about it. It is
hoped that this initiative will also increase sharemarket
participation amongst New Zealanders who currently
lag far behind Australians in this area of savings.
Industry commentators have been very supportive of the
Smartshares Savings Plan to help the first time investor.
Mary Holm, a prominent business writer for the New
Zealand Herald stated recently “…It’s a particularly good
way to invest via a share fund – which is the best higher-
risk, higher-return vehicle for those with a small amount
of money.”
Our example here illustrates how a modest contribution
of $100 per month into Smartshares can help a first
time investor reach their investment goals sooner.
26
Regular savings directly into Smartshares - what a difference it could make!
$16,000
$15,000
$14,000
$13,000
$12,000
$11,000
$10,000
$9,000
$8,000
$7,000
$6,000
$5,000
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
$5,000 base amount invested + $100 a month (net of tax) $5,000 base amount invested (net of tax)
Please note this graph is for illustration only and does not provide any views to the possible
returns of Smartshares. This example assumes a gross return of 10%pa over five years based
on 6% dividend yield and 4% capital gains (all dividends reinvested net of tax).
This scenario shows that an investor would have
$14,541 in their Smartshares fund in five years, starting
with an initial $5,000 investment and adding just $100
each month, through the Smartshares Savings Plan.
If the investor were to contribute $200 per month
this investment would grow to $21,736 reaching their
investment goal even faster.
Units in TENZ, MIDZ, FONZ and MOZY Smartshares have been
accepted for quotation by New Zealand Exchange Limited and will
be quoted upon completion of allotment procedures. However, the
Special Division that regulates NZX Funds Management Limited takes
no responsibility for any statement in this advertisement.
*The 25 cent transaction fee as outlined in the Investment Statement
is currently being waived by NZX Funds Management Limited.
JOINING THE SAVINGS PLAN
To join the plan, Smartshares investors simply need to
order an investment statement from the Smartshares
website (www.smartshares.co.nz) or call 0800 80 87 80.
smartshares
 NZX Operating Metrics - Quarter 1 2005
NZX metrics are available on a monthly basis and can be found at www.nzx.com/aboutus/investor/metrics

MARKET CAPITALISATION ($m) INDICES

Q1 Change % of GDP Q1 Change

All Domestic Equity 63,246 17% 52% NZSX 50 Index 3,039 17%

NZSX 62,791 16% 51% NZSX 50 Portfolio Index 1,662 20%

NZAX 455 109% n/a NZSX 15 Index 5,617 17%

NZDX 6,549 9% 5% NZAX ALL Index 1,202 17%

TRANSACTIONS - NUMBER TRANSACTIONS - NUMBER ‹ $50k

Q1 Change Q1 Change
NZSX 154,248 13% NZSX 137,640 11%
NZDX 4,970 -23% NZDX 3,854 -24%
NZAX 1,275 152% NZAX 1,267 151%
Total 160,493 12% Total 142,761 10%
Daily avg 2,675 15% Daily avg 2,379 14%

Direct Market Access 35,553 n/a

TRANSACTIONS - VALUE OVERALL ($m) TRANSACTIONS - ANNUALISED VELOCITY

Q1 Change Q1 Change
NZSX 6,633 15% NZSX 10 Index 55% 5%
NZDX 387 -24% NZSX 50 Index 41% -6%
NZAX 7 193% NZSX All Index 39% -4%
Total 7,027 12%
Daily avg 117 16% ORDER NUMBERS
Q1 Change
229,497 8%
Daily avg 3,825 12%

ISSUERS PARTICIPANTS
Q1 Change Added YTD Q1
Companies Trading & Advising Firm 16
NZSX Domestic 141 4% 0 Advising Firm 11
NZSX Dual Full 3 50% 0 Delivery & Settlement Participants 18
NZSX Overseas 55 -4% 0 FASTER Participants 2
NZAX 22 83% 0 Futures & Options Participants 5
NZDX 42 11% 0 Sponsors 40
Securities
Debt 85 5% 1
ETFs 6 50% 0 MARKET DATA
Warrants 8 -20% 0 Q1
Q1($m) YTD ($m) Primary Data Distributors 18
New equity raised $487 $487 Real Time Data Terminals 6,944
New debt raised $152 $152

SMARTSHARES LINK MARKET SERVICES

Q1 Change Q1
Funds Under Management ($m) 181 114% Total Issuers 114
Holders 10,506 157% Listed Issuers 71
Number of Funds 4 300%

NOTES:
1. All figures are measured at the end of the last trading day or for the duration of the quarter.
2. Change refers to the change since the same period in the previous year
3. All Domestic Equity Market Capitalisation includes all securities quoted on the NZSX and NZAX markets of New Zealand, Incorporated Issuers and Dual Listed Issuers.
The Market Capitalisation of Dual Listed Issuers is calculated according to the proportion of revenue generated in New Zealand.
4. Market Capitalisation for the NZDX is the total nominal (face) value of all quoted securities excluding New Zealand Government Stock.
5. Number of Direct Market Access trades includes any trade that involves at at least one Direct Market Access side
6. The number of orders is the number of new orders. It does not represent any ammended orders nor does it consider the number of trades that results from it.
27
MARKETPLACE
Quarter ended 31 March 2005

Trades on all NZX markets

Top 10 - by value of trades ($M) Top 10 - by number of trades
Q1 04 Q1 04
MAJOR MARKET EVENTS Firm Value (%)
(%)
Firm Trades (%)
(%)

• Fletcher Building Ltd raises $141 million in an First NZ 1,387 19.7 (22.1) First NZ 27,511 17.1 (15.7)
institutional book build, to fund the acquisition of GSJBWere 1,207 17.2 (22.0) ABN AMRO Craigs 20,293 12.6 (12.7)
Amatek Holdings Ltd in Australia.
UBS 883 12.6 (14.6) GSJBWere 18,283 11.4 (10.4)
• Macquarie Goodman Property Trust embarks on
ABN AMRO NZ 856 12.2 (9.3) ASB Securities 18,205 11.3 (8.6)
a capital raising of $231 million via a placement,
institutional book build, and entitlements offer to Macquarie 786 11.2 (7.1) Forsyth Barr 17,653 11.0 (12.3)

existing shareholders. The funds will be used to Citigroup 745 10.6 (9.5) Direct Broking 15,304 9.5 (6.3)
acquire a portfolio of property assets from Macquarie
Forsyth Barr 494 7.0 (5.7) Macquarie 12,979 8.1 (6.8)
Goodman Group.
ABN AMRO Craigs 301 4.3 (3.6) UBS 8,405 5.2 (4.4)
• Tower Ltd completes a scheme of arrangement to
distribute shares of subsidiary Australian Wealth ASB Securities 160 2.3 (1.8) ABN AMRO NZ 7,883 4.9 (4.9)

Management to all shareholders. Direct Broking 129 1.8 (1.5) Citigroup 6,495 4.0 (4.6)
• Tenon delivers a capital repayment of $321 million to
shareholders. The distinction between Tenon Ordinary
and Tenon Preference shares is removed. GLOBAL INDEX RETURNS
Global markets, as measured by the MSCI Indices,
• Wrightson completes a full takeover of rival rural
showed mixed returns this quarter. The Australian market
services company Williams & Kettle. Williams &
withstood a weak March to give an overall positive return
Kettle is delisted.
for the quarter. Pacific and European markets were also
• AMP acquires 10% of Capital Properties NZ via a stand
up, but the strengthening of the New Zealand dollar
in the market.
against the Yen and Euro dampened the returns available
from these markets in New Zealand dollar terms.
NZX FIRMS
The increase in trading activity has allowed most
NZX Firms to increase their absolute trading turnover ����������������������������������������
compared to Q1 2004. The biggest increases in market ����

share were recorded by ABN AMRO NZ, Macquarie and ����

Forsyth Barr (in terms of value traded) and by First NZ, ����

ASB Securities and Direct Broking (in terms of number of ����

trades). The market share statistics for NZX Firms on all ����

����
NZX’s markets this quarter were:
�����

�����
Source: MSCI

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28
DIRECT MARKET ACCESS
A major development for NZX this quarter has been the
uptake of Direct Market Access (DMA) by NZX Firms.
DMA has opened the way for the development of software
that interacts directly with NZX’s trading system. This
new technology allows the streamlining of order processing
at NZX Firms and the implementation of automated
algorithmic trading.
DMA makes it easier for participants to access the markets,
which will have positive spin-offs in terms of liquidity,
demand for New Zealand securities and new listings.
NZSX MARKET - TRADING ACTIVITY
Trading activity on the NZSX Market has been up this
quarter. February and March 2005 were the two busiest
months since 2001 in terms of the number of trades (2806
and 2675 average trades per day respectively). Value of
trading was also high, averaging over $114 million per day
in both February and March.

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In March 2005, 14,300 trades were executed using DMA
technology (with a DMA order on the buy side, the sell
side or both sides). This represented 24.5% of all trades
in March.
The value of DMA trades in March 2005 was $114 million,
4.6% of total value traded. Thus far DMA has been used
mostly in environments where there is a large volume of
small value trades.
If we consider only on-market equity trading (i.e.
excluding debt trading and off-market negotiated deals),
DMA activity accounts for 29.4% of the number of trades
and 15.4% of value traded in March.
NZSX MARKET – TOTAL RETURNS
The market retreated slightly in the March 2005 quarter,
on the back of weakening macroeconomic indicators and a
small number of below expectation profit announcements
in March. This quarter is the first time the NZSX 50 Index
has delivered a negative quarterly return since March
2003.
The market is still well above its 2004 levels. 12 month
returns for the NZSX Indices vary from 14.0% for the
NZSX 10 Index to 29.4% for the small-cap NZSX SCI
Index.

29
 NZSX 50 Index
�������������
Top 10 Positive Contributors
����
Security Index Last Q1 05 Q1 Index 12 Month
���� weight price Return impact Return
���� (%) ($) (%) (points) (%)
Independent 4.20 6.00 7.16 8.58 27.3
����
Newspapers
���� Fletcher Building 6.50 6.64 3.48 6.95 60.6
���� Auckland Intl Airport 5.47 8.10 4.28 6.84 30.0
���� Telecom Corp of NZ 26.06 6.06 0.72 6.05 14.1
���� Waste Management 1.35 6.12 12.50 4.67 45.7
NZ
����
��������������������������������������������������������������������������������������������������������� Pumpkin Patch 0.77 3.28 20.88 4.04 -
Contact Energy 8.29 6.50 1.56 3.45 23.8
The Warehouse Group 1.31 3.97 9.37 3.31 -2.8
Sky Network TV 1.25 6.43 7.49 2.70 25.9
Mainfreight 0.38 2.65 17.78 1.71 56.2
NZSX Market - Total Index Return
Index Value Q1 2005 (%) 12 Months (%)

NZSX 50 3039.08 -0.8 17.2 NZSX 50 Index

Bottom 10 Negative Contributors
NZSX 15 5617.40 -1.1 17.4
Security Index Last Q1 05 Q1 Index 12 Month
NZSX 50 Portfolio 1662.01 -1.7 20.0 weight price Return impact Return
(%) ($) (%) (points) (%)
NZSX 10 3316.06 -0.6 14.0
F&P Appliances Hdgs 1.73 2.97 -30.93 -23.16 -26.6
NZSX MidCap 6540.44 -0.6 23.7
F&P Healthcare Corp 3.36 2.99 -7.72 -8.46 32.4
NZSX SCI 19485.24 -2.1 29.4
Sky City 4.55 4.92 -5.34 -7.80 21.1
NZSX All 3158.99 -0.8 20.3 Entertainment
Tower 1.26 1.77 -16.29 -7.22 16.3
Carter Holt Harvey 5.70 1.97 -3.02 -5.58 -20.7
NZSX 50 INDEX Promina Group 2.13 5.45 -6.03 -4.10 31.8

Of the 50 securities in the NZSX 50 Index, 23 gave a Nuplex Industries 0.81 4.97 -12.06 -3.44 18.1

positive return this quarter. Overall, the NZSX 50 Index Guinness Peat Group
Plc
3.08 2.08 -3.02 -2.96 14.6

fell by 0.8%, or 25.8 index points. Lion Nathan 0.54 7.84 -15.43 -2.96 17.4
Cavalier Corporation 0.40 3.80 -16.71 -2.47 -15.9
The securities which had the biggest impacts on the Index
were Independent Newspapers (which pushed the Index
up 8.6 points), Fisher and Paykel Appliances and Fisher NZSX SCI INDEX
and Paykel Healthcare (dragging the Index down 23.2 There were a number of strong performers among the small-
points and 8.5 points respectively). cap stocks this quarter. NZ Finance Holdings, which listed
after an IPO in October 2004, doubled in price this quarter,
The poorer performing securities this quarter were mainly
partly due to popularity with strategic shareholders.
stocks that have given strong returns over the past year.
Of the bottom 10 negative contributors this quarter, seven NZSX SCI Index
have still given positive 12 month returns, all in excess of Top 10 Performers
14%, despite their poor performance this quarter. Security Last Q1 05 12 Month
price Return Return
($) (%) (%)
NZ Finance Holdings 0.82 105.0 -
Training Solutions Plus 0.002 100.0 0.0
Vertex Group Holdings 2.06 31.2 54.1
NZ Refining Co 34.50 17.8 145.9
CDL Investments NZ 0.37 15.6 48.0
Cadmus Technology 0.30 15.4 160.9
Metlifecare 3.90 14.1 72.6
Allied Farmers 2.88 13.7 92.1
Toll NZ 3.05 13.0 117.9
Mooring Systems 4.45 12.7 18.4

30
NZSX SCI Index NZAX Market – Total Returns
Bottom 10 Performers Bottom 10 Performers
Security Last Q1 05 12 Month Security Last Q1 05 Six
price Return Return price Return Months
($) (%) (%) ($) (%) (%)
New Image 0.07 -64.8 -77.6 RetailX 0.08 33.3 -60.0
Widespread Portfolios 0.017 -39.3 -37.9 Livestock Improv Corp 1.30 20.6 10.9
Genesis R&D Corp 0.28 -37.8 -56.9 Just Water International 0.94 20.4 23.5
Apple Fields 0.03 -33.3 0.0 Ashburton BS Ordinary 4.30 12.9 25.9
Life Pharmacy Limited 1.35 -32.5 -3.6 Wool Equities 0.72 12.5 50.0
Broadway Industries 0.80 -28.6 -16.8 Comvita 2.20 6.1 -7.1
Aust Prop Hldgs Group 0.03 -28.6 -40.0 Eastern HiFi 0.96 4.3 -
KidiCorp Group 0.18 -28.0 0.0 Loan and Buildng Society 4.56 3.6 16.8
Blue Chip New Zealand 0.90 -25.0 -44.4 Ashburton BS Preference 1.26 1.5 15.5
Heritage Gold NZ 0.083 -24.5 -16.2 Oyster Bay Mlb Vineyards 2.74 1.5 2.6
Speirs Group 1.20 0.0 37.4
Satara Co-op Group 1.18 -2.3 -
The NZ Wine Company 1.90 -5.0 -2.3
NZ Wool Services Intl 0.50 -7.4 -4.9
Zintel Group 1.00 -9.1 -18.9
Seeka Kiwifruit Inds 4.50 -9.6 -0.6
Southern Travel Holdings 1.08 -11.3 -
Cynotech 0.22 -15.4 50.4
Windflow Technology 2.50 -16.7 -20.4

NZAX MARKET - TRADING ACTIVITY Connexionz 0.50 -24.2 -

The NZAX Market has matured significantly since its Solution Dynamics 1.08 -32.5 -10.0
A2 Corp 0.22 -45.0 -56.0
launch in November 2003. There are now 23 Issuers with
The CACI Group 0.18 -50.0 -47.1
securities listed on the market. The growth in the market
can be seen in the number of trades and value of shares
traded, which are up 150% and 190% respectively this NZAX ALL INDEX
quarter as compared to the same period in 2004. The NZAX All Index followed the NZSX Market indices
down this quarter, down 4.5% to 1202.21. The 12 month
return on this in Index is 17.3%.
����������������������������������
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NZAX MARKET - TOTAL RETURNS

The following table highlights the growth in value
generated for shareholders of NZAX securities for the past
quarter and the previous six months.

31
 NZX DEBT INDICES
NZX calculates a range of government bond, corporate bond
and bank bill indices designed to track the performance of
fixed interest securities in New Zealand. The table below
shows the performance of the main indices to the end of
NZDX MARKET - TRADING ACTIVITY March.
Trading on the NZDX Market has been moderate this
quarter.
NZX Debt Indices - Returns
Returns 31 March 05 Data
Index Q1 05 12 Months Yield Mod.
���������������������������������������� (%) (%) (%) Duration
�� ���
NZX NZ Government Stock 0.53 3.86 6.24 4.04 years
�� ��� Index
�� NZX Corporate Investment 0.76 4.49 7.13 2.50 years
���
Grade Bond Index
��
�� NZX 90-Day Bank Bill Index 1.65 6.42 7.08 n/a
�
��
�

�
��
The raising of interest rates in the past year has weakened
� �� the market value of existing bonds, resulting in low
�
������������������������������������������������������������������������������������������������������������������������������������
� 12 month returns for the NZ Government Stock and
�������������������� ����������������������
Corporate Bond Indices.
A significant event for NZX NZ Government Stock
Index this quarter was the maturity of the February
NZDX MARKET - NEW LISTINGS 2005 Government Bond, which lengthened the modified
The first quarter of the year is usually quiet for new listings, duration of the Index by about 0.6 years.
however there was one new security quoted on the NZDX
Market this quarter.

NZDX New Debt Securities Quoted

Issuer Security code Date Security type Interest Maturity date
listed rate
Infratil Ltd IFT090 1/03/05 Infrastructure 8.50% Feb 2020
Bonds

32
Q1-05 UPDATE
Corporate Accreditation of NZX Market
Participants
Corporate accreditation is one of the pillars of the
regulatory supervision conducted by NZX in respect of
its Market Participants (commonly known as Broking
Firms). The road to successfully attaining corporate
accreditation commences with submitting an application
form and providing a number of prescribed documents
which contain details of the Firm’s business, key staff,
procedures, systems and controls. The application process
also requires the principals (i.e. the directors, partners or
the sole trader him/herself) of the Firm to make certain
undertakings to NZX to the effect that they are fit and
proper to hold that position and they will ensure that the
Firm will comply with its regulatory obligations. Any new
Firm seeking to become a Market Participant will need to
undergo this application process.
Under the NZX Participant Rules, which came into effect
on 3 May 2004, all existing Firms had to apply to attain
the newly created designation of Market Participant. This
application had to be made by 3 November 2004, the end
of the transitional period for the new Rules. NZX has now
completed processing all of the applications received from
existing Firms and made determinations in respect of all
of the applicants. A list of Firms accredited as Market
Participants (and NZX Sponsors) is provided on the NZX
website in the ‘Market Participants’ section.
Given its fundamental importance, the application process
for all existing Firms was a meticulous one involving
a considerable amount of work for both NZX and the
applicants. We acknowledge the hard work performed by
the applicants prior to the submission of their application.
We wish to thank all applicants for this.
We believe that the outcome has been extremely beneficial
in that NZX now has detailed information relating to, as
well as a greater understanding of, the composition and
activities of its Participants. Furthermore, Participants
are likely to have a much greater understanding of their
regulatory responsibilities having undergone the process.
During the process, each Market Participant had to
demonstrate that they had:
• Professional indemnity insurance
• Written compliance procedures
• A designated, independent compliance resource to
provide compliance oversight
• Written business continuity and emergency
arrangements.
NZX freely admits that it has deliberately raised the bar of
what it takes to become and remain a “member” of NZX
(as was the terminology used prior to the demutualisation).
We believe that this has greatly enhanced the section of the
financial services industry for which NZX, in exercise of its
function as a “Self-regulating Organisation” is responsible.
NZX wishes to congratulate all Firms that have successfully
attained the designation of NZX Market Participant.
Accreditation for existing Firms was by no means a
formality. In this regard, we note that not all applications
were successful. We firmly believe that using the NZX
brand, as Market Participants are entitled and encouraged
to do (whether in signage or stationery), will provide a
mark of quality and is an achievement to be proud of.
33

Link Market Services
Towards the end of last quarter NZX and ASX Perpetual
Registrars Limited (ASX Perpetual) announced that
they had formed a joint venture to offer full registry
and employee share plan administration services to the
New Zealand market. Link Market Services Limited
(headquartered in Auckland) was created as the company
to deliver these services.
NZX and ASX Perpetual each have a 50% stake in Link
which has also acquired BK Registries Limited New
Zealand’s second largest registry business. Link seeks to
deliver a premium level of service to New Zealand issuers
(and a seamless service to dual-listed entities) based on
ASX Perpetual’s leading edge share registry system.
Introducing i-Search
This quarter NZX launched i-Search, a new online database
tool which provides to access NZX market announcements.
i-Search information is searchable on multiple levels and
includes the original company documents. This provides
an invaluable tool for building and maintaining a picture of
what is happening with NZX Listed Issuers.
i-Search is updated in real time and also contains historic
market announcements which include directors’ and
officers’ disclosures and substantial shareholder details, as
well as the full financial disclosures required by the NZX
Listing Rules.
If you are interested in finding out more about i-Search
please see our website (www.i-search.nzx.com). Free trial
subscriptions are also available, email data@nzx.com to
find out more.
34
NZX Submissions
NZX takes a proactive role in commenting on, and
informing people of, issues which affect New Zealand’s
economy. OPEN is one communication tool which we use
for this purpose and in addition, NZX prepares submission
documents on specific issues. This quarter, NZX
produced a submission on the Unlisted Securites Market
to the Minister of Commerce. Previous submissions have
been on the Stobo Report and the Report of the Savings
Product Working Group. These submissions are available
on the NZX website in the ‘About NZX’ section under
‘Presentations and Consultation Documents’.
Advertising with NZX
NZX is now offering online advertising through the NZX
website. Advertising on our website offers you a prominent
position on one of the top ten financial services websites in
New Zealand (source: Neilsen Netratings, Nov 2004). The
advertising options include banner and island placements
on selected pages of the NZX website.
In addition, print advertising is an option in OPEN.
Advertising in OPEN puts your message in front of
approximately 4000 (as at November 2004) key individuals
including CEOs, NZX Market Participants, lawyers,
investment bankers and other interested parties. For more
information about advertising and rates please visit the
NZX website’s ‘Contact Us section’.
The source for market information

i-Search is a new online

database service from NZX which
provides access to all market
announcements.

i-Search provides searchable

information and includes the
original company documents.

www.i-Search.nzx.com

Special offer
Try i-Search free for one month.
To trial i-Search or for more information please

call the Market Data team on +64 4 436 2879 or

email data@nzx.com.

35
To advertise here, contact open@nzx.com
If you have any comments or feedback on this publication, or would like to be added to the
OPEN mailing list, please email open@ nzx.com.

This newsletter is provided with the understanding that neither NZX nor its representatives NZX, ASB Tower
are engaged in rendering professional advice or services. NZX and its representatives make Level 9, 2 Hunter Street
no warranties, express or implied, as to the accuracy of the content of this newsletter. PO Box 2959
Neither NZX nor its representatives shall be liable for any direct, indirect, consequential or Wellington, New Zealand
other loss arising from the use of this newsletter or any information contained herein and/or P: +64 4 472 7599
further communications in relation to this newsletter. If you wish to unsubscribe from the F: +64 4 496 2893
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36 Zealand Exchange Limited, 2005
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