NZX Limited (NZX) has invited interested parties to make submissions on proposed amendments to the NZSX/NZDX Listing Rules.

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1 System Operator: Reserve Bank of New Zealand Custodian Trustee: New Zealand Central Securities Depository Limited(NZCSD) 1 June 2012 NZX Limited PO Box 2959 WELLINGTON Attention: Megan Mcluskie Dear Ms Mcluskie, Submission on proposed amendments to NZSX/NZDX Listing Rules NZX Limited (NZX) has invited interested parties to make submissions on proposed amendments to the NZSX/NZDX Listing Rules. This submission is made by the Reserve Bank of New Zealand in its capacity as operator of the NZClear system. This submission is supported by the following entities:! Computershare Investor Services (New Zealand ) Limited! Link Market Services Limited! JP Morgan! HSBC Nominees (New Zealand) Limited! Citibank Nominee (New Zealand) Limited! Direct Broking Limited Our submission does not address the changes which the NZX at this time proposes to make to the Listing Rules. Rather, we provide feedback on a specific element of the existing Listing Rules which we believe results in sub-optimal administration of listed securities, and which has consequential impacts on investors ability to obtain full, timely and accurate information on their investments. Background on NZClear NZClear has been New Zealand s central securities depository for over 20 years. The NZClear system currently has assets in custody totalling $159 billion. This includes equities with a market value of more than $18 billion, approximately one third of the capitalisation of securities listed on the NZX.

2 Area of concern NZClear s particular area of concern is to ensure that New Zealand investments are administeredin an accurate, timely, complete, unambiguous and efficient manner. This information is relayed to ultimate beneficial owners and fund managers located in all global time zones. Accurate, timely and complete communication of corporate actions information to investors is essential to ensure investors are not denied the opportunity to make informed decisions. NZClear and key financial markets participants including the main registries, brokers, custodians and NZCDC are working together in order to improve information flows to investors and also to develop standards for corporate action processing to achieve the end objective of having investors receive correct, complete and timely information. Most corporate actions information is announced by issuers pursuant to the Listing Rules. In particular, listed issuers are required to complete and issue Appendix 7 of the Listing Rules to provide information required by Rules and We have three recommendations with respect to Appendix 7 and announcements of corporate action information. Firstly, in terms of structure, we note that Appendix 7 is an integral part of the Listing Rules. As such, any changes to Appendix 7 must be approved by the FMA. We understand the process for effecting changes to the Listing Rules, and therefore any changes to Appendix 7, are potentially time consuming and costly and consequently changes to Listing Rules occur infrequently. We believe that there is no compelling reason to require the FMA s approval to be given to changes to Appendix 7. The form needs to be able to be readily adapted on a timely basis, for example in response to changes in tax law or development of new types of entitlements. We submit that a more appropriate requirement than having the Appendix 7 form hard-wired into the Listing Rules is for the Listing Rules to require that the listed issuers complete a Notice of Event Affecting Securities, with the form itself prescribed by the NZX from time to time. NZX should be required to publish the prescribed form on its website and to advise all listed issuers and the FMA whenever the prescribed form has been updated and/or replaced. This suggestion is entirely consistent with Rule which allows NZX to approve written Procedures relating to operation of the Listing Rules. This suggested configuration will result in the relevant forms being more up to date than is currently the case, so ensuring investors are better informed. Secondly, we believe the Listed Rules (Rule ) should include a general requirement that Listed Issuers should provide such additional information in respect of any corporate action as required in the prescribed form. Thirdly, as a matter of detail, we submit that the existing Appendix 7 form should provide additional detail (where relevant) as set out in Appendix A to this submission. We appreciate this level of detail is outside the intended scope of this consultation process, and industry participants are willing to

3 work with NZX in order to explain the rationale for requesting the information and to identify the best format for the prescribed form. Conclusion Whilst the draft changes to the Listing Rules do not include proposals to change Appendix 7, this consultation process represents an opportunity to make what we consider is an important change to the Rules that, over time, will ensure more relevant information is provided to investors on a more timely basis. Moreover, this suggestion will ensure that sufficient checks are in place so that changes to the relevant forms are subject to review. Thank you for the opportunity to provide input on the NZX Listing Rules. If you require clarification in respect of any matters we have raised, then please contact me by telephone on or by at mikew@rbnz.govt.nz. Yours sincerely Mike Wolyncewicz Chief Financial Officer Reserve Bank of New Zealand

4 Appendix A to submission The following feedback has been received from NZClear members regarding Appendix 7 and the provision of the corporate action information. Clearly this feedback points for the need for the content of Appendix 7 to undergo an overhaul in order to better meet the information needs of investors. The overwhelming impression we have is that the disclosure requirements need to be included in a framework that is dynamic and which ensures that investors get all the information they need in a timely way. Moreover, there needs to be a strong feedback loop back to issuers who need to know what the standards are and when they have not met them. Whilst we do not expect NZX to resolve these detailed issues via this particular consultation, we believe this list does strongly reinforce the need for:! Appendix 7 to be removed from the Listing Rules! detailed Procedures regarding information provision to be developed and enforced. Timing of advice of strike prices Timing of allotment of shares Provide source of shares issued under a DRP programme State the terms of offer of DRP shares- discount rate State the terms of offer of DRP shares- period for determining market pricing Dividends in foreign currencygive timely advice of foreign exchange rates Timely advice of the outcome of meetings We note that Listing Rule anticipates this information will be available before record date which generally will not be the case. We recommend that the NZX include in Procedures a minimum period for provision of strike prices e.g. Strike prices must be announced to the NZX the business day following the end of the pricing period. We note that this may require that a separate form be issued (or an updated Appendix 7 is issued). We would like to see issuers be required to notify the market of the allotment of securities as soon as possible after the conditions precedent have been completed, and the time at which allotment occurs should be completely unambiguous. Appendix 7 should state if DRP stock will be sourced from new issued capital or bought on market (DVOP vs. DRIP) Appendix 7 should state if DRP shares will be issued at discount, and if yes, what percentage Appendix 7 should state the pricing period start and end date FX exchange rates for dividends announced in foreign currency but converted into New Zealand dollars should be announced to the market no later than 2 business days before payment date. Company meeting results should be announced to the market within 48 hours of the

5 Explicitly disclose the rate of imputation on dividends Issue guidelines for rounding of entitlements completion of the meeting. Imputation rate should be clearly stated on Appendix 7 (imputed to 28% or 30% or such other percentage). If more than one percentage has been used, details should be provided as to what percentage has been applied to the relevant elements of the payment. Introduce a common rounding policy to 6 decimal places to reduce confusion and inconsistency. We appreciate this may be governed by offer documents, but in drafting documents issuers should be able to refer to a best practises document. Other suggestions: NZX Procedures should allow NZX to impose fines for non-compliance with disclosure procedures Timeliness of provision of information regarding resolutions to be tabled at meetings Disclose where beneficial and registered investors entitlements are different. Whilst we prefer to deal with disclosure by way of education, ultimately sustained nonconformity with Procedures (including providing misleading, ambiguous, late or incomplete information) should result in censure and/or a fine. In addition to the minimum requirements for notification of resolutions in a company s constitution, the Listing Rules should prescribe a minimum notice period. It is felt that in some instances current notification periods may be tight where resolutions have to pass through a chain of nominees before being considered by offshore beneficial investors. Offshore investors will typically hold shares through a chain of custodians or nominees. In some cases there are restrictions on entitlements which are driven by either registered ownership or beneficial ownership. Issuers should be compelled to provide unambiguous statements which clarify any restrictions as to what level of ownership entitlements will be applied at, i.e. registered holder level (NZClear s NZCSD Limited) or beneficial owner level. This may be captured through procedures or via NZX s supervision arm explicitly putting questions to issuers asking them to clarify

6 this at the outset of all corporate actions. Treatment of claims for supplementary dividends Tax elements of Appendix 7 are irrelevant or superfluous Disclose information for Debt instruments Disclose information for hybrid instruments Not all trades are able to be settled on or before a record date. As a result offshore investors may be denied the opportunity to receive supplementary dividends unless an issuer honours a claim for such. Claims processing can be costly and creates operational risk. Investors would like to see a standard developed which allows investors a set period to claim supplementary dividends and for issuers to honour such claims. A number of elements of Appendix 7 relating to taxation appear to be out of date or superfluous. Our intention is to prepare a pro forma draft of a more up to date version of Appendix 7 for consideration by NZX. Currently, little information is disclosed on debt instruments in a structured way. For debt instruments, procedures should exist which require issuers to disclose via an Appendix 7-type process standard information such interest rates (including reset rates), interest rate calculation convention, record dates, interest to initial subscriber information (if any), tax information such as AIL exemption. Currently, little information is disclosed on hybrid instruments in a structured way. Issuers are particularly interested in imputation and taxation information, in addition to payment amounts. We note that Rule refers to the Income tax Act We wonder if this should refer tothe Income Tax Act 2007.