NZX Limited (NZX) Earnings Call Transcript & Summary

[Foreign Language] Good morning, and welcome to NZX's 2023 ASM. I am Sara Wheeler, General Counsel and Company Secretary of NZX. Before we begin, I'd just like to take us through some housekeeping. The toilets are located behind the lift, so directly pass the welcome desk as you come in. In the event of an emergency, please follow the green signs or follow me or one of the team, who will help direct you outside. In terms of the agenda, first, we will hear from NZX's Chair, James Miller, who will give a welcome and strategic overview. Secondly, we will move to NZX's CEO, Mark Peterson, who will provide a report on financial and business performance. We will then move to the formal part of the meeting. We have 5 resolutions today. Firstly, the usual resolution to authorize directors to set audit fees for 2023. The election of Rachel Walsh as a Director; and similarly for Dame Paula Rebstock. The reelection of Frank Aldridge as Director; and the proposal for the total remuneration payable to all directors to be increased by $42,000 from $522,000 to $564,000 with effect from 1 July 2023. We will attend to voting, and then we will move to general business. If you are intending on asking a question, please signal to us, and we will bring a microphone to you. We would kindly ask that questions relate to the business and operations of NZX Group as we are unable to answer questions relating to other companies listed on the exchange. Shareholders participating online will also be able to ask questions, and you can submit these at any time using the tab at the bottom of your screen. I encourage shareholders who have questions relating to the business of meeting -- of the meeting to send their questions through as soon as possible. Please note that only shareholders, proxy holders or shareholder company representatives may vote. Shareholders will be able to cast their vote online using the voting tab where you will need to enter your CSN and holder number for validation. Please refer to the virtual meeting online portal guide or contact the team at Link on 0-800-200-220 if you require any assistance. Following the meeting, we, of course, invite you to stay for refreshments. I will now hand over to James Miller.

Thank you, Sara. [Foreign Language] and good morning. I'm delighted to welcome you all here today to the NZX 2023 Annual Shareholder Meeting. Welcome to those attending either in-person or online. The meeting is being held as a hybrid ASM. We're pleased to hold the meeting today in New Zealand's Capital Market Center, that was officially opened in November last year. The new center celebrates New Zealand Capital Market's past, present and future. Already, the center has been home for many special occasions such as IPOs, direct listings, data shows, company anniversaries and new product lines. We've also had a number of school and university students from New Zealand and internationally visit the capital markets in to learn more about our stock exchange and the proud history of the New Zealand Capital Markets. I look forward to the center being the focus for more schools and university students in years to come. For those of you who are in the room, our directors and management team always enjoy these opportunities to chat with you. So please stay on after today's meeting for refreshments. Now for the introductions. I'm pleased to introduce to you the Board, Rachel Walsh, Dame Paula Rebstock; Frank Aldridge; Elaine Campbell; Peter Jessup; Lindsay Wright; and Sarah Miller, our Future Director. I'll explain the recent director changes shortly. Also sitting with our Board are the CEO, Mark Peterson; and Company Secretary, Sara Wheeler. And we have most of the senior leadership team in the audience here at the meeting. Our NZX auditor, KPMG, is represented here today by Brent Manning. I'm pleased to confirm we have a quorum. And therefore, the 2023 Annual Shareholders Meeting of NZX Limited is open. I'm pleased to outline the continuing process -- progress NZX is making on delivering its strategy. I'm proud of what NZX has achieved to grow the business and implement a strategic plan that is bearing fruit in terms of our global ambitions and valued for shareholders. Through that -- our 2.0 strategy, growing, connecting, adding value, we are positioning NZX for the future. In 2022, right across the NZX Group, we showed our purpose by being committed to connecting to people, businesses and capital every day. Smartshares, Wealth Technology, the international partnerships with Fonterra, and the European Energy Exchange, and GlobalDairyTrade, and the Singapore Exchange Dairy Derivatives. Alongside their growing information services business, the emissions trading scheme and carbon auction, are all adding value and considerable bench strength to our core markets business. I take personal pride in the international partnerships and warm friendships, which ensured that NZX is well connected to the world and the exciting opportunities that exist. Likewise, I'm proud of our achievements in growing Smartshares business with a diversified client base, smart acquisitions and delivering default status as a KiwiSaver provider. Funds under management that were circa $1.7 billion, when I became Chair, are now $10.3 billion. In my view, Smartshares will lead the passive market in New Zealand in the years to come. And given the KiwiSaver market is around $96 billion, and most global markets have approximately 20% allocated to passive. The business has a clear pathway to grow to approximately $20 billion without factoring in industry growth factors. This is exciting for NZX and the New Zealand Capital Markets and it gives us greater control of our destiny. In 2022, the Board reaffirmed the next stage of the strategy. This includes encouraging stronger global connections and opportunities. It's about bringing more size, scale and efficiencies to our capital markets. Our fund management business, Smartshares, and our funds under administration, Wealth Technologies businesses. I want to thank my fellow directors and NZX Chief Executive, Mark Peterson, and his dedicated team for their hard work and perseverance throughout this year. There is, of course, much more to be done and to deliver our growth aspirations. NZX's vision to be a trusted New Zealand business delivering sustainable wealth, value and opportunities for all. In August, we announced NZX would establish the new Institute of Corporate Governance Institute, the CGI, as a center for thought leadership around corporate governance and the New Zealand listed -- for New Zealand listed companies. The development of the CGI follows public consultation on the NZX Corporate Governance Code. The aim of the CGI is to ensure the NZX Main Board has settings in place that will improve the performance and increase shareholder value in a sustainable manner, while lowering the issuer's cost of capital. The CGI will shift away from developing a solutions-based policy and move to delivering outcomes supported by evidence and academic research. It aims to be a market leader for corporate governance settings that are appropriate for a leading, innovative and regional stock exchange. We hope the CGI will follow in the successful footstep of NZ RegCo. They underpin the government entity responsible for performing NZX's frontline regulatory functions. NZ RegCo continues to grow from strength to strength, and I want to acknowledge the diligent work of Chair, Trevor Janes, and RegCo's Board, and the Chief Executive, Joost van Amelsfort, and his team. On 12th of October last year, the NZX announced the resignation of Nigel Babbage and Richard Bodman after more than 5 years on the Board. It was great sadness we learned that Nigel had passed away on the 20th of November just before completing his turn. Nigel was a proud champion of NZX as a Board member and significant shareholder. He was a man of immense passion, integrity and something that would -- he demonstrated throughout his 35-year career as a currency trader, businessmen, conservationist and Director. Rich has furnished his term on 31st of December. He was an excellent director, bringing his first-class technical skills alongside promoting high-quality ethical standards and behavior. At NZX, he helped drive the establishment and expansion of our Wealth Technology business alongside improvements in our technology and clearing operations. Both Nigel and Richard left NZX in good heart and financial position. They have been part of the Board that has moved the organization from being a narrow based exchange operator into a scaled diversified financial business with the expansion of Smartshares and the growth of NZX Wealth Technologies. We thank them both for their significant contribution. Secondly, regarding new NZX director appointment, on the 12th of October 2022, we announced the appointment of Rob Hamilton and Rachel Walsh. And on 1st of February this year, Dame Paula Rebstock. The directorships began the day they were announced. Sarah Miller also joined the NZX Board on 1st of January as our fifth future director under the Institute of Directors Program, bringing legal, corporate and frontline markets experience. With these appointments, it means that in 2023, NZX will be -- for the first time, have a majority of directors who are women. As you'll be aware, on the 20th of March, NZX Board announced that it had withdrawn its endorsement of the incoming Chair Elect, following the announcement of the AUSTRAC proceedings against SkyCity Adelaide in December 2022, NZX carefully considered its position. The Board determined that, in the interests of NZX and noting that its position as the operator of the New Zealand capital markets, it could no longer endorse the proposed share while the AUSTRAC proceedings remained unresolved. As a result, I agreed to continue in the role of NZX Chair until the new Chair was appointed. The kind of person NZX Board is after as Chair is someone who understands the ins and outs of the New Zealand market, understands the dual role NZX plays as a market operator and business, endorses NZX's strategic direction and has previous Chair experience. As you appreciate, in light of last month's developments, NZX Board is not in a position to provide an update today on the position of Chair. However, I'm pleased to say the selection process is well advanced and we're making good progress. My intentions remain the same as when you last elected me in 2022. As I said before, I'm pleased that new Chair will inherit a company with a clear strategy, strong momentum and opportunities to grow the business and the returns for shareholders over time. The NZX Board notes feedback regarding the need for greater transparency of the Chief Executive's remuneration. We are committed to addressing this in the 2023 annual report. The Corporate Governance Institute and the New Zealand Shareholders Association are both working on an appropriate industry template. We'll be guided by these in deciding our approach to enhance remuneration disclosure. One of the resolutions today relates to the proposed increase of the NZX director fee pool. At the 2022 ASM, last year, the company indicated that director fees had not been independently reviewed since 2001, that our director fees were substantially behind the market. Chair and [ director fees ] trailed the 2001 market medium by 67% and 59%, respectively, and the fee pool represented 60% of the market medium. To attract the required talent to take the company forward, the pool needed to increase and steps to $690,000 by 2024, which would represent 95% of the 2001 market median. The company also indicated 50% of the increase would be applied to the acquisition of NZX shares, and that it would come back to shareholders to seek the required approvals in 2023 and 2024 for the 2 subsequent fee changes. At last year's ASM, shareholders supported, by 98.94% of votes cast, the first step to increase the pool to $522,000. And we're generally supportive of the 3-step process I've just mentioned. That NZX Board previously engaged PwC to carry out an independent report benchmarking for nonexecutive director fees based on a group of 20 peer companies. In line with the previous plan, for increased director fees, that also being mindful of the operating environment, approval is now being sought at the ASM for reduced increase in the director fee pool. The proposal for this year is to increase the pool by $42,000 to $564,000, around half what was originally envisaged. Consistent with this plan outlined in 2022 ASM, NZX, intends to see shareholder approval for our future ASMs for future director fee increases in order to bring director fees in line with relevant market benchmarks. I ask for your support today for this resolution today. In the year ahead, NZX is focused on rounding out our product offering in the capital markets, in line with other international exchanges, driving scale and operating leverage across the broader business and increase the revenue base will be a priority. We know our product offering could be expanded, which is a key driving growth factor -- sorry, is key to driving further growth in the capital markets activity and greater global connections. NZX's full year 2023 operating earnings EBITDA, including acquisitions and integration costs, are expected -- no, sorry, excluding -- are expected to be in the range of $36 million to $40.5 million. The guidance is subject to the normal caveats and assumptions outlined in the presentation slide and within the NZX's 2022 results investor presentation. When Mark and I commissioned the 150th history of NZX and hosted celebrations throughout the country, many commentators were of the view we wouldn't make it to 200 years as a stand-alone entity. While recent global market events have conspired against me, and I haven't delivered the total shareholder returns I would have liked, the broker sum of parts valuations clearly indicate considerable latent value has been created by a very talented and hard-working team. I have every confidence future boards will extract this value and the capital markets community can confidently look forward to NZX celebrating its 200th anniversary in 43 years' time. Creating NZ RegCo, the Corporate Governance Institute, the Capital Markets Center and opening the company's eyes to the potential of NZX with our board visit to New York in 2018, uniting the markets behind our 150th celebrations, and the Capital Markets 2029 Vision, are all personal highlights for me. And personally I'd like to thank our shareholders for your continuing support during my time as Chair of NZX. I'll now hand over to our CEO, Mark.

Thanks, James. [Foreign Language]. My name is Mark Peterson, and I'm the Chief Executive of NZX. I welcome all shareholders with us today and those attending online. Despite challenging market conditions in 2022, the NZX Group delivered a pleasing result due to the diversity of our product offering and the robust building blocks for growth we've been putting in place since 2017. Our results and achievements for the year ended 31 December 2022, demonstrates steady progress in delivering our growth strategy and balancing cost with opportunity. NZX has maintained solid earnings through market cycles, announcing operating earnings or EBITDA of $36.6 million, which is up 2.3% year-on-year, excluding acquisition costs, net for the financial year ended 31 December 2022. If we included the acquisition costs, group operating earnings were up 1.9% to $35.1 million. Net profit after tax for the year was $14.2 million compared with $15 million in the previous year. The NZX Board declared a final dividend of $0.031 per share, that was paid on the 16th of March 2023, contributing to a full year 2022 dividend of $0.061 per share fully imputed. Focusing now on the highlights. Group revenues were up 8.8%, $95.7 million for the full year, and the overall revenue growth reflects the strength of our strategy and broader earnings base. Capital listed and raised through 2022 was at the highest level since 2015. Our data business had another very strong year. And our Dairy Derivatives business, now in partnership with SGX, had an increase of lots traded by 40% through 2022, and is up 61% as at the 31st of March this year. Smartshares' funds under management continues to grow strongly and is now at $10.3 billion, including through the successful acquisition of QuayStreet. Operationally, we had a very strong year with 100% uptime recorded in all critical market trading, clearing and settlement systems. We've had to deal with a few challenges through the year, like many firms, and these include the macroeconomic environment. With inflation running high and monetary policy lifting interest rates and attempt to curb demand, pressure has come on to equity prices. This has in turn flowed through to materially lowering secondary trading levels through the year. And we believe the negative impacts to FUM and FUA in the lower trading levels had resulted in our revenues being somewhere between $5 million and $6 million lower than the trajectory that we're previously on. We would have liked to have transitioned a substantial new client under the Wealth Technologies platform last year. However, some part is critical to the transition last year were not ready to deliver the service the end investor would expect, and the transition is now scheduled for the beginning of May. Operating expenses, including -- or sorry, operating expenses, excluding acquisition and integration costs, increased 13.3% to $59.1 million. Cost inflation is impacting our business and has been felt in staff costs alongside other areas, IT, in particular. We've also taken on 2 integration projects with Smartshares and ASB Superannuation Master Trust and QuayStreet. And we need to resource these above our normal BAU staffing levels. The integration efforts and associated headcount costs are being spread over 2 years, and the uplift in earnings are expected to remain at the previous disclosed levels. And finally, it was terribly sad for all of us at NZX to have Nigel pass away. He was a huge supporter of what we do and what we are trying to achieve with our business. Turning to our key business areas. In 2022, $20.9 billion of capital was listed and raised on market. This is one of the strongest years of capital listing raise since 2015 and continues the positive run over the last decade. Pathways to listing worked well with 7 new issuers joining the main board. Promoting these pathways was a key recommendation in growing New Zealand's capital markets in the 2029 -- or [ the comment ] of the 2029 report. In 2022, there was a shift from equity to debt, reflecting global market conditions. During the height of the COVID-19 outbreak, we saw a pivot away from bonds as investors climbed up the risk curve to achieve returns. In 2022, bonds were back with 26 bonds deal -- with 26 bond deals listed on market and more than $11.3 billion worth of debt was listed and raised. ESG bonds remained strong with 41 bonds now listed on the NZX debt market in the ESG category, representing 26% of the listed bonds on issue. We expect to see green bonds continue to grow as more companies look to raise funds for projects to deliver environmental benefits. Contact Energy's recent $300 million green bond issue is a great example of this. In 2022, NZX maintained its on-market liquidity levels at 64%. This was despite total value traded being lower due to ongoing market uncertainty. The expectation remains NZX will reach 80% of our market liquidity in the next 5 years. And our midpoint trading venue launch will be key to reaching these levels and this project is a key focus for our team in 2023. Alongside this development, our other priority is launching our NZX 20 Futures product. Our cornerstone group remains very supportive and so too is the wider market. Our priorities are getting our clearing rules more aligned to global standards around risk and recovery tools in particular, and enhancing our technology platform to cater for the needs of participants. We expect to launch this in 2024, all going to plan. Despite softer market conditions, information services revenues continue to grow. They were up 10.9% to $19.4 million for the year. This will be a source of recurring revenue growth into the future as we develop new product and delivery mechanisms. Total professional terminal numbers remained steady, with an uplift in revenue, demonstrating strong interest in our markets from local and global investors. The Dairy Derivatives partnership between NZX and SGX Group has led to a significant increase in growth and the annual volume trading record broken on 20 October 2022. By the end of 2022, just over 428,000 lots were traded, surpassing the previous full year traded volume record of just under 361,000 lots. That was an increase of 40%. The partnership has seen NZX's Dairy Derivatives listed on the NZXs derivatives platform and combines NZXs core dairy expertise and industry engagement market insight, research capability and product development within SGX as leading Asian presence and global distribution capability. The first quarter of 2023 has seen the growth continue with just over 134,000 lots traded over the quarter, which is an increase of almost 62% on the same period last year. We now sit at the table to assist the unlocking of the significant potential to evolve Global Dairy Trade to be a truly global trading platform, alongside the opportunity to grow the SGX-NZX Dairy Derivatives to many multiples of the physical dairy markets. NZX's information services continues to provide effective market insights to support engagement across dairy market investments. In partnership with the Electricity Authority and TransPower, we delivered the real-time pricing project that went live on the 1st of November 2022. Since 2021, NZX, in partnership with EEX, has been managing New Zealand's Emissions Trading Scheme Auctions for NZ units. The auction now has 102 fully registered participants ranging across multiple sectors within New Zealand and abroad. The secondary carbon market also provides opportunities to deepen carbon trading in New Zealand. In November, the New Zealand government announced a request for information for a centralized regulated exchange operator for the trading of spot carbon. NZX is supportive of the potential market benefits of this opportunity. Smartshares continues to be on a strong growth path. In recent years, we've been steadily building capability with our people and technology to match our growth ambitions. While the changes in market conditions in 2022 impacted top line funds under management levels, this was largely offset by the strong net cash inflows of $800 million and the acquisition of the ASB Superannuation Master Trust. This lifted overall FUM to $8.26 billion at the end of last year. Operating earnings, including acquisition integration costs, lifted 42.8% to $11.2 million. We've said we would look for the right mergers and acquisitions opportunities that fit our strategy. This has included the ASB Superannuation Master Trust announcement in 2021, and in November last year, the announcement of the purchase of QuayStreet and its $1.6 billion of funds under management from Craigs Investment Partners. QuayStreet provides another opportunity towards achieving scale and operating leverage in Smartshares. We remain on track for at least the $4 million to $4.3 million in earnings growth annually from the ASB Superannuation Master Trust and the $3.3 million to $3.6 million of earnings growth for QuayStreet. The remaining external integration costs expensed over '23 and '24 are estimated to be around $3 million to $3.5 million. Scale and operating leverage are important elements for our Funds Management business. With market showing some recovery in Q1 2023 and with the settlement of QuayStreet transaction at the end of March, Smartshares has $10.3 billion of funds under its management. Our market analysis indicates that $15 billion to $20 billion of FUM is the point where cost bases are at their most efficient for New Zealand fund managers. The impact by market conditions -- or impacted by market conditions, NZX's Wealth Technologies funds under administration at the end of last year was $9.96 billion. Revenue reached just under $6 million, which was an increase of 36.3% from 2021. Wealth Tech's pipeline prospects remain strong. As previously mentioned, further FUA growth is underpinned by a large contractor client, which we are now onboarding in early May. NZX Wealth Technologies also had a very positive start in the first quarter of this year, lifting funds under administration to $10.3 billion and also won 3 new medium-sized advisory clients. All 3 are scheduled to be transitioned onto our platform later this year. From a strategic perspective, we have made significant progress in strengthening the NZX Group business and our market and operations infrastructure over the last 5 years. This has enabled the NZX Group to maintain earnings through the cyclical movements of markets and tightening of financial conditions and is reflected in our results. When markets turn back to being more favorable, we expect a revenue uplift of $5 million to $6 million. Through 2022, NZX is focusing on continuing to grow our revenue, maintain our earnings, drive efficiencies and maximize the leverage of the acquisitions and investments we've made in recent years under our strategy. At the same time as making appropriate investment in market infrastructure, we have focused on addressing cost pressures. But this remains a key priority for the year ahead. It is about balancing cost with developing our group business to capture opportunities that will have upside when markets recover. We're making good progress towards growing a more integrated financial markets infrastructure and services business, as mentioned already. And at scale, integrated business is at the heart of our growth strategy. Growing markets is fundamental to what we do, helping businesses get access to capital and providing investor's opportunities to grow their wealth by investing in equity, debt and fund securities. Our ambition to round out our capital markets product offering in areas such as equity derivatives and carbon markets will broaden our earnings base at scale to our settlement and clearing activities and mature our market. We are globalizing our footprint across all businesses as evidenced by the partnerships between NZX and SGX, the European Energy Exchange and Fonterra with GlobalDairyTrade. We see significant opportunities in the star-alliance type strategy, and global partnerships will help us achieve scale. In addition, most exchanges have a level of diversification. And in our case, for Smartshares and Wealth Technologies businesses, there are long-term structural market tailwinds that support strong growth in both. With Smartshares, we want to create further products to ensure investors can use our markets to get exposures to assets all around the world. Our group strategy in 2027 is clear, round out our product offering and capital markets in line with other exchanges internationally, and drive scale and operating leverage across the broader business to increase our revenue base. And we're off to a good start in 2023 with revenue up $3.6 million or 16.5% to $25.45 million in the first quarter. $1.6 million has come from the acquisitions of ASB Superannuation Master Trust and QuayStreet, with $2 million coming from organic growth. ESG remains a priority for NZX and we have further opportunities within our business alongside providing capability and leadership to the wider market to leverage. We continue to make steady progress in 2022 across the business, and NZX achieved net carbon zero certification for the 2021 year and the 2022 years from Toitu Envirocare. Governance remains our strength, while our focus in the year ahead will be on improving our transparency and communication on environmental and social aspects of ESG and delivering to legislative reporting requirements. As James has mentioned, our remuneration disclosure for the group will take a step up in the 2023 annual report. In the last year, NZX completed our review of NZX Corporate Governance Code after comprehensive engagement with the industry. We are delighted with the interest and thoughtful feedback we received. The updated code promotes good governance and business practices, including greater environmental, social and governance disclosure among listed companies. As the operator of New Zealand stock market and as a provider of financial service and a technology business, and as a regulator, our focus is to create value while delivering a positive impact on society and the environment. Demonstrating our commitment as a business and market operator in the 2022 -- in 2022, NZX published in our annual report, for the first time, our climate statement. We also partnered with BusinessDesk in supporting its new sustainable finance section. Public markets will continue to play an important role in facilitating the flow of capital towards decarbonizing the New Zealand economy. In 2022, further significant geopolitical and macroeconomic events were adding to the growing list of significant challenges the world economy and businesses are facing. Through all of this, I'm extremely proud of the fortitude and resilience NZX staff continue to demonstrate. Committed and customer-focused are the words that best sum up the collective attitude in last year. They are a testament to the caliber of our people and their ability to cope with constant change, alongside strong management by our senior leaders. I have huge appreciation of everybody's efforts and achievements. Acknowledgment also needs to go to NZ RegCo, the independently governed entity responsible for monitoring and enforcing compliance by listed issuers and accredited market participants with NZX's market rules. Under the leadership of Chief Executive Joost van Amelsfort, NZ RegCo continues to go from strength to strength. It was pleasing to see in the Financial Markets Authority's annual NZX market operator obligations review in June last year, the recognition of how effectively NZ RegCo was operating as a stand-alone frontline regulator and demonstrating an appropriate level of independence from NZX. NZX was also pleased with the findings of that review, which noted a significant improvement in NZX technology and systems capabilities, personnel and risk management practices. Finally, before I hand back to James, I would like to thank you, our shareholders, for your continued support and confidence in NZX. Thank you very much.

Okay. Thanks, Mark. We now move to the formal business of the day. All items of business are ordinary resolution and required to be passed by a simple majority being more than 50% of the eligible votes cast. The resolutions that we'll be voting on today are as follows: Resolution 1, the auditor's fees; Resolution 2, the election of Rachel Walsh as a Director of NZX; Resolution 3, election of Dame Paula Rebstock as a Director of NZX; Resolution 4, the reelection of Frank Aldridge as the Director of NZX; and Resolution 5, the approval of the updated director fee pool. As stated in the voting proxy form, all voting at today's meeting will be done by way of poll. And accordingly, in my capacity as Chair, I require that a poll to be held on each of the resolutions. Shareholders on Link, please refer to the PowerPoint slide with the instructions on how to vote. Your Board supports each of the resolutions and intends to vote undirected proxies in favor of these 5 resolutions, noting the voting restrictions relating to Resolution 5. I'll just add. At the end of each resolution, we'll have a chance for questions, but also at the end of all that, there will be chance for general business and questions that should normally go there if they could please go into that section. Resolution 1 relates to the Board being authorized to fix the fees and expenses of KPMG as our company auditor for 2023 financial year. KPMG is the current auditor of NZX. I move, as an ordinary resolution, that the Board be authorized to determine the auditor's fees and expenses for the 2023 financial year. Are there any questions from the floor on this resolution? Okay. Are there any questions online, Sara? No? Okay. There appears to be no further discussion on this resolution. Resolution 2 relates to the election of Rachel Walsh. Rachel was appointed a Director of NZX. With effect from 12th of October 2022, Rachel retires in accordance with the listing rules and the NZX constitution and offers herself for election. The Board recommends Rachel Walsh to you as a Director of NZX and unanimously supports her election. Being eligible, Rachel has confirmed she is available for election, and I invite Rachel to address the meeting on her proposed election.

Thanks, James. Good morning. I'm pleased to be here today to put myself forward for election at this ASM. Over the last 8 years, I've served as the Chief Financial Officer. Currently, at NZX's largest technology company, Datacom Group, which is a private company with a turnover of $1.5 billion and 6,500 employees, owned by New Zealand Super Fund and its founding family, and previously at Abano Healthcare Group, which was an NZX listed entity at that time. In both these roles, I was responsible for risk and strategy. And at Datacom, the internal technology team, headed by the Chief Information Officer, [indiscernible] reports through to me. I currently utilize these skills at NZX as Chair of the clearing house and sitting on the Technology Committee. I am an experienced financial services executive and have diverse experience across a number of industries as a consultant as well as in-house, including the financial services sector, information technology, fast moving consumer goods and private equity. I'm a fellow of the Institute of Chartered Accountants and serve on their external reporting advisory panel for the external reporting Board. Previous to my CFO roles, I worked at Rank Group and PwC. And in both of these entities, I have had deep exposure to private equity and regulated markets, particularly the U.S., Australia and New Zealand. This included both debt and equity issuances as well as filing. The motto I have taken with me from Rank Group is that the numbers need to be right and cash generation is paramount. I have a passion for NZ INC., as evidenced by my last 3 jobs, being for NZ head offices of New Zealand companies with global aspirations. That is with this lens that I bring my skills and experience to the NZX. Thank you.

Thank you, Rachel. I move as an ordinary resolution that Rachel Walsh be elected as director. Are there any questions from the floor on this resolution? Okay. Are there any questions online? Okay. Thank you. Resolution 3 relates to the election of Dame Paula Rebstock. Dame Paula Rebstock was appointed as a director of NZX with affect from 1st of February 2023. Dame Paula retires in accordance with the listing rules and the NZX's constitution and offers herself for reelection. The Board recommends Dame Paula Rebstock to you as Director of NZX and unanimously support her election. Being eligible, Dame Paula has confirmed she is available for election. I invite Dame Paula to address the meeting on her proposed election.

Thanks, James. [Foreign Language]. Good morning, shareholders. I appreciate the opportunity to speak to you today in support of my nomination for the role of independent director on the NZX Board. Although I've only served on the Board since February, my experience so far confirms that the role combines the key strands that have really shaped my professional career up to this point. And that is my interest in well-functioning markets and efficient regulation and growing successful New Zealand businesses. I'm an economist by training, and I was educated with a strong awareness of the important role markets play in the economic development, efficient resource allocation and equitable economic outcomes. Financial markets, in particular, play a critical role in ensuring stability of economic systems. At a practical level, I had the opportunity to contribute for over a decade in the governance of the Accident Compensation Corporation's reserve fund, both as Chair of the company and as a member of the investment committee, alongside my colleague, James, and also Trevor. Not only did the scale of the fund change considerably, more than doubling to over $50 billion, during our time, we also changed its composition with a push into private markets. The latter provided important extra risk capital in nontraditional markets. And I'm now very much looking forward to supporting Smartshares to grow further in the passive space and can readily see its potential to rapidly double in size, in line with what you heard from the Chairman. Related to my role at ACC, I was involved with Kiwi Group Holdings, the then parent company of Kiwi Bank, Kiwi Wealth, Kiwi Insurance and New Zealand Home Loans. This gave me valuable exposure to the wider financial sector, including banking and involve the completion of a large number of equity transactions. And I will acknowledge that eventually, we did sell the bank back to the Crown. The senior roles at both ACC and Kiwi Group Holdings involved close working relationships with the New Zealand Treasury, other regulatory agencies and of course, the government of the day. In terms of the interaction with the public sector, the past 10 years built on my earlier experience as Chair of the New Zealand Commerce Commission and as a member of the establishment Board for the FMA. That brings me to the regulatory angle in my professional history. Obviously, there's plenty of evidence that capital markets need well-defined boundaries and effective oversight to ensure efficient functioning on a sustained basis. Failures in that regard have the potential to lead to crisis of confidence, of market participants and the wider public, and can cause severe disruptions with consequence for economic dislocation and wealth destruction. While at the commission, my focus was primarily on markets for goods and services. Now at the NZX, it's very clear we play a critical role in providing that oversight for capital markets. As a Director of NZX, I -- if I'm elected, I will be particularly focused on the evolution of the legislative and policy framework for our financial markets to further strengthen the breadth and depth of New Zealand markets. Finally, I'm committed to growing successful New Zealand businesses through sound governance. I have served on a wide range of boards across the infrastructure, health, financial and insurance sectors. I'm currently Deputy Chair of listed company Vector, and bring to NZX a perspective from the listed company, [ Arena ]. In conclusion, I believe my skill set and professional experience will enable me to be an effective director of NZX. I would welcome your support for my election as an independent director. If elected, I'll work tirelessly with my fellow directors and the executive team to deliver sustained returns to you, our shareholders. Thank you.

Thank you, Dame Paula. I move as an ordinary resolution that Dame Paula Rebstock to be elected as a director. Are there any questions from the floor on this resolution? Online? No. Okay. Thank you. Resolution 4 relates to the reelection of Frank Aldridge. Frank was appointed as a Director of NZX in May 2017. Frank retires by rotation in accordance with the listing rules and offers himself for reelection. The Board recommends Frank Aldridge to you as a Director of NZX and unanimously supports his reelection. Being eligible, Frank has confirmed he is available for election, and I invite Frank to address the meeting on his proposed reelection.

Thanks, James. Good morning, everyone. Thank you for being here today. I'm pleased to put myself up for reelection this year to the Board of the NZX. I've been involved in capital markets, as you've seen here, for over 25 years, both in New Zealand and Australia, and could bring vast experience. And in fact, my first job when I left university, in '94, long time ago, was an analyst at the New Zealand Stock Exchange. So I've been involved the whole career. This is through my previous roles as Managing Director of Craigs Investment Partners for 16 years. I was Chair of Wilsons Advisory and Stockbroking for about 5 years when we bought them -- Craigs bought them. Have also been Chair of the Securities Industry Association and on the Board -- the privilege to be on the Board of the NZX for the last 6 years. I'm still involved through markets through my private company advising corporates and family offices, and I'm a Chartered Member of the Institute of Directors. The NZX is at the heart of the capital markets, and there is no other time than now that we need a strong Board and management team to carry us through. I'm currently Chair of the Human Resources Committee, a member of the Nominations Committee and a member on the Audit and Risk Committee. I obviously stood in briefly in the last 6 months, and Rachel's taken over as Chair of the Clearing Committee after the unfortunate passing of Nigel Babbage, which has been mentioned. He was a very good friend of mine. I also assist at times, chairing various deals for special project committees given I've worked extensively within the industry. I thank you for your support, and if reelected, I look forward to working with all stakeholders over the coming period through these trying times. It is a privilege to stand here to you -- in front of you today, seeking reelection as a Director of the NZX. Thank you.

Thank you, Frank. I move as an ordinary resolution that Frank Aldridge be reelected as a Director. Are there any questions from the floor on this resolution? Are there any questions submitted online? Okay. Thank you. Resolution 5 seeks the approval for total annual remuneration available to all directors to be increased by $42,000 from $522,000 to $564,000 with the effect from 1 July 2023. As noted earlier in my presentation -- earlier in my presentation, the current NZX director fee pool was approved last year. And at the time, we signaled our intention to return to shareholders to seek further adjustments to bring NZX director fees in line with the market median. This year, we are seeking half the increase that was originally envisaged, and recognize -- in recognition of the challenges in the current operating environment. As noted, that the resolution is supported today, and subject to ongoing company performance, the Board would also like to signal its intention to seek further increases of the fee pool to achieve market rates. The Board unanimously supports the proposed resolution. Voting restrictions apply to this resolution as set out on Page 4 of the Notice of Meeting, which broadly restricts each Director and associated persons of each Director from voting in favor of the resolution, except for vote that's cast as a direct proxy for a person entitled to vote. I move as an ordinary resolution that the total annual remuneration payable to all directors to increase by $42,000 from $522,000 to $564,000 with effect from 1st of July 2023. Are there any questions from the floor on this resolution? Yes.

[indiscernible] the decrease in the share price over the past years.

We've had a similar question from online. And so I guess you break that down. I do have a huge amount of empathy for putting up a share -- director fees in a time when TSR, total shareholder return, has been tough for shareholders. And so breaking that down, we're down, I think, 9% this year. And the market was down, too. And so it's not an ideal time, and I do concede that to you, ensuring as much empathy on that issue. But having said that, director fee increase -- director fees were last seen at market in 2001. It's unbelievable, a long time ago. And that set the time of IPO, and since then, we've slipped further and further behind market. And so you do need to pay market to get good quality directors to come and work for you. So I'm conscious of that. And to reflect the question that you're raising, we've decided to keep the fee increase to be half the amount that we were proposing to do this year, then move them to market. It may take a little bit longer to get them to market, just reflecting that shareholders haven't got the return that we would have liked them to get. And to show some kind of empathy towards that issue. It's a tough issue. But at the end of the day, trying to do 2 things at once, and that's where we end up. Thank you. Good question. William, what have you got, mate?

I'll trust. That was a good question. I'll just continue with it. You've been very keen at giving money away to directors and spending money on staff increases and everything else. But you forgot one thing, shareholders come first. And I've had shares in this company for 12 or 15 years. And basically, the dividends haven't moved in that time, certainly, in the last 10 years. And house prices have doubled, and we've seen other shares have massive dividend returns. I haven't heard at all -- you want a salary increase and you've obviously giving your staff annual salary increases. But shareholders come first. You wouldn't -- no one would be here if it wasn't for the shareholders. So we want something. And there has to be a progressive dividend policy that has to be monotonic, meaning going up every year. And there's lots of other companies that have been doing this, that have been highly successful over the 10 years. This company has not. It's a pathetic share price, and you're on a monopoly. So there is something wrong. So shareholders come first.

Yes, look -- [ you don't have to tell me that ]. And look, that's come back to just what I said before. I've got 2 things to achieve here, and I do need to move the director fees that are not only slightly behind market, they are miles behind market, right? Yes. And -- yes. So dividends were left unchanged, but you got to remember, you have a market-based business that does have cyclicality, right? There is monopoly assets to it, but at the end of the day, when markets are down, our revenues go down with it across a range of factors. So we have to do what I would call a hustle year this year and a bit of last year to get through that. And I'm sure the teams are on to that. But you can't make it out of nothing, right? You can't pay out of nothing. You've got to have the cash to pay the dividend. And so I hear you. I'm pleased the Board's here, everybody. And the message is received loud and clear. But I still strongly advocate support that we can't be paying fees that were set in 2001. That's equally not as...

[indiscernible].

I know you would. Okay. Anybody else got stories?

You don't seem to have any trouble finding directors to go on the board.

Yes. But look at -- and that's sure. But like -- whether it's in your own company or something, you don't ask the people to work under market rates. And like everybody here is passionately committed about the capital markets. Like, I see everyone here to give back to the capital market. And so does everybody here. That's their #1 thing. But there's only so far you can take that and -- before you need to actually pay at a fair market rate. And I'm not asking to get above market rates on the 95% of market rates eventually. And so I hear you, but people are doing it for the right reasons. You've heard all the directors today and every director here, I can tell you, does it for the right reasons because they want a successful capital markets in New Zealand. Passionately feel that.

Just on shareholder value, could I ask collectively how many shares are held by the Board with -- into [ 8 ] shares?

Okay. I'll get someone to -- we've got a reason why how many I, but I don't know collectively for everybody. It was quite a large number when Nigel was here, but he's just jumped off for year. Yes, 240 apparently, 1,000.

Yes. And when I look at the relative performance of NZX shares over 2 years, I noticed the NZX50 is down 7%. I noticed the NZX is down 40%. Thank you.

Yes. The same number was given over a 2-year period. Yes. Yes. There was a capital raise in the middle of that, I'm pretty sure. But -- so I'm not going to question your math. It probably is correct. I'm definitely not questioning it. Yes. No, look, it's a challenge. It's a challenge we've got to face straight into, and I think that's a fecal hear loud and clear. Any other questions? Okay. Sara, if you could summarize any questions that haven't already been done by the room on this issue?

[indiscernible]

No, no, I mean for increases. Is there anything on...

Yes, there are general questions.

No, no. Okay. So okay, nothing on there. So let me get to -- okay. We can now turn to the voting for any shareholders who have not already cast their postal or proxy votes. Looks in the right place. Yes. That's right. Shareholders should now submit their votes for, against or abstain as [indiscernible] resolution, voting will be open until we close the meeting. Yes, some are collecting them now. Once all votes have been cast, they will be counted by the company's share register, Link Market Services and will be scrutinized by the company's auditor, KPMG, who is in attendance of the meeting. The results of today's meeting will be released to the market on completion of the verification of voting. At this point, we will open up to any questions from shareholders and attendants and online on the financial results, business updates or any other matters you'd like to raise. Please complete your voting while we take questions. Are there any items of general business, William?

So successful companies all have a 10-year summary of how they've been going over 10 years. And just before I came here, I was looking at BHP, and they have a great summary. So a suggestion to the Board and the management that you do a 10-year summary, your asset growth, you're just the standard and you're a net share broker. So you -- you know what requirements, including what the dividends have been paid out and the dividends as seen. So earnings per share, just the usual thing. I'm just surprised for someone that's talking about corporate governance and everything, you don't have a 10-year summary, where it seems to be common practice, particularly amongst overseas companies.

Good comment. Good comment, something to take on one he's got it. Any other questions on general business? Just wait for the mic, struggle to hear.

Thank you for that detailed presentation and the update. Just got 2 questions. First 1 is in regards to the CGI. You mentioned that it would increase shareholder value and also decrease cost of capital. Would you be able to elaborate on that?

Yes. So that's across the whole market. So the idea of the CGI is to create good corporate governance that investors can rely on and knowing and predictably be able to get an understanding of how board will operate. So the process that they do is, they'll call for submissions and I've got 2 policies out at the moment. I've gotten what they are, but someone will be able to remind me. I think 1 of them is on REM disclosure. And if the idea is there that if you can get standardized formats that are equivalent to what you would see offshore and predictable and expected. With that level of certainty investors can have confidence and therefore assign a lower cost of capital to our market. So that's the idea of that. And with lower cost of capital, you tend to get higher valuations off the back of that. So it's something that we consistently work with -- work towards and have been for a 10-year period or longer at the exchange. Particularly with offshore investors, it's very important. If you go back long, long time with New Zealand's history, it hasn't been that good, and there's been a sustained period year-on-year to improve that. Good question.

Hi, Shareholder, Eric Tan. I think you deserve every center of your 18% you're thinking of. However, I think that the timing is just wrong. The other thing is you haven't got an increase in the earlier years of 2000 is because the share price was hovering around $0.80, $0.90. That was the reason and that was not because you have an increase. And I've got 1 last question is, you have all these later companies, and was -- do these directors also get an increase of 16% or 8%?

So the last part is no. So you mean like the smart sheets forward and lights now, this only affects this table here. The REM has just started, not sure exactly how it works, but it's completely different from the proposal that's put forward here. Thank you for your support. And I hear the issues that TSR and the issues that you raised. So yes, that's well heard.

McCloud, shareholder. I would like to say during your activities over the last 12 months, particularly what you've outlined today, namely the contacts that have been made in the country to spread your business and more particularly outside using. Now that is quite an effort. Under present conditions prevailing and what's happening is an achievement. Now you've got that format there. You should be able to increase dividends from now on, if all these contracts are used correctly and it should be success. And I think the gentlemen or several speakers at the back they are sort of losing patience. I can understand that. But now you've got the format settled, all you got to do is get the results from it. Now the last one, I brought it up last year is the reporting of the New Zealand stock exchange activities every day on a daily basis. The reporting done by the television here. Now the only station doing it is Prime and they do it about 4 PM to 6 PM, in evening. Sometimes it's not every evening. We should have more exposure there because this encourages people to participate in the local market. At 1 time we were well ahead of even some other companies, how the reporting was done in television. There was clubs were formed to invest in shares. Well, you're obviously being a Chairman would know the history of that. Now, is there anything being done to encourage more exposure in reporting on the evening television?

Yes, I'll do the first part of your question first. Like on the leverage and the global opportunity, that's great, and thank you for the acknowledgment. I think we've really got a home now on dairy and having the partnerships with the EEX and Singapore add to the equation. The business is going really, really well. And we've got the best partner to better leverage off with serious global balance sheets to be able to track along with, and that's way better than us trying to do it here. So that part, I'm quite excited to how that will go forward. I'm going to throw you the question about what [indiscernible].

Okay. Yes, we note your question. And also we note your question from last year as well. So thanks for bringing up again. It's 1 of those things that we haven't been able to achieve with TV, it's a challenging medium. But I would also say from an exposure perspective, we have increased our exposure of company's performance, the things that we can control massively in the last few years. And the efforts of our origination team in conjunction with the media room that you can see around the corner there. We often will hear people and CEO, CFO is doing podcasts on their performance might be at the half year or the full year results. That goes out all over our social media channels, of which social media seems to dominate the way that we share information these days. So we're doing a lot in that area. The TV piece is a challenge, as you know. So we take the point exposure is key. We're doing quite a lot of work with the likes of The Business Desk and The Herald to make sure that capital markets more generally and particularly just sustainable funds against the exposure at business too. And I think I noted in my speech, the sponsorship that we've got there. So we take the point around disclosure. We're just doing it probably slightly different than you might have suggested.

Okay. We'll go to the gentleman right at the back.

Thank you, Mr. Chairman. Over the years, there's been various discussion about floating the funds management side of the business offers a separate entity. And from what I've heard today, that's where you're relying on the growth to come from. I think a stand-alone operation list on exchange would be a great advantage because I think there's a lot of latent wealth in that that's not reflected in the current share price.

Agree. That was what I was trying to say in some of the parts valuation, that's 1 way to crystallize it. But that will be for the future Board to decide how to do that the value is there, and that's 1 way of getting a mark on it.

Yes. Just a question in regards to the on-market liquidity. The target was to achieve 80% in the next 5 years, would you be able to just elaborate on how that will be achieved?

Yes, please.

So just to explain that. In other markets around the world, I did allude to this in my words earlier. We've got big change or we've had a big change in on-market liquidity over the last 5 years. When I first started broking, it was more like 20% that was executed on the screen. So we've now got it to 65%. The step together to 80 involves the deployment of what we call the NZX midpoint order book. And it's an on-market trading venue, albeit that it is a separate to, and I'm going to use some technical language here the lift market. So the market that everybody sees with the debt, if you like, in the cells and the buy orders through the screen. There is going to be another venue, which will actually be anonymous, but it will allow for orders to trade so long as they match against the midpoint price that is determined in the lit market. And other markets around the world have this venue. So in Australia, for example, it's called the Centerpoint market. Very common, very standard, very normal. We just don't have it. But if you actually take what we anticipate is to be the liquidity that would go through the midpoint order book, that would then get added to the percentage that we've got trading on the screen through the lit market, and that is how we're going to get through to the late 70%, early 80%. So it isn't this project that I identified in my words earlier.

Okay. All right. So if you can trying to read out and summarize the questions, hopefully, not recruiting the 1 that's already from the floor.

So Kaushik Patel has asked, can you please describe the level of engagement that NZX has with government on the importance of the capital markets to New Zealand's economy.

Do you want to do that? Yes.

So thank you for the question from the shareholder online. In directions with government officials and official term, if you like, has been sort of high on our list for the last couple of years. We've invested in that through the recruitment of somebody that knows that world quite well. Sarah Miller joined our team in -- well, in the last 12 months. What we typically do is we're politically agnostic. So we will share what our thoughts both not just government, but also other aspects of the political spectrum. And we do have continued conversations in that regard. They're not every day, but they are reasonably regular. We've invited officials and government to our Board meetings from time to time, and we will have private conversations with the main occasions as well. I think probably 1 of the big pieces of work that has been done, and it's not just been done by ourselves, it was actually sponsored by ourselves in the Financial Markets Authority, what was the formation of the Capital Markets 2029 work. And they've resulted in a number of recommendations across a number of themes of which was a true representation of the market's view as to what needs to be done to actually help invigorate markets. And government is well aware of that, not just at ministerial level or at officials level, but certainly at treasury and everywhere else. So we're focusing on making sure that, that is well understood and eyes are on that, because we think New Zealand needs some of that activity. Hopefully, that helps.

Thanks. The next question is from Andrew Art, who asks, will a Corporate Governance Institute have a website where it's work will be publicly available.

Yes, it will. And -- is it up for now? It is up. And I'm not sure what it addresses what -- yes, go to nzx.com, and you'll find it under that. So yes, it will be there.

Another question also from Patel is, what is the carrying value of the funds businesses acquired over the last 4 years?

Do you want to take that?

Happy to take that. Thank you again for the question. So if you went back and looked at the Smartshares business, the purchase of SuperLife, the acquisition of the ASB Master Trust and the QuayStreet business, you'd probably get to a carrying value of around about $100 million. Just to note, though, that -- and it's a lens on the comments that have been made already around the sum of the parts. So when we look at the carrying value that we actually look at the inherent value in that business, we are -- we know for sure because we do bear these things ourselves. What we think the likes of the funds business is worth to us as an owner, and it is substantially more than that. Obviously, what we also do through annual cycles is the auditing process and the impairment process we test our assumptions against all of that. And I can tell you that the impairment testing valuations come in well in excess of the carrying value. And I think probably a data point that might be worth pointing out would be the transaction where Fisher Funds bought Kiwi Wealth, that's probably something that would give you a bit of feel for what we think the valuation next year is. So I'm just getting feed, some information from our CFO. So the financial statement pages are notes 3 and 5, actually identify all of that as well. Just noting that it excludes the most recent acquisition of QuayStreet.

Another question is what is the dividend outlook for 2023 and 2024?

Yes, we've heard from the room pretty clearly, but we don't forecast that at this stage.

The final question we have so far is also from Kaushik Patel. Just to ask, have you considered cutting projects, which are not committing to the -- contributing to the bottom line?

Again, thanks for the question online. We've been very deliberate in recent years, actually, not just this year and making sure that the efforts that we place go on to pieces of work that are going to return value. And we've got a long list of ideas that could be done. But like probably most businesses, we've got to just direct those resources to that. So the most important things that will deliver our strategy. So I think noting the question, we've probably done that. We are really focusing on things that add value and those that aren't are probably on the sidelines for a while.

Yes. The only other question related to the midpoint venue launch, which Mark has already answered. So we have no other questions online.

Thank you. Okay.

Anyone like to comment? Well, also from Andrew, can you advise what the metrics were for the Fisher Funds Kiwi Wealth acquisition, the answer to that.

I don't think we'll answer that question, that's publicly available. So maybe, Andrew, you can just look at online.

Okay. Thank you. There appears to be no further business for discussion. So that brings the meeting to a close. And ladies and gentlemen, that brings us to the end of formal business for the NZX 2023 Annual Shareholders Meeting, and thank you.