2 0 0 5N E W Z E A L A N D E X C H A N G E L I M I T E D A N N U A L R E P O R T
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C o n t e n t s
1 . C h a i r m a n ’ s R e p o r t
2 . C h i e f E x e c u t i v e ’ s R e p o r t
5 . F i n a n c i a l R e v i e w
1 1 . B o a r d o f D i r e c t o r s
1 9 . F i n a n c i a l s
3 9 . S t a t u t o r y I n f o r m a t i o n
4 7 . D i r e c t o r y
2 0 0 5N E W Z E A L A N D E X C H A N G E L I M I T E D A N N U A L R E P O R T
I s s u e d 3 1 M a rc h 2 0 0 6
Annual Meeting
Annual Meeting of shareholders of NZX will be held at The Icon Room, Level 2, Te Papa
Cable Street, Wellington, New Zealand on Thursday 8 June 2006, commencing at 3.30pm.
Full details, including the business to be dealt with, are contained in the Notice of Meeting
which will be sent to shareholders on or around 22 May 2006.
Financial Calendar
31 December 2005 2005 Financial Year end
17 February 2006 Preliminary Full Year Financial Results issued
March 2006 2005 Annual Report issued
17 March 2006 Record date for dividend payment
7 April 2006 Dividend payment
3.30pm, 6 June 2006 Latest time for receipt of proxies for Annual Meeting
3.30pm, 8 June 2006 Annual Meeting
July 2006 Preliminary Half Year Announcement issued
September 2006 2006 Half Year Report issued
31 December 2006 2006 Financial Year end
AGM AND FINANCIAL CALENDAR
1
CHAIRMAN’S REPORT
2005 has been a strong year for NZX. While the headlines have largely been written about a
national economic downturn, NZX has developed the independent and sustainable revenue
streams that have contributed to an excellent result.
As we stated at the time of our 2005 half-year results, it is incumbent upon NZX, as a key
player in New Zealand’s capital markets, to deliver a high standard of transparency to our
shareholders and to the wider markets. To give that clarity and transparency, we have grouped
this commentary around four key result themes.
Resilience: Th e majority of the 23% increase in operating EBITDA can be attributed to
consistent, reliable and sustainable revenue streams. NZX is now largely independent of short
term market sentiment. While we no longer rely heavily on new listings and index performance,
new listings are of course a vital component of a healthy capital market and we welcome all our
stakeholders playing a part in educating various business sectors in the benefi ts of listing and
encouraging new businesses to access the capital markets.
Operating leverage: NZX’s business is operating to scale. Our revenue is growing faster
then our expenditure and this is proven by a 19% revenue growth and an increase of 46% in
EBITDA.
Subsidiary businesses: Smartshares and Link have reached break even points in scale and,
going forward, will contribute positively to the NZX Group cashfl ow.
Strong cashfl ow: Th e sound operating EBITDA result reiterates sustainability and allows us to
have fl exibility in our capital and dividend policy.
Together these form a picture of a business that is built to withstand – and thrive in – any
climatic conditions.
In addition, we have made a signifi cant announcement regarding the NZX capital policy.
NZX’s new dividend policy is based on a payout ratio of around 60% of NPAT. Th e dividend
for the 2005 fi nancial year will be $.25 per share, fully imputed. NZX will also distribute
approximately $16.2 million to shareholders by way of a return of its entire store of available
subscribed capital pro-rata to all shareholders.
Th is signals an exciting new step along NZX’s evolutionary path, and also serves as an
acknowledgement of the critical role played by our shareholders in our success.
NZX will continue to aggressively pursue growth and even after this signifi cant return of capital,
will maintain signifi cant capacity to fund growth. Given NZX’s strong track record since listing
two and a half years ago, NZX is in a position to take advantage of numerous fi nancing options,
including raising debt, should this prove attractive.
On behalf of the Board and the team at NZX, I off er my congratulations and thanks to our
shareholders for the ongoing confi dence we share in the future of New Zealand’s capital markets.
Simon Allen, Chairman
30 March 2006
2 NEW ZEALAND EXCHANGE LIMITED 2005 ANNUAL REPORT
NZX is about infrastructure
Infrastructure. It’s invariably expensive, often invisible and inevitably taken for granted, but
economies and civilisations would not survive without it.
NZX is about infrastructure. NZX builds, maintains and constantly improves the infrastructure
of New Zealand’s capital markets. It’s a job we’re proud to do.
Healthy capital markets ensure New Zealand’s competitiveness for global
investment fl ows. Th ey encourage a strong savings culture amongst New
Zealanders. Th ey lead to effi cient, low cost delivery of investment products.
And they support a competitive environment for investment services.
In past years capital markets infrastructure in New Zealand suff ered
neglect. Its associated assets were stripped, leaving an emaciated frame in
slightly shabby clothing.
NZX could care less about the clothes, but we care intensely about the
health of the body underneath. Th at body is our infrastructure, and it’s
critical for the sustainability and competitiveness of New Zealand’s
fi nancial markets and the plethora of associated industries.
Th e four key components of capital market infrastructure are:
Trust and confi dence
Technology and systems
Business processes and standards
Regulation and policy.
NZX has been investing diligently right across the spectrum, and will continue to do so, building
real muscle into New Zealand’s capital markets.
For investors in NZX, muscle-building means certainty about our strategy and exposure to solid
long term growth. For investors in New Zealand and in NZX listed securities, it means easy
access to a range of sound choices, and all the information they need to make the best savings and
investment decisions. For listed companies, it means local and international access to investors
who have increasing confi dence in the quality of New Zealand investments. It also means
accurate and predictable pricing for their stock available, real time, around the world. And for
the New Zealand economy, it means our entrepreneurial export, manufacturing, agricultural,
technology and, increasingly, energy and infrastructure sectors have access to capital via an
investment-hungry universe: capital that is essential to grow, to forge new markets, to develop
new capabilities, to employ more people and, ultimately, to reinvest for further growth.
CHIEF EXECUTIVE’S REPORT
Healthy capital markets ensure
New Zealand’s competitiveness
for global investment flows.
They encourage a strong savings
culture amongst New Zealanders.
They lead to efficient, low cost
delivery of investment products.
3
NZX in 2005 – muscle moves markets
Trading activity, measured by average daily value traded, increased 16%. Th e average
annual increase over the last two years has been 18%.
Automated trading strategies, through the use of DMA, have increased the average daily
new or amended orders in our market by 82%.
Our market supervision team handled 135 rulings and waivers and in each case met their
delivery commitments. In the last three years the eff ectiveness of this team has increased
dramatically.
Two of New Zealand’s four major banks have become distribution and underwriting
sponsors, signaling the value delivered by NZX infrastructure in supporting effi cient
distribution of investment grade credit products.
NZX co-led a group of market stakeholders to initiate a change to the tax treatment of
stock lending transactions, which means market participants can prepare for a new level of
transactional activity.
Th e listing of Vector set an important precedent for public ownership of important utility
and infrastructure assets. Th e successful fl oat leaves the Trustees of Auckland Energy
Consumer Trust in control of 75% of voting shares while providing New Zealand investors
an investment opportunity. We are confi dent more will follow this path.
NZX has also matured as a company. Since I joined in 2002, we have grown our team to 65
people from a base of 30. We have strong and passionate team dedicated living and working to
our core values: Brave, Vital, Team, Results, Accountable, Leader and Advancing
New Zealand.
NZX in 2006
Th is year NZX is building more muscle and stamina into our markets, delivering greater
value to shareholders, to our wider stakeholder community and, ultimately, to the New
Zealand economy.
Muscle is the economic value delivered by NZX…
… reflected in:
Th e number of new companies and new sectors represented on our markets.
Continued growth in secondary capital raisings.
Ongoing growth in trading volumes, more and more of which will be facilitated by DMA and new trading strategies.
Stimulated growth in demand for information about our markets both domestically and, increasingly, off shore.
4 NEW ZEALAND EXCHANGE LIMITED 2005 ANNUAL REPORT
Stamina is the network value sustained by NZX…
…reflected in:
Growing numbers of investors, in New Zealand and off shore, being supported by a highly skilled and information-rich professional community.
Listed companies being increasingly partnered by that same community.
Increasing reach throughout New Zealand capital markets via the attraction of new participants and provision of services that extend beyond core equity markets.
An evolving market supervision framework that builds confi dence and trust in our markets.
A broadening range of products.
More points of entry for new investors and more leverage for sophisticated investors.
Speedy, reliable and appropriately costed services to all users.
At the same time we are identifying and examining options for future
growth within the framework of New Zealand’s capital markets
infrastructure.
Our major investments to date - Smartshares and Link Market Services
- have, in addition to delivering solid fi nancial performance, given our
team a much better understanding of the challenges posed by markets
infrastructure in its current state. Th is knowledge and experience
leaves us well placed to make informed investment decisions, both
within, and external to, our current business in future.
We believe there is still enormous potential to invest in and shape the
muscle of New Zealand’s capital markets infrastructure that will yield
major benefi ts for all participants, including banks, custodians, brokers, fi nancial planners,
investment managers and, most importantly, New Zealand investors.
We have confi dence in the long term future of our country. Equally, we know our future will
demand even more markets muscle. NZX is geared to build that muscle through investing in
our people, in market trust and confi dence, and in bringing creative solutions to New Zealand’s
capital market challenges.
Mark WeldonChief Executive Offi cer30 March 2006
CHIEF EXECUTIVE’S REPORT CONTINUED
Smartshares and LINK have, in
addition to delivering solid financial
performance, given our team a
much better understanding of
the challenges posed by markets
infrastructure in its current state.
5
2 0 0 5N E W Z E A L A N D E X C H A N G E L I M I T E D F I N A N C I A L R E V I E W
6 NEW ZEALAND EXCHANGE LIMITED 2005 ANNUAL REPORT
FINANCIAL REVIEW
I. OVERALL RESULTS
Strong fi nancial results in 2005 refl ect the signifi cant progress made in transforming
NZX’s core business and success with key investments. Just two and half years since
listing, NZX has established a resilient business model that generates a more stable
and dependable revenue. The introduction of a dividend policy and the announcement
of the intention to return $16.2 million of available subscribed capital is a signal, both
of confi dence in NZX’s business model and that all available forms of fi nancing will be
considered to fund further growth.
Sou
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NZX
Dat
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7
NZX MARKETS BUSINESS
NZX’s Markets delivered a particularly strong result. Our core revenue lines of listings,
transactions, and market information increased by 13%, 14%, and 21% respectively. Total
revenue reached $18.1 million, a 13% increase versus 2004. Meanwhile, operating expenses
reached $10.7 million, a 9% increase versus 2004. The overall result was a 15% increase in
EBITDA and refl ects the operating leverage of this business.
Listing fees received from issuers of equity and debt securities for the services provided by
NZX’s market infrastructure totalled $6.6 million, a 13% increase versus 2004. Services
to issuers include the provision of trading facilities, collection and dissemination of market
announcements, the global dissemination of pricing information, and the facilitation of
settlement. While NZX expects medium to long term prospects for major capital raisings
to be strong, shorter term fl uctuations in this activity will not seriously impair NZX fi nancial
performance. NZX has established stable levels of revenue despite an actual decrease in
initial listings or IPO activity. In 2005 revenue received from initial listing fees decreased by
$221,000, or 18% versus 2004.
Importantly, revenue generated from annual, or recurring, fees increased by $655,000, or
18% versus 2004.
NZX MARKETS SMARTSHARES LINK*
$NZ 000s FY 2004 FY 2005 % FY 2004 FY 2005 % FY 2005
OPERATING REVENUE 16,015 18,139 13% 673 1,432 113% 3,117
OPERATING EXPENDITURE 9,818 10,685 9% 652 1,558 139% 2,501
OPERATING EBITDA 6,197 7,454 20% 21 (126) -700% 616
Gain/(loss) on Investments 92 (63) -168% 0 0 0% 0
Non Recurring Income/(Expenditure) (494) (704) 43% (1,043) 0 -100% 0
EBITDA 5,795 6,687 15% (1,022) (126) -88% 616
Depreciation (553) (751) 36% 0 0 0% (413)
Amortisation (55) (129) 135% 0 (28) -100% (113)
EBIT 5,187 5,807 12% (1,022) (154) -85% 90
II. FINANCIAL PERFORMANCE BY BUSINESS UNIT
NZX BUSINESS UNITS STATEMENT OF FINANCIAL PERFORMANCE
Sou
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NZX
Dat
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8 NEW ZEALAND EXCHANGE LIMITED 2005 ANNUAL REPORT
There was an average of 2,587 transactions for $126 million in value per day on NZX’s
markets in 2005. Compared to 2004, average daily transactions were 5% higher and
average daily value was 16% higher. Activity was particularly strong early in the year, but
cooled down during the second half of 2005. Transaction revenue, however, increased
to $4.8 million, a 14% increase versus 2004.
In addition to facilitating the matching of bids and offers, NZX infrastructure also
facilitates fully electronic delivery versus payment settlement of transactions between
market participants, and also the legal title transfer of securities from participants to
their clients.
NZX has made signifi cant investments in the transactions area over the past two
years and expects transaction numbers increase as a result. An open interface to
our trading engine facilitating Direct Market Access (DMA) was introduced for the fi rst
time in the August 2004. Since that time DMA has played a key role in facilitating new
types of automated trading and pricing activity in our market. It also supports product
development efforts by our participants including the introduction of warrants, CFD’s
and options.
Source: NZX Data
FINANCIAL REVIEW CONTINUED
9
In addition to technical infrastructure, NZX has worked hard to support a change in
tax law that will enable stock lending activity. This regulatory infrastructure change is
expected to take effect by mid 2006 and is expected to open our market to additional
levels of trading activity and liquidity.
NZX will continue to invest in development and improvement of the transactional
infrastructure in New Zealand to ensure low cost, effi cient, and standard methods
of trading, clearing and settlement are available to our participants. We expect this
investment to drive further increases in trading activity on our markets.
TRANSACTIONS - NUMBER
FY CHANGE
NZSX 614,766 4%
NZDX 26,829 -2%
NZAX 7,635 26%
Total 649,230 4%
Daily Average 2,587 5%
TRANSACTIONS - VALUE ($M)
FY CHANGE
NZSX 29,630 16%
NZDX 1,952 2%
NZAX 58 67%
Total 31,640 15%
Daily Average 126 16%
Market information revenues are the other major component of our NZX Markets
business revenue. Like listings, this stable revenue is sourced from a large number of
customers both within and outside Australasia. There are more than 7,500 individual
consumers of NZX real time information around the world. Market Information revenue
reached $3.4 million, an increase of 21% versus 2004. This increase has been driven
by a pricing change in July 2005, but also refl ects an increase in underlying demand for
our real time pricing and news information.
While NZX Group expenditure increased by 16%, Markets business expenditure
increased by only 9% in 2005. Total expenditure for the Markets business was $10.7
million; over half of that expenditure covered staff and related costs. Total staff in the
Markets business has remained constant at around 60 throughout the year.
SUBISIDIARIES AND ASSOCIATES
NZX Group has made signifi cant investments outside its core Markets business. In
2004 NZX increased the size and scope of its passive funds management business
and launched Smartshares. Near the end of 2004 NZX also announced a joint venture
in the registry business, Link Market Services. These two businesses are both
performing to expectations and have broken through initial scale thresholds to ensure
future profi tability and operating leverage.
Source: NZX Operating Metrics, Full Year 2005
10 NEW ZEALAND EXCHANGE LIMITED 2005 ANNUAL REPORT
SMARTSHARES
Smartshares is New Zealand’s leading passive funds manager with four equity based
products. Smartshares manages $195 million in retail funds and also manages over
$100 million of wholesale funds. Smartshares recently received the mandate to run
a passively–managed New Zealand equity sector of the New Zealand Superannuation
Fund (NZSF).
In 2005 Smartshares generated $1.4 million in revenue, a 113% increase versus
2004. This increase is evidence of the growth during 2004 from one fund to four
funds. Importantly, Smartshares has a scalable and effi cient operational model that
will produce increasing profi tability as the business grows. Key product enhancements
such as the Smartshares savings plan and direct purchase are new additions and
enhance the ability to collect additional funds. Smartshares is a 100% owned subsidiary
of NZX Group; its result has been consolidated.
LINK MARKET SERVICES
Link Market Services (LINK) is the second largest share registry services provider in
New Zealand with over 100 clients. LINK was founded in 2004 as a 50/50 joint
venture with Link Market Services Australia. In addition to attracting new clients, LINK
in 2005 acquired BK Registries, and generated $3.1 million in revenue and an EBITDA
of $616,000.
LINK completed a busy year in 2005 with the introduction of a new registry system to
the New Zealand market. During this transition LINK extended its client base and now
serves fi ve of the top NZX 50 companies, including three trans-Tasman issuers.
LINK’s contribution to the NZX Group result is equity accounted and refl ects the impact
of depreciation and amortisation expenses.
III. CASHFLOW AND CAPITAL EXPENDITURE
NZX Group’s cash (or cash equivalent) balance was $25.1 million at 31 December 2005
and has remained very consistent at year end over the last three years. During this same
period, NZX has undergone a signifi cant corporate transformation, made signifi cant
capital investment, and paid a special dividend of $0.40 per share ($5.4 million) in
May 2005. NZX’s stable cash balance demonstrates the quality and dependability of
NZX cashfl ow during a period in which NZX has carried no debt. Importantly, this track
record of performance enables NZX Group to take advantage of capital market fi nancing
options that were not available to it in 2003.
smartshares
FINANCIAL REVIEW CONTINUED
11
Capital expenditure within the Markets business, and the NZX Group, totalled $1.9
million in 2005. The majority of this expenditure was driven by a relocation of
premises within Wellington in July 2005. NZX’s new home at NZX Centre (11 Cable
Street, Wellington) provides an improved working environment and suitable venue for
demonstrating leadership within New Zealand’s capital markets. The vast majority of
the remaining capital expenditure covered the replacement of major computer hardware
supporting transaction settlement.
Major capital expenditure prior to 2005 has included the following items:
Link Market Services - $3.3 million.
Smartshares Funds purchases - $500,000.
Trading engine enhancements, including DMA - $500,000.
SFE agreement to list NZFOX products.
In addition to these capital investments, NZX has also incurred signifi cant non recurring
expenditure to grow the Smartshares business. The launch of funds in 2004 generated
non-recurring expenditure of $1.0 million. Additionally, the collapse of Access Brokerage
in 2004 has generated $838,000 of non-recurring expenditure in 2004 and 2005.
Normal capital expenditure, excluding acquisitions or major development activities, is
generally expected to be less than $500,000 per year.
IV. CAPITAL AND DIVIDEND POLICY
In conjunction with the announcement of its full year result on 17 February 2006, NZX
announced a dividend policy of approximately 60% of NPAT and a return of capital
totaling $16.2 million. The dividend announced for the 2005 fi nancial year was $.25
per share and its payment date is 7 April.
Going forward, NZX will aggressively pursue growth, and will fi nance that growth through
the most effi cient means possible.
Source: NZX Data
12 NEW ZEALAND EXCHANGE LIMITED 2005 ANNUAL REPORTNEW ZEALAND EXCHANGE LIMITED 2005 ANNUAL REPORT
DIRECTORS: MARK WELDON, HENRY VAN DER HEYDEN, SIMON ALLEN (CHAIRMAN), NIGEL WILLIAMS (DEPUTY CHAIRMAN), NEIL PAVIOUR-SMITH, ANDREW HARMOS
BOARD OF DIRECTORS
13
BOARD OF DIRECTORS
Simon Christopher Allen – CHAIRMAN BSc, BCom, FSCAP
Simon is Chief Executive of ABN AMRO in New Zealand and has 23 years’ experience in the New Zealand and Australian capital markets.
Simon established BZW (now ABN AMRO) in 1988. ABN AMRO group is a registered bank in New Zealand and provides products and services to Government, corporate and investors. Simon is also a director of several ABN AMRO group companies including 50% owned ABN AMRO Craigs Limited.
Simon has involvement in the New Zealand Business & Parliament Trust (Trustee), St. Cuthbert’s College Trust Board (Director) and is a Fellow of the Institute of Finance Professionals.
Nigel Williams – DEPUTY CHAIRMAN BCom
Nigel has over 20 years’ experience in both New Zealand and overseas capital markets, including his current role as Managing Director, Institutional Markets for the combined ANZ New Zealand Limited and National Bank New Zealand Limited. He has held various senior management roles within the National Bank of New Zealand Limited, including Treasurer, and is currently a member of the Bank‘s principal governance committees. Nigel is also a director of Interchange and Settlement Limited.
Nigel graduated from the University of Otago with a Bachelor of Commerce in Marketing, Accounting and Finance and has also attended advanced management training at the University of Michigan, USA and Oxford University, England.
Andrew William Harmos LLB (Hons), BCom
Andrew is one of the founding partners of Harmos Horton Lusk, an Auckland-based specialist corporate legal advisory fi rm. Andrew was formerly a senior partner of Russell McVeagh, which he left in 2002 after 21 years with that fi rm. He specialises in takeover advice and structuring, securities offerings, company and asset acquisitions and disposals, strategic and board corporate legal advice. He was appointed a director of NZX in 2002, and prior to that has held a number of other listed company directorships. He is a director of the Westfi eld New Zealand group.
Neil Paviour-Smith BCA, CA, ACIS, FCFIP
Neil is Managing Director of Forsyth Barr Limited, a nationwide sharebroking and investment management fi rm, and a director of various related companies. Neil has 17 years’ experience in the New Zealand securities industry including several years in equity funds management and research roles. Neil is a director of listed companies Global Equity Market Securities Limited and Global Corporate Credit Limited.
14 NEW ZEALAND EXCHANGE LIMITED 2005 ANNUAL REPORT
Neil is an NZX Advisor, a Fellow and past Chairman of the Institute of Finance Professionals NZ, a member of the Institute of Chartered Accountants of NZ, the Institute of Directors, the Institute of Chartered Secretaries NZ, and the CFA Society of NZ.
Henry van der Heyden BEng (Agr) Hons
Henry was appointed to the NZX Board on 6 September 2005. He became Chairman of Fonterra Co-operative Group in September 2002 and is a founding director of the co-operative, which is New Zealand’s largest company operating in over 100 countries internationally. He has contributed to industry governance for 13 years, as both a director and chairman, and played a considerable role in the industry rationalisation that led to Fonterra’s establishment. He has extensive experience in the disciplines of large-scale manufacturing and international exporting and the fi nancial, regulatory, trade and customer infl uences on them. He is a director of Innovation Waikato Limited, Independent Egg Producers (IEP) and King St Advertising, and serves on Waikato University’s School of Management Advisory Board. He is also a Trustee of Asia:New Zealand.
Mark Rhys Weldon – CHIEF EXECUTIVE BA BCom, MEcon (First Class Hons), Doc Jur, Dip
Int’l Law (Hons)
Mark is the Chief Executive of NZX, and works closely with management to implement the Board’s strategies. Mark is also a director of NZX Funds Management Limited and Chairman of Link Market Services Limited.
Mark graduated from Auckland University with a Masters degree in Economics (First Class Honours), a Bachelor of Commerce and a Bachelor of Arts. Mark then studied at the Columbia University School of Law in New York, graduating in 1997 with a Doctorate in Jurisprudence and a Diploma in International Law.
Mark joined leading New York law fi rm Skadden, Arps, Slade, Meagher & Flom as an attorney. While there, he worked extensively in securities law and on mergers and acquisitions. Mark went on to work at the New York offi ce of McKinsey & Company. He specialised in stock exchanges, asset management and wholesale banking (investment and commercial), and general corporate strategy. Mark is a member of the NZX Business Advisory Board and the New Zealand Olympic Committee.
BOARD COMMITTEES
The Remuneration
Committee comprises
Simon Allen (Chair),
Nigel Wiliams and
Henry van der Heyden
The Audit Committee
comprises
Neil Paviour-Smith
(Chair), Nigel Williams
and Simon Allen
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OUR VALUES BRAVE VITAL ACCOUNTABLE LEADER TEAM ADVANCING NEW ZEALAND RESULTS
VITAL ACCOUNTABLE LEADER TEAM ADVANCING NEW ZEALAND RESULTS VITAL ACCOUNTABLE
LEADER TEAM ADVANCING NEW ZEALAND RESULTS VALUES BRAVE VITAL LEADER ACCOUNTABLE
ADVANCING NEW ZEALAND RESULTS VITAL ACCOUNTABLE LEADER TEAM ADVANCING NEW ZEALAND
RESULTS VITAL ACCOUNTABLE LEADER TEAM ADVANCING NEW ZEALAND RESULTS VALUES
BRAVE VITAL ACCOUNTABLE LEADER TEAM ACCOUNTABLE ADVANCING NEW ZEALAND RESULTS
VITAL ACCOUNTABLE LEADER TEAM ADVANCING NEW ZEALAND RESULTS VITAL ACCOUNTABLE
LEADER TEAM ADVANCING NEW ZEALAND RESULTS VALUES BRAVE VITAL ACCOUNTABLE
LEADER TEAM ADVANCING NEW ZEALAND RESULTS VITAL ACCOUNTABLE LEADER TEAM
ADVANCING NEW ZEALAND RESULTS VITAL ACCOUNTABLE LEADER TEAM ADVANCING NEW ZEALAND
RESULTS VALUES BRAVE VITAL ACCOUNTABLE LEADER TEAM ADVANCING NEW ZEALAND RESULTS
VITAL ACCOUNTABLE LEADER TEAM ADVANCING NEW ZEALAND RESULTS VITAL
ACCOUNTABLE LEADER TEAM ADVANCING NEW ZEALAND RESULTS VALUES BRAVE VITAL LEADER
ACCOUNTABLE ADVANCING NEW ZEALAND RESULTS VITAL ACCOUNTABLE LEADER TEAM ADVANCING
NEW ZEALAND RESULTS VITAL ACCOUNTABLE LEADER TEAM ADVANCING NEW ZEALAND RESULTS
VALUES BRAVE VITAL ACCOUNTABLE LEADER TEAM ACCOUNTABLE ADVANCING NEW ZEALAND RESULTS
VITAL ACCOUNTABLE LEADER TEAM ADVANCING NEW ZEALAND RESULTS VITAL ACCOUNTABLE LEADER
TEAM ADVANCING NEW ZEALAND RESULTS VALUES BRAVE VITAL ACCOUNTABLE LEADER TEAM
ADVANCING NEW ZEALAND RESULTS VITAL ACCOUNTABLE LEADER TEAM ADVANCING NEW ZEALAND RESULTS
VITAL ACCOUNTABLE LEADER TEAM ADVANCING NEW ZEALAND RESULTS VALUES BRAVE VITAL RESULTS
VITAL ACCOUNTABLE LEADER TEAM ADVANCING NEW ZEALAND RESULTS VITAL ACCOUNTABLE
LEADER TEAM ADVANCING NEW ZEALAND RESULTS VALUES BRAVE VITAL LEADER ACCOUNTABLE
ADVANCING NEW ZEALAND RESULTS VITAL ACCOUNTABLE LEADER TEAM ADVANCING NEW ZEALAND
RESULTS VITAL ACCOUNTABLE LEADER TEAM ADVANCING NEW ZEALAND RESULTS VALUES
BRAVE VITAL ACCOUNTABLE LEADER TEAM ACCOUNTABLE ADVANCING NEW ZEALAND RESULTS
VITAL ACCOUNTABLE LEADER TEAM ADVANCING NEW ZEALAND RESULTS VITAL
ACCOUNTABLE LEADER TEAM ADVANCING NEW ZEALAND RESULTS VALUES BRAVE VITAL ACCOUNTABLE
LEADER TEAM ADVANCING NEW ZEALAND RESULTS VITAL ACCOUNTABLE LEADER TEAM ADVANCING
NEW ZEALAND RESULTS VITAL ACCOUNTABLE LEADER TEAM ADVANCING NEW ZEALAND RESULTS
BRAVE VITAL ACCOUNTABLE LEADER TEAM ACCOUNTABLE ADVANCING NEW ZEALAND RESULTS
VITAL ACCOUNTABLE LEADER TEAM ADVANCING NEW ZEALAND RESULTS VITAL ACCOUNTABLE
LEADER RESULTS ADVANCING NEW ZEALAND RESULTS VALUES BRAVE VITAL LEADER
16 NEW ZEALAND EXCHANGE LIMITED 2005 ANNUAL REPORT
NZX is committed to ensuring it employs best practice governance structures and principles
in keeping with Appendix 16 of the NZSX Listing Rules (Rules) and the Corporate Governance
Principles and Guidelines published by the Securities Commission.
NZX believes good governance starts at the top with the Board of Directors (the Board) who
are elected by shareholders to direct and control NZX’s activities.
OPERATION OF THE BOARD
The Board is responsible for the overall direction and strategy of NZX. It selects the Chief
Executive and delegates the day to day operation of NZX’s business to the Chief Executive. The
Chief Executive implements policies and strategies set by the Board and is responsible to it.
The Board has established a Code of Ethics that provides a set of principles for Directors to
apply in their conduct and work for NZX. The principles include managing confl icts of interest,
the required skills of Directors, trading in NZX’s shares, and maintaining confi dentiality of
information received in their capacity as Directors of NZX.
BOARD OF DIRECTORS
The Board currently comprises six Directors of whom fi ve are non-Executive Directors. In
accordance with Rule 3.3.1B, the Board has determined that fi ve of the six Directors are
Independent as defi ned in the Rules. The Independent Directors are Simon Allen (Chairman),
Nigel Williams (Deputy Chairman), Andrew Harmos, Neil Paviour-Smith and Henry van der
Heyden. Mark Weldon, the Chief Executive, is the only non-Independent Executive Director on
the Board.
In accordance with the constitution, one third of the Directors are required to retire by rotation
and offer themselves for re-election by shareholders each year.
Meetings of the Board are scheduled in advance. Meeting agenda and papers must be
circulated at least fi ve business days before each meeting to allow Directors suffi cient time
to prepare.
The Board has access to executive management and from time to time, key executive managers
are invited to attend and participate in meetings of the Board. Annually, each executive manager
must present a business plan for their area of responsibility to the Board for approval.
The Board holds regular scheduled meetings (every six weeks) and also holds ad hoc meetings
to consider time sensitive or specifi c issues. During the 2005 fi nancial year, the Board met
(including via teleconference) 12 times.
CORPORATE GOVERNANCE
H R L Morrison announced his retirement as a director of NZX at the meeting on 9 June 2005.
T E C Saunders announced his retirement as a director of NZX at the meeting on 9 June 2005.
The Board appointed H van der Heyden a director of NZX in September 2005
17
COMMITTEES
The Board has two standing committees: an audit committee and a remuneration committee.
AUDIT COMMITTEE
The audit committee operates under a charter, which sets out its role in assisting the Board
with corporate fi nancial matters. It may only comprise Independent Directors and at least one
member of the audit committee must have expertise in accounting.
The audit committee has a clear line of communication with the independent and internal
auditor, and it may, at its discretion, meet with the independent auditor without company
management being present.
The audit committee met four times in the 2005 fi nancial year. The audit committee met with
the independent auditor three times in the 2005 fi nancial year.
REMUNERATION COMMITTEE
The remuneration committee operates under a charter that sets out its role. It assists the
Board in reviewing the remuneration policies and practices of NZX as they relate to the
Directors including any committees that Directors may serve on, and the remuneration of the
Chief Executive.
The remuneration committee comprises entirely non-Executive Directors. The remuneration
committee met three times in the 2005 fi nancial year.
NOMINATIONS
Given the size of the Board, there is no nominations and succession committee. Rather, the
full Board is involved in the Director nomination process.
2005 NZX DIRECTORS’ ATTENDANCE RECORD
Director NZX Board Audit Committee
Remuneration Committee
Simon Allen 12/12 3/4 3/3
Lloyd Morrison 8/9
Andrew Harmos 12/12
Neil Paviour-Smith 12/12 4/4 3/3
Tim Saunders 5/7 3/3
Mark Weldon 12/12
Nigel Williams 12/12 2/2 3/3
Henry van der Heyden 4/4 1/1
H R L Morrison announced his retirement as a director of NZX at the meeting on 9 June 2005.
18 NEW ZEALAND EXCHANGE LIMITED 2005 ANNUAL REPORT
DISCLOSURE
NZX has internal procedures in place to ensure that key fi nancial and material information
is communicated to the market in a clear and timely manner. In addition to its disclosure
obligations under the Rules, NZX has adopted a quarterly reporting regime and produces
operating metrics monthly. This additional information provides transparency and assists
the market in evaluating NZX’s performance. NZX also maintains a website which provides
contact points for the public and is continuously updated with information regarding NZX and
its releases.
RISK MANAGEMENT
The Board is responsible for ensuring that key business and fi nancial risks are identifi ed and
appropriate controls and procedures are in place to effectively manage those risks. Directors
may seek independent professional advice to assist with their responsibilities. During the
2005 fi nancial year Directors sought independent professional advice where necessary.
INSURANCE AND INDEMNIFICATION
NZX provides indemnity insurance cover to Directors and executive employees. This is explained
further on page 41.
SHARE TRADING
The company has adopted a formal NZX Securities Trading Policy to address insider trading
requirements under the Securities Markets Act 1988. The NZX Securities Trading Policy is
modeled on the Insider Trading (Approved Procedure for Company Offi cers) Notice 1996
(the Notice) and administered by the NZX Securities Trading Committee that consists of the
Corporate Counsel and Chairman of the Board. The NZX Securities Trading Policy restricts
trading in the fi nancial year by prohibiting trading in NZX’s securities during ‘black-out’ periods
set out in the Notice.
If a Director or offi cer wishes to trade NZX securities in a ‘trading window’, that person must
fi rst apply, and obtain, consent from the NZX Securities Trading Committee.
Because of the nature of NZX’s business, any employee who wishes to buy or sell any security
listed on NZX’s markets must follow the NZX Securities Trading Policy and apply to NZX for
consent to trade. This policy is reinforced through individual Employment Agreements.
CORPORATE GOVERNANCE CONTINUED
19
2 0 0 5N E W Z E A L A N D E X C H A N G E L I M I T E D F I N A N C I A L S TAT E M E N T S
20 NEW ZEALAND EXCHANGE LIMITED 2005 ANNUAL REPORT
Parent Group
Note Dec 2005$000
Dec 2004 $000
Dec 2005 $000
Dec 2004 $000
Operating revenue 1 18,139 16,015 19,500 16,390
Equity accounted earnings of associate (LINK) - - (34) -
Operating expenses 2 10,685 9,818 12,172 10,469
Operating EBITDA 7,454 6,197 7,294 5,921
Unrealised gain/(loss) on investment bonds (63) 92 (63) 92
Non-recurring income/(expenditure) 10 (704) (494) (704) (1,538)
EBITDA 6,687 5,795 6,527 4,475
Interest expense/(income) (1,647) (1,661) (1,647) (1,661)
Depreciation 2 751 553 751 553
Amortisation 8 129 55 156 55
Surplus before tax 7,454 6,848 7,267 5,528
Tax expense 11 1,985 2,286 2,380 1,851
Net Surplus after tax 5,469 4,562 4,887 3,677
STATEMENT OF FINANCIAL PERFORMANCE
FOR YEAR ENDED 31 DECEMBER 2005
21
STATEMENT OF MOVEMENTS IN SHAREHOLDERS’ FUNDS
FOR YEAR ENDED 31 DECEMBER 2005
Parent Group
Dec 2005$000
Dec 2004 $000
Dec 2005 $000
Dec 2004 $000
Net Surplus after tax 5,469 4,562 4,887 3,677
Total recognised revenue & expenditure 5,469 4,562 4,887 3,677
Issue of Share Capital 1,780 - 1,780 -
Dividend payment (5,398) - (5,398) -
CEO Share Scheme Shares (1,141) - (1,141) -
Shares held in Subsidiary Company - - 1,141 -
Movement in Shareholders’ funds for the period 710 4,562 1,269 3,677
Shareholders’ funds at beginning of period 32,655 28,093 29,638 25,961
Shareholders’ funds at end of period 33,365 32,655 30,907 29,638
22 NEW ZEALAND EXCHANGE LIMITED 2005 ANNUAL REPORT
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2005
S C Allen N Paviour-Smith M R Weldon
Chairman Director Chief Executive Offi cer
Parent Group
Note Dec 2005$000
Dec 2004 $000
Dec 2005 $000
Dec 2004 $000
ASSETS
Current assets:
Cash at bank 718 151 1,546 187
Cash investments 3 18,100 19,931 18,100 19,931
Receivables & prepayments 5 2,911 2,501 3,416 2,183
21,729 22,583 23,062 22,301
Non current assets:
Advances 14 1,146 2,132 154 -
Fixed assets 7 2,453 1,327 2,453 1,327
Investments 4 11,792 10,398 8,758 8,898
Deferred tax 11 397 361 438 361
15,788 14,218 11,803 10,586
Goodwill 8 306 527 808 1,055
Total assets 37,823 37,328 35,673 33,942
LIABILITIES AND SHAREHOLDERS’ FUNDS
Accounts payable and other current liabilities 6 4,612 4,277 4,920 4,423
Provision for taxation 11 (154) 396 (154) (119)
4,458 4,673 4,766 4,304
Share capital 15 17,372 16,733 16,381 14,601
Retained earnings 15 15,993 15,922 14,526 15,037
Total Shareholders’ funds 33,365 32,655 30,907 29,638
Total liabilities & shareholders’ funds 37,823 37,328 35,673 33,942
Th ese fi nancial statements were authorised for release on 16 February 2006.
23
STATEMENT OF CASH FLOWS
FOR YEAR ENDED 31 DECEMBER 2005
Parent Group
Dec 2005$000
Dec 2004 $000
Dec 2005 $000
Dec 2004 $000
CASH FLOWS FROM OPERATING ACTIVITIES
Cash was provided from:
Cash received from customers and others 21,551 18,249 22,612 18,951
Net GST received/(paid) (901) (934) (901) (934)
Interest received 1,563 1,577 1,773 1,698
22,213 18,892 23,484 19,715
Cash was applied to:
Cash paid to suppliers and employees 13,531 11,063 15,510 12,885
Taxation paid 2,571 2,255 2,571 2,255
16,102 13,318 18,081 15,140
Net cash fl ows from operating activities 6,111 5,574 5,403 4,575
CASH FLOWS FROM INVESTING ACTIVITIES
Cash was provided from:
Decrease in bank deposits 1,831 5,848 1,831 5,848
1,831 5,848 1,831 5,848
Cash was applied to:
Purchase of fi xed assets 1,876 1,073 1,876 1,073
Increase in other assets 268 - 268 -
Increase in investments 1,458 10,306 (42) 9,335
3,602 11,379 2,102 10,408
Net cash fl ows from investing activities (1,771) (5,531) (271) (4,560)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash was provided from:
Proceeds from issue of shares 1,625 - 1,625 -
1,625 - 1,625 -
Cash was applied to:
Dividend payment 5,398 - 5,398 -
5,398 - 5,398 -
Net cash fl ows from fi nancing activities (3,773) - (3,773) -
Net increase in cash held 567 43 1,359 15
Opening cash balance 151 108 187 172
Cash at end of period 718 151 1,546 187
24 NEW ZEALAND EXCHANGE LIMITED 2005 ANNUAL REPORT
STATEMENT OF CASH FLOWS
FOR YEAR ENDED 31 DECEMBER 2005
Parent Group
Dec 2005$000
Dec 2004 $000
Dec 2005 $000
Dec 2004 $000
RECONCILIATION OF SURPLUS FOR THE PERIOD TO
NET CASH FLOWS FROM OPERATING ACTIVITIES
Surplus for the period
5,469 4,562 4,887 3,677
Add non cash items:
Depreciation 751 553 751 553
Amortisation 129 55 156 55
Goodwill impairment 360 - 360 -
Unrealised (gain)/loss on investment bonds 63 (92) 63 (92)
Equity accounted earnings of associate (LINK) - - 34 -
6,772 5,078 6,251 4,193
Decrease/(increase) in accounts receivable (410) (237) (1,233) 17
Decrease/(increase) in deferred tax (36) (43) (77) (43)
Increase/(decrease) in accounts payable 335 1,148 497 1,295
Increase/(decrease) in provision for tax (550) 74 (35) (441)
Increase/(decrease) in Fidelity Fund - (446) - (446)
Net cash fl ows from operating activities 6,111 5,574 5,403 4,575
25
STATEMENT OF ACCOUNTING POLICIES
FOR YEAR ENDED 31 DECEMBER 2005
ENTITIES REPORTING
Th e fi nancial statements presented for the “Parent” comprise New Zealand Exchange Limited (“NZX”). Th e consolidated
fi nancial statements for the “Group” are for the economic entity comprising NZX, its subsidiaries and associate.
STATUTORY BASE
NZX is a company registered under the Companies Act 1993 and is an issuer in terms of the Securities Act 1978. Th ese
fi nancial statements are presented in compliance with the Financial Reporting Act 1993 and the Companies Act 1993.
MEASUREMENT BASE
Th e fi nancial statements have been prepared on the basis of historical cost with the exception of certain items for which specifi c
accounting policies are identifi ed.
ACCOUNTING POLICIES
Th e fi nancial statements are prepared in accordance with New Zealand generally accepted accounting practice. Th e accounting
policies that materially aff ect the measurement of fi nancial performance, fi nancial position and cash fl ows are set out below.
GROUP FINANCIAL STATEMENTS
Subsidiaries are those entities controlled, directly or indirectly, by the Parent. Th e Group fi nancial statements consolidate the
fi nancial statements of NZX and its subsidiaries using the purchase method.
Associates are entities in which the Group has signifi cant infl uence, but not control, over the operating and fi nancial policies.
Th e Group fi nancial statements include the Group’s share of the net surplus of associates on an equity accounted basis.
All material transactions between Parent and subsidiaries are eliminated on consolidation. Shares in NZX held by subsidiary
companies are shown as a deduction from share capital.
REVENUE RECOGNITION
Income earned in the normal course of business is recognised at the time the service is provided. When revenue is received in
advance it is amortised evenly over the period the service will be provided.
Interest income is accounted for as earned.
FIXED ASSETS AND DEPRECIATION
All fi xed assets are initially recorded at cost and include the cost of acquisition along with the value of other directly
attributable costs which have been incurred in bringing the asset to the location and condition necessary for their intended
use. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately
to its recoverable amount.
26 NEW ZEALAND EXCHANGE LIMITED 2005 ANNUAL REPORT
Fixed assets have been depreciated on a straight line basis so as to expense the cost of the assets over their useful lives as follows:
Computer equipment: 33.3%
Furniture & equipment: 20%
Leasehold improvements: 10%
SHARE ISSUE COSTS
Costs associated with the issue of shares are recognised as a reduction of the amount collected per share.
TAXATION
Tax expense is based on accounting surpluses, adjusted for the permanent diff erences between accounting and tax rules.
Th e impact of all timing diff erences between accounting and taxable income is recognised as a deferred tax liability or asset. Th is
is the comprehensive basis for the calculation of deferred tax under the liability method.
A deferred tax asset, or the eff ect of losses carried forward that exceeds the deferred tax liability, is recognised in the fi nancial
statements only where there is virtual certainty that the benefi t of timing diff erences, or losses, will be utilised.
GOODS AND SERVICES TAX (GST)
Th e Statement of Financial Performance and Statement of Cash Flows have been prepared so that all components are stated
exclusive of GST. All items in the Statement of Financial Position are stated net of GST, with the exception of receivables and
payables, which include GST invoiced.
FINANCIAL INSTRUMENTS
Financial instruments carried in the Statement of Financial Position include cash and bank balances, investments, accounts
receivable and accounts payable. Th e particular recognition methods adopted are disclosed in the individual policy statements
associated with each item.
INVESTMENTS
Investments in subsidiaries and associates are stated at cost in the Statement of Financial Position.
Investment Bonds are stated at market value and any resultant gain or loss is recognised in the Statement of Financial
Performance. All other investments are stated at the lower of cost or net realisable value.
GOODWILL
Goodwill is reviewed as it relates to each specifi c transaction. Th e amount recognised as Goodwill will be amortised on a
straight line basis over the shorter of its estimated useful life or 20 years.
IMPAIRMENT
Annually, the directors assess the carrying value of each asset. Where the estimated recoverable amount of the asset is less than
its carrying amount, the asset is written down. Th e impairment loss is recognised in the Statement of Financial Performance.
STATEMENT OF ACCOUNTING POLICIES CONTINUED
FOR YEAR ENDED 31 DECEMBER 2005
27
ACCOUNTS RECEIVABLE
Accounts receivable are carried at estimated realisable value after providing against debts where collection is doubtful.
STATEMENT OF CASH FLOWS
Th e following are the defi nitions of the items used in the Statement of Cash Flows:
Operating activities include all transactions and other events that are not investing or fi nancing activities.
Investing activities are those activities relating to the acquisition, holding and disposal of property, furniture and equipment
and of investments. Investments can include securities not falling within the defi nition of cash.
Financing activities are those activities that result in changes in the size and composition of the capital structure. Th is
includes both equity and debt not falling within the defi nition of cash.
Cash is considered to be cash on hand and current accounts in banks, net of bank overdrafts.
OPERATING LEASES
Operating lease payments are recognised as an expense in the periods the amounts are payable.
COMPARATIVES
Comparative fi gures where necessary have been restated to correspond with current year classifi cations.
CHANGES IN ACCOUNTING POLICIES
Th ere were no material changes in accounting policies during the period.
FOR YEAR ENDED 31 DECEMBER 2005
28 NEW ZEALAND EXCHANGE LIMITED 2005 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
FOR YEAR ENDED 31 DECEMBER 2005
1. Operating revenue
Parent Group
Dec 2005$000
Dec 2004 $000
Dec 2005 $000
Dec 2004 $000
Listings 6,618 5,835 6,547 5,784
Participant fees 1,313 1,067 1,313 1,067
Trading, clearing & settlement 4,814 4,239 4,814 4,239
Market information 3,367 2,780 3,367 2,780
Regulatory 1,753 1,626 1,753 1,626
Smartshares Limited - - 1,432 696
Other Income 274 468 274 198
18,139 16,015 19,500 16,390
2. Operating expenses
Parent Group
Dec 2005$000
Dec 2004 $000
Dec 2005 $000
Dec 2004 $000
Employee & related costs 6,250 5,567 6,743 5,650
Information technology 1,824 1,619 1,824 1,619
Legal 475 435 514 531
Marketing 211 382 421 382
General administration 1,467 1,316 2,148 1,748
Directors’ fees 295 290 302 300
Audit fees 50 48 90 78
Other auditors’ services 26 151 43 151
Doubtful Debts 87 10 87 10
10,685 9,818 12,172 10,469
Depreciation – computer equipment 635 535 635 535
Depreciation – furniture & equipment 53 18 53 18
Depreciation – leasehold improvements 63 - 63 -
751 553 751 553
29
FOR YEAR ENDED 31 DECEMBER 2005
3. Cash and cash investments
Parent Group
Dec 2005 Interest rates Maturities Dec 2005$000
Dec 2005$000
Cash at bank 6.95% Call 718 1,546
Bank deposits – at call - Call - -
Bank deposits – 30 day 7.52%-7.60% 30 Days 18,100 18,100
18,818 19,646
Parent Group
Dec 2004 Interest rates Maturities Dec 2004$000
Dec 2004$000
Cash at bank 0% Call 151 187
Bank deposits – at call 6.5% Call 500 500
Bank deposits – 30 day 6.62%-6.67% 30 Days 19,431 19,431
20,082 20,118
4. Other investments
Parent Group
Dec 2005$000
Dec 2004 $000
Dec 2005 $000
Dec 2004 $000
Investment in associate 3,213 3,255 3,179 3,255
Investment in subsidiaries 3,000 1,500 - -
Investment bonds 5,579 5,643 5,579 5,643
11,792 10,398 8,758 8,898
INVESTMENT IN SUBSIDIARIES
Th e Parent’s investment in subsidiaries comprises shares at cost. Subsidiaries comprise:
Interest held by Group
Name of entity Principal activities Dec 2005 Dec 2004
Smartshares Limited Funds Management 100% 100%
Tane Nominees Limited Nominee Company 100% 100%
NZX Executive Share Plan Nominees Limited Nominee Company 100% 0%
All subsidiary entities have a balance date of 31 December. All subsidiary entities are incorporated in New Zealand.
30 NEW ZEALAND EXCHANGE LIMITED 2005 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR YEAR ENDED 31 DECEMBER 2005
INVESTMENT IN ASSOCIATE
Name of entity Principal activities Interest held by Group Group carrying amount
Dec 2005 %
Dec 2004 %
Dec 2005 $000
Dec 2004 $000
Link Market Services Limited Registrar 50% 50% 3,179 3,255
Link Market Services Limited is jointly owned by NZX and Link Market Services Limited Australia (formerly ASX Perpetual
Registrars Limited). It is incorporated in New Zealand and has a balance date of 31 December.
Link Market Services Limited was incorporated on 15 December 2004.
Results of Associate
Dec 2005 $000
Dec 2004 $000
Share of operating revenue 1,559 -
Share of operating expenses 1,250 -
Share of EBITDA 309 -
Share of depreciation & amortisation 264 -
Share of Interest expense 47 -
Share of surplus/(defi cit) before tax (2) -
Share of tax expense (32) -
Share of total recognised revenue and expenditure (34) -
Interest in Associate Parent Group
Dec 2005$000
Dec 2004 $000
Dec 2005 $000
Dec 2004 $000
Shares at cost (including cost of acquisition) 3,213 3,255 - -
Carrying value:
Balance at beginning of year - - 3,255 -
Reduction in the cost of acquisition - - (42) -
Associate acquisition during the year - - - 3,255
Share of total recognised revenue and expenditure - - (34) -
Balance at end of year - - 3,179 3,255
31
FOR YEAR ENDED 31 DECEMBER 2005
5. Receivables and Prepayments
Parent Group
Dec 2005$000
Dec 2004 $000
Dec 2005 $000
Dec 2004 $000
Trade receivables 2,181 1,291 2,502 1,461
Prepayments 287 378 329 415
Intercompany receivable 70 543 - -
Accrued interest 92 98 92 98
Accrued income 281 191 493 209
2,911 2,501 3,416 2,183
6. Accounts Payable and Other Current Liabilities
Parent Group
Dec 2005$000
Dec 2004 $000
Dec 2005 $000
Dec 2004 $000
Trade creditors 335 661 364 708
Unearned income 2,711 2,453 2,711 2,453
Employee entitlements 221 155 223 155
Accrued expenses 1,111 905 1,388 1,004
GST 234 103 234 103
4,612 4,277 4,920 4,423
7. Fixed Assets
Dec 2005 Cost$000
Accumulated Depreciation
$000
Book Value Dec 2005
$000
Computer equipment 5,063 4,154 909
Furniture & equipment 555 230 325
Leasehold improvements 1,282 63 1,219
6,900 4,447 2,453
32 NEW ZEALAND EXCHANGE LIMITED 2005 ANNUAL REPORT
Dec 2004 Cost$000
Accumulated Depreciation
$000
Book Value Dec 2004
$000
Computer equipment 4,660 3,520 1,140
Furniture & equipment 250 177 73
Capital work in progress 114 - 114
5,024 3,697 1,327
Fixed assets for both the Parent and the Group are the same.
8. Goodwill
Parent Group
Dec 2005$000
Dec 2004 $000
Dec 2005 $000
Dec 2004 $000
Balance at beginning of period 527 - 1,055 -
Goodwill arising on acquisition 268 582 268 1,110
Impairment (360) - (360) -
Amortisation (129) (55) (156) (55)
Balance at end of period 306 527 808 1,055
9. New Zealand Exchange Limited Fidelity Guarantee Fund
On 3 May 2004 the NZX Participant Rules (the Participant Rules) came into force, replacing the NZX Business Rules 2003.
Th e Participant Rules contain provision for a Fidelity Guarantee Fund (Fund) on the same terms as existed before their
commencement. Th e relevant sections of the NZX Participant Rules are 8.11 – 8.14.
Under the Participant Rules, the liability of the Fund for any one particular failure remains limited to $500,000 or such greater
amount as may be determined from time to time by NZX. Furthermore the maximum amount payable to any one claimant in
respect of a failure is limited to $20,000 or such greater amount as NZX may determine in that particular case. Th ese provisions
refl ect the position pre-demutualisation under the NZX Business Rules 2003.
On 6 September 2004 Access Brokerage Limited was put into liquidation. NZX applied the Fidelity Guarantee Fund to
investors who suff ered loss as a consequence of the Access Brokerage Limited failure in accordance with the terms of the
Participant Rules. Th e provision held in the Statement of Financial Position at 31 December 2005 is nil (2004: nil).
10. Non-recurring Items
Non-recurring items reported include expenditure incurred in investigating the default of Access Brokerage Limited and
preparation for the NZX Discipline hearing for Access Brokerage Limited of $344,000, and the impairment to goodwill from
the Sydney Futures Exchange (SFE) contract of $360,000. At December 2004 non-recurring items included $494,000 related
to the default of Access Brokerage Limited, $621,000 related to Smartshares marketing expenditure for the launch of new funds
and IPO Brokerage Fees of $423,000 for the launch of new funds.
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR YEAR ENDED 31 DECEMBER 2005
33
11. Taxation
Parent Group
Income Tax Dec 2005$000
Dec 2004 $000
Dec 2005 $000
Dec 2004 $000
Operating surplus before tax 7,454 6,848 7,267 5,528
Permanent differences:
Non-deductible expenditure 35 79 65 79
Equity accounted earnings of associate - - 34 -
Surplus subject to tax 7,489 6,927 7,366 5,607
Tax at 33% 2,471 2,286 2,431 1,851
Loss offset for 2004 & 2005 year (435) - - -
Foreign tax credits (68) - (68) -
Prior year under/(over) provision 17 - 17 -
Income tax recognised in Statement of Financial Performance 1,985 2,286 2,380 1,851
Comprising:
Current tax 2,021 2,329 2,457 1,894
Deferred tax (36) (43) (77) (43)
1,985 2,286 2,380 1,851
Deferred tax
Balance at beginning of period 361 318 361 318
Current year charge 57 - 98 -
Transfer from tax expense (21) 43 (21) 43
Balance at end of period 397 361 438 361
Imputation Credit account
Balance at beginning of period 3,943 1,688 3,943 1,688
Income tax paid 2,571 2,255 2,571 2,255
Imputation credits attached to dividends paid (2,444) - (2,444) -
Balance at end of period 4,070 3,943 4,070 3,943
FOR YEAR ENDED 31 DECEMBER 2005
34 NEW ZEALAND EXCHANGE LIMITED 2005 ANNUAL REPORT
12. Financial Instruments
FAIR VALUE
Th e fair value of the fi nancial instruments is considered to be approximately equivalent to the value as refl ected in the Statement
of Financial Position.
CREDIT RISK
Th e maximum credit risk associated with the fi nancial instruments held by NZX is considered to be the value refl ected in the
Statement of Financial Position. Th e risk of non-recovery of these amounts is considered to be minimal.
NZX does not require collateral or other security to support fi nancial instruments with credit risk.
Concentrations of credit risk arise where NZX is exposed to the risk that a party may fail to discharge an obligation in the
normal course of business. NZX Treasury policy is to limit the exposure to counterparties to $10 million for registered banks
and to $3 million for other institutions with a minimum credit rating of A-.
INTEREST RATE RISK
NZX is exposed to interest rate risk in that future interest rate movements will aff ect cash fl ows and the market value of fi xed
interest and other investment assets. NZX does not use any derivative products to manage interest rate risk.
13. Commitments
Dec 2005$000
Dec 2004$000
Up to 1 year
Lease of premises 665 290
Capital fi t out of new premises - 1,486
SFE Trading Infrastructure - 275
1 – 2 years 665 496
2 – 5 years 1,995 1,488
> 5 years 2,993 2,687
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR YEAR ENDED 31 DECEMBER 2005
35
14. Related Party Transactions
During the period, NZX’s subsidiary Smartshares Limited managed the NZX MidCap Index Fund (MIDZ), NZX Australian
MidCap Index Fund (MOZY), NZX 10 Fund (TENZ) and NZX 50 Portfolio Index Fund (FONZ). At 31 December,
Smartshares Limited had an intercompany debt with NZX of $70,000 (Dec 2004: $543,000).
NZX had a related party receivable from its associate, Link Market Services Limited, of $181,000 at 31 December 2005 (Dec
2004: nil).
No amounts owed by related parties have been written off or forgiven during the period.
In 2003, fi nancial assistance was provided to the Chief Executive Offi cer, Mark Weldon. A disclosure document was provided
to all shareholders on 15 September 2003 setting out details of a proposal by the Company to give fi nancial assistance to
the Chief Executive Offi cer and Director of the Company, Mark Weldon. Th e fi nancial assistance was in connection to the
acquisition by a nominee company (“Nominee”) of 634,275 Share Scheme Shares in NZX, to be held by the Nominee on behalf
of Mr Weldon in accordance with the terms of the NZX CEO Share Scheme (“Scheme”).
Th e terms of the Scheme, and the proposed fi nancial assistance, were approved by members of the Company’s predecessor, the
New Zealand Stock Exchange, at the time of demutualisation, and were fully described in the NZX Prospectus and Investment
Statement registered on 3 June 2003.
Th e directors of NZX authorised NZX to give fi nancial assistance to Mr Weldon to fund the acquisition of the Shares, by way
of a loan of $2,132,433, which is the aggregate of the issue prices for the 634,275 ordinary shares to be issued under the Scheme.
In July 2005, 380,565 Share Scheme Shares qualifi ed under the NZX CEO Share Scheme and Mr Weldon repaid $1,140,426
to NZX, reducing his fi nancial assistance to $992,007.
Th e directors of NZX authorised NZX to give fi nancial assistance to some NZX employees in February 2005 to assist them
in the acquisition of NZX ordinary shares under the NZX Executive Share Plan. Th e total fi nancial assistance provided under
the NZX Executive Share Plan was $319,205. At 31 December 2005, NZX employees had repaid $164,998; the balance
outstanding is $154,207.
15. Share Capital
On 1 January 2003 there were 3,310,000 shares on issue which were split 1:1 on 30 May 2003. In June 2003 there was a
combined off er comprising a 1:2 renounceable rights issue of 3,290,000 shares at $1.50 and an off er to the public of $10,000,000
of shares at the fi nal price of $3.60. As at 31 December 2005 there were 13,137,569 ordinary shares issued and fully paid (Dec
2004: 12,685,504). All ordinary shares rank equally with one vote attached to each fully paid ordinary share.
In February 2005, NZX issued 71,500 ordinary shares to NZX Executive Share Plan Nominees Limited at $8.94 (Dec 2004:
nil). During 2005, 37,000 shares were transferred out of the nominee company to NZX employees in accordance with the
terms of the NZX Executive Share Plan. Th e remaining 34,500 shares are held in trust by the nominee company.
In July 2005, 380,565 Share Scheme Shares qualifi ed under the NZX CEO Share Scheme. Th ese shares were transferred out
of the nominee company to Mr Weldon and reclassifi ed as ordinary shares.
In December 2003 186,410 options to acquire ordinary shares were issued to staff under the NZX Executive Share Option
Plan. A portion of these options have lapsed; there are 131,310 remaining on issue which have an exercise date in July 2006.
FOR YEAR ENDED 31 DECEMBER 2005
36 NEW ZEALAND EXCHANGE LIMITED 2005 ANNUAL REPORT
Movement in Share Capital Parent Group
Dec 2005$000
Dec 2004 $000
Dec 2005 $000
Dec 2004 $000
Balance at beginning of period 16,733 16,733 14,601 14,601
Share issue during the period
Ordinary Shares 1,780 - 1,780 -
Executive Share Scheme Shares (1,141) - (1,141) -
Shares held by Subsidiary Company - - 1,141 -
Balance at end of period 17,372 16,733 16,381 14,601
Movement in Retained Earnings Parent Group
Dec 2005$000
Dec 2004 $000
Dec 2005 $000
Dec 2004 $000
Balance at beginning of period 15,922 11,360 15,037 11,360
Surplus for the period 5,469 4,562 4,887 3,677
Dividend payment (5,398) - (5,398) -
Balance at end of period 15,993 15,922 14,526 15,037
16. Distribution to Shareholders
A fully imputed special dividend of 40 cents per share was paid in May 2005.
17. Contingent Liabilities
Th ere are no Contingent Liabilities at 31 December 2005 (Dec 2004: nil).
18. Segmented Reporting
Th e company and its subsidiaries operate within the fi nancial markets industry. All signifi cant operations take place in
New Zealand.
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR YEAR ENDED 31 DECEMBER 2005
37
19. Earnings per Share
Group
Dec 2005$000
Dec 2004 $000
Earnings per share (cents per share) 37.77 28.99
Earnings per share are calculated by dividing the operating surplus attributable to shareholders by the weighted average number
of ordinary shares on issue during the period.
20. New Zealand International Financial Reporting Standards
In December 2002 the New Zealand Accounting Standards Review Board announced that the New Zealand equivalents to
International Financial Reporting Standards (IFRS) will apply to all New Zealand entities for the periods commencing on or
after 1 January 2007 with the opportunity to early adopt by up to two years. NZX intends to adopt NZIFRS for the year ended
31 December 2007.
NZX has a project to identify the diff erences between existing NZ GAAP and NZIFRS as they impact on NZX.
21. Significant Events after Balance Date
Th ere were no signifi cant announcements or events after balance date.
FOR YEAR ENDED 31 DECEMBER 2005
38 NEW ZEALAND EXCHANGE LIMITED 2005 ANNUAL REPORT
Auditors’ Report to the shareholders of New Zealand Exchange Limited
We have audited the fi nancial statements on pages 20 to 37. The fi nancial statements provide information about the past fi nancial performance and cash fl ows of the Company and Group for the year ended 31 December 2005 and their fi nancial position as at that date. This information is stated in accordance with the accounting policies set out on pages 25 to 27.
Directors’ ResponsibilitiesThe Company’s Directors are responsible for the preparation and presentation of the fi nancial statements which give a true and fair view of the fi nancial position of the Company and Group as at 31 December 2005 and their fi nancial performance and cash fl ows for the year ended on that date.
Auditors’ ResponsibilitiesWe are responsible for expressing an independent opinion on the fi nancial statements presented by the Directors and reporting our opinion to you.
Basis of OpinionAn audit includes examining, on a test basis, evidence relevant to the amounts and disclosures in the fi nancial statements. It also includes assessing:(a) the signifi cant estimates and judgements made by the Directors in the preparation of the fi nancial
statements; and(b) whether the accounting policies are appropriate to the circumstances of the Company and Group,
consistently applied and adequately disclosed.
We conducted our audit in accordance with generally accepted auditing standards in New Zealand. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary to provide us with suffi cient evidence to give reasonable assurance that the fi nancial statements are free from material misstatements, whether caused by fraud or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the fi nancial statements.
We have no relationship with or interests in the Company or any of its subsidiaries other than in our capacity as auditors, tax advisors and providers of other assurance services.
Unqualifi ed Opinion
We have obtained all the information and explanations we have required.
In our opinion:(a) proper accounting records have been kept by the Company as far as appears from our examination of
those records; and(b) the fi nancial statements on pages 20 to 37:
(i) comply with generally accepted accounting practice in New Zealand; and(ii) give a true and fair view of the fi nancial position of the Company and Group as at 31 December
2005 and their fi nancial performance and cash fl ows for the year ended on that date.
Our audit was completed on 21 February 2006 and our unqualifi ed opinion is expressed as at that date.
Chartered Accountants Wellington
PricewaterhouseCoopers113-119 The TerracePO Box 243WellingtonNew ZealandTelephone +64 4 462 7000Facsimile +64 4 462 7001
39
1. Business Operations
Th ere have been no changes in the business undertakings of the company, subsidiaries and associate during the year.
2. Interests Register
Th e Group is required to maintain an Interests Register in which particulars of certain transactions and matters involving the
directors must be recorded.
Th e following matters were recorded in the Interests Register in 2005.
3. Directors’ Interests
Th e directors have declared interests in the following entities:
Director Interest Entity
S C Allen Director ABN AMRO Craigs Limited
Director ABN AMRO New Zealand Limited
Director ABN AMRO Group Companies in New Zealand
Director Xylem Investments Limited
Director Big Bonds NZ Limited
Chairman Innofl ow Technologies Limited
A W Harmos Partner Harmos Horton Lusk
Director Westfi eld New Zealand Group
N Paviour - Smith Director Forsyth Barr Group Limited and Associated Companies
Director Forsyth Barr Limited
Director Leveraged Equities Finance Limited
Director Global Equity Market Securities Limited
Director Global Corporate Credit Limited
N Williams Director Interchange & Settlement Limited
Director ANZ Securities (NZ) Limited
Director ANZMAC Securities (NZ) Nominees Limited
Director Arawata Capital Limited
Director Arawata Trust Company
Director Arawata Finance Limited
Director Samson Funding Limited
Director Norway Funds Limited
Director Bage Investments Limited
STATUTORY INFORMATION
FOR YEAR ENDED 31 DECEMBER 2005
40 NEW ZEALAND EXCHANGE LIMITED 2005 ANNUAL REPORT
Director Interest Entity
Director Endeavour Equities Limited
Director Endeavour Finance Limited
Director Endeavour Securities Limited
Director Tui Endeavour Limited
Director Tui Securities Limited
Director Trillium Holdings Limited
Director Alos Holdings Limited
H van der Heyden Director Fonterra Co-operative Group Limited
Director King St Advertising
Director Innovation Waikato Limited
Director Independent Egg Producers Co-Op Limited
Trustee Asia : NZ Foundation
Member University of Waikato Business Management School Advisory Board
M R Weldon Chairman Link Market Services Limited
Director Smartshares Limited
Member New Zealand Olympic Committee
Member University of Auckland School of Business Advisory Board
4. Information used by Directors
Th ere were no notices from directors of the company requesting to disclose or use company information received in their
capacity as directors which would not otherwise have been available to them.
5. Directors holding Office and their Remuneration
Th e directors holding offi ce during the year are listed on the following page. Th e total amount of the remuneration and other
benefi ts received by each director during the year, and responsibility held, is listed next to their names.
STATUTORY INFORMATION CONTINUED
41
FOR YEAR ENDED 31 DECEMBER 2005
Directors Remuneration Special Responsibility
S C Allen $87,500 Chairman
Chairman Remuneration Committee
Member Audit Committee
A W Harmos $43,750
N Paviour-Smith $46,250 Chairman Audit Committee
N Williams $44,500 Deputy Chairman
Member Audit Committee
Member Remuneration Committee
H van der Heyden1 $16,667 Member Remuneration Committee
M R Weldon $851,000 Chief Executive Offi cer
H R L Morrison2 $25,000
T E C Saunders3 $25,250
1 Th e Board appointed H van der Heyden a Director of NZX in September 2005
2 H R L Morrison announced his retirement as a Director of NZX at the Annual Meeting in June 2005
3 T E C Saunders announced his retirement as a Director of NZX at the Annual Meeting in June 2005.
6. Indemnification and Insurer of Executive and Director
During the year, the company paid insurance premiums in respect of directors’ and executive employees’ liability insurance. Th e
policies do not specify the premium for individuals.
Th is insurance provides cover against costs and expenses involved in defending legal actions and any resulting payments arising
from a liability to persons (other than the company or a related body corporate) incurred in their position as director or executive
employee unless the conduct involves a wilful breach of duty or an improper use of inside information or position to gain
advantage.
7. Subsidiary Companies Directors
Mr Mark Weldon, Mr Geoff rey Brown and Mr Don Trow held offi ce as directors of the subsidiary company, Smartshares
Limited at the end of the fi nancial year. Mr Don Trow was paid director fees of $12,500 in relation to this directorship. Ms
Elaine Campbell is the sole director of Tane Nominees Limited. Mr Simon Allen and Mr Neil Paviour-Smith are the directors
of NZX Executive Share Plan Nominees Limited. Th e remuneration of employees acting as directors of subsidiaries is disclosed
in the relevant banding of remuneration set out under Employee Remuneration.
42 NEW ZEALAND EXCHANGE LIMITED 2005 ANNUAL REPORT
8. Employee Remuneration
During the year a number of employees or former employees (excluding directors) received remuneration and other benefi ts,
including non cash benefi ts and NZX shares in accordance with the NZX Executive Share Plan, in their capacity as employees
of the company. Th e value of those exceeding $100,000 per annum were as follows:
Remuneration Ranges Employee
100,000 – 109,999 5
110,000 – 119,999 2
120,000 – 129,999 1
130,000 – 139,999 -
140,000 – 149,999 -
150,000 – 159,999 -
160,000 – 169,999 2
170,000 – 179,999 1
180,000 – 189,999 -
190,000 – 199,999 -
200,000 – 209,999 1
210,000 – 219,999 -
220,000 – 229,999 -
230,000 – 239,999 -
240,000 – 249,999 -
250,000 – 259,999 -
260,000 – 269,999 -
270,000 – 279,999 1
280,000 – 289,999 2
290,000 – 299,999 -
As stated in Note 15 to the Financial Statements, as at 31 December 2005 there were 131,310 options to acquire ordinary shares
issued to staff under the terms of the NZX Executive Share Option Plan. Th e fi rst exercise date of options issued under the
Plan is July 2006. NZX has to meet certain criteria to enable these options to be exercised. Th e value of the options has not
been included as part of the employee remuneration.
STATUTORY INFORMATION CONTINUED
43
FOR YEAR ENDED 31 DECEMBER 2005
9. Director Transaction in Securities of the Parent Company
Director Date No. of securities acquired/(disposed)
Securities held Non-Benefi cial as
at 31 Dec 2005
Securities held Benefi cial as at
31 Dec 2005
S C Allen 50,833
A W Harmos 20,833
N Paviour-Smith 25,958
N Williams 10,000
H van der Heyden 0
M R Weldon 19 Sep 2005 31,805 703,9131
10. Auditors
Th e auditor of the parent company and group is PriceWaterhouseCoopers. PriceWaterhouseCoopers provide audit and other
services for which they are remunerated.
Parent Group
$000’s $000’s
Audit services 50 90
Taxation services 14 14
Other services 12 29
1 450,203 shares and 253,710 share scheme shares
44 NEW ZEALAND EXCHANGE LIMITED 2005 ANNUAL REPORT
1. Top 20 Security Holders
Th e following table shows the names and holdings of the 20 largest holdings of securities in the Company as at 31 January 2006.
Shares Held %
Probatus Investments Limited 1,018,146 7.75
TEA Custodians Limited 769,706 5.86
New Zealand Superannuation 464,314 3.53
Premier Nominees Limited 410,629 3.13
Accident Compensation 405,413 3.09
Peter H Masfen 383,473 2.92
Nigel Babbage 374,178 2.85
Custodial Services Limited 372,423 2.83
Asteron Life Limited 315,333 2.40
Ithaca (Custodians) Limited 310,500 2.36
ASB Nominees Limited 300,000 2.28
TEA Custodians Limited 279,770 2.13
Leveraged Equities Finance 255,550 1.95
Custodial Services Limited 227,614 1.73
David M Odlin 172,000 1.31
ASB Nominees Limited 169,984 1.29
Lola Nominees Limited 150,203 1.14
NZ Guardian Trust Investment 132,558 1.01
Westpac Banking Corporation 125,142 0.95
Custodial Services Limited 85,883 0.65
6,722,819 51.16
SECURITY HOLDER INFORMATION
FOR YEAR ENDED 31 DECEMBER 2005
45
2. Spread of Ordinary Shareholders as at 31 January 2006
Size of Holding Shareholders Shares
Number % Number %
1 to 1,000 1,439 58.90 815,986 6.21
1,001 to 5,000 777 31.81 1,753,371 13.35
5,001 to 10,000 101 4.13 842,346 6.41
10,001 to 20,000 62 2.54 1,025,263 7.80
20,001 to 30,000 35 1.43 953,663 7.26
30,001 to 40,000 8 0.33 277,062 2.11
40,001 to 50,000 3 0.12 145,000 1.10
> 50,000 18 0.74 7,324,878 55.76
2,443 100.00 13,137,569 100.00
Domicile of Holders Shareholders Shares
Number % Number %
New Zealand 2,403 98.36 12,585,479 95.80
Australia 23 0.94 93,713 0.71
Other 17 0.70 458,377 3.49
2,443 100.00 13,137,569 100.00
3. Substantial Security Holders
Th e following information is given pursuant to section 26 of the Securities Markets Act 1988. According to the fi le kept by
the Company under section 25 of the Securities Markets Act 1988 the following were substantial holders in the Company as at
31 January 2006. Th e total number of voting securities on issue as at 31 January 2006 was 13,509,089, comprising 13,137,569
ordinary shares, 253,710 Share Scheme Shares and 117,810 options to acquire ordinary shares.
Relevant Interest
%
Fisher Funds Management Limited 1,225,617 9.07
Probatus Investments Limited Bare Trustee and Nominee for Forsyth Barr Exchange Holdings Limited
1,018,146 7.53
ING NZ Limited 783,527 5.79
M R Weldon 703,913 5.21
FOR YEAR ENDED 31 DECEMBER 2005
46 NEW ZEALAND EXCHANGE LIMITED 2005 ANNUAL REPORT
4. Waivers from the Listing Rules
Of all waivers set out in the Prospectus and Investment Statement dated 3 June 2003 only those relating to the CEO Share
Scheme remain applicable as at 31 December 2005. Th ose applicable waivers are:
A waiver from the application of Listing Rule 7.3.1(a) to allow NZX to issue shares where under the terms of the CEO
Scheme, it is obliged or entitled to do so, and to allow NZX to issue shares under the Off er.
A waiver from the application of Listing Rule 7.6.1 to allow NZX to purchase its own shares where, under the terms of the
CEO Scheme it is obliged or entitled to do so.
A waiver from the application of Listing Rule 7.6.3 to allow NZX to redeem its own shares where, under the terms of the
CEO Scheme, it is obliged to do so.
A waiver from Listing Rule 7.6.5 to allow NZX or a wholly owned subsidiary to provide fi nancial assistance to Mr Weldon
for the purposes of implementing the CEO Share Scheme.
A waiver from the application of Listing Rule 7.6.6 to exempt and share acquisitions or redemptions by NZX, and the
provision of fi nancial assistance given for the purposes of the CEO Share Scheme from the requirement that any such
acquisition, redemption or fi nancial assistance to be made or given within 12 months (for acquisition) or six months (for
redemption or fi nancial assistance).
5. Securities Issued by NZX
NZX’s ordinary shares (including those Share Scheme Shares that converted to ordinary shares in July 2005) are quoted on
the NZSX Market. NZX’s options, issued pursuant to the Executive Share Option Plan, are not quoted on any market. Th ose
Share Scheme Shares issued pursuant to the CEO Share Scheme that have not qualifi ed for conversion to ordinary shares are
not quoted on any market and will not do so until such time as they qualify and are converted into ordinary shares of NZX.
SECURITY HOLDER INFORMATION CONTINUED
FOR YEAR ENDED 31 DECEMBER 2005
47
Registered Office
New Zealand Exchange Limited
NZX Centre
Level 2
11 Cable Street
PO Box 2959
WELLINGTON
Tel: +64 4 472 7599
www.nzx.com
Board of Directors
Simon Allen
Nigel Williams
Neil Paviour-Smith
Henry van der Heyden
Mark Weldon
Th e directors can be contacted at NZX’s
registered offi ce.
DIRECTORY
Auditors
PricewaterhouseCoopers
113-119 Th e Terrace
WELLINGTON
Share Registrar
Link Market Services Limited
PO Box 91976
AUCKLAND 1030
Investor Enquiries +64 9 375 5998
Fax +64 9 375 5990
www.linkmarketservices.com