Bayly AndrewANDREW BAYLY (National—Port Waikato): Thank you Madam Speaker. I haven't been on the Governance and Administration Committee but I have been asked to talk on the New Plymouth District Council (Perpetual Investment Fund) Bill. First of all I just want to acknowledge Glen Bennett for bringing the bill through the select committee process and obviously steering it through the House. The first thing everyone seems to be saying is what their connection is to New Plymouth in Taranaki. Just for the record the Baylys arrived in New Plymouth in 1842 on the Amelia Thompson and many of my family live there. There are Bayly Roads in Taranaki! And in fact some of the early All Black teams had Baylys in them—talking about rugby. At one stage the Taranaki rugby team was I think near majority made up of Baylys but anyway. I'm going to stop there because I could carry on. There have been mayors of Taranaki—whatever.But having said all that my real connection to this which I only just found out—I was talking about this earlier on. Prior to coming into politics I had a business merchant bank and a long time ago—it must have been 2008—we had an approach from a small fund called Taranaki Investment Management Ltd. who came to us and said We would like you to look at whether we should buy some farms in Tasmania." This is a true story and I'm only revealing it because I have been asked to talk on it. Anyway they came to us and we said "Well fine. We'll do an analysis of it." They were asking us whether they should buy the farms. So we said to them first of all "Well why don't you provide us with all the due diligence material you've got." They said "No we're not going to do that. You're going to do your own desktop review and we want you to come back and tell us what you think." So we did that and I remember—I had a couple of people working on it—looking at long-term weather patterns for Tasmania. I remember ringing up stock agents in Tasmania to talk about access to cows looking at genetic stock where they were going to sell the milk to—all those sorts of things. We eventually compiled a brief in terms of a business assessment whether they should buy the 25 farms.When we went back to present the findings to Taranaki Investment Management Ltd. we said "Broadly our conclusions are as follows: the first thing is you've got a relatively small fund"—and I forget what it was; $250 million—"and you're proposing to spend most of that money buying one particular asset in one particular area. So first of all in terms of good funds portfolio management that's not a really desirable outcome. What you should do is diversify and this is very large. So that's our first big concern." The second thing we said to them was "We are concerned that you can buy this asset but how do you get out of it? How do you sell down your shareholding? That's the big question. Who is going to go and buy 25 dairy farms in Tasmania—if you hold them for five 10 15 years? So there is a real risk about buying this significant asset." And the third thing we said was "If you get past those two things—and by the way our recommendation is you don't—our price estimate is"—I can't quite remember the figure; I don't know whether it was $110 or $1.10 per share; I can't remember—"but if you're going to buy it pay no more than let's say $1.10 per share."Those were our three pieces of advice—I remember giving it—and at that point the investment management team said to us "Well thank you very much for what you've done. Very useful very helpful. I've just got to tell you that not only have we committed to buying the farms but we've also agreed to pay I think $1.40 per share." It was certainly much more. And at that point I thought "Wow substantial risk." Now I look at this bill and I have concerns about what this bill is about. First of all it is described as "the PIF is a long-term fund … managed and applied for the social economic environmental and cultural wellbeing"—of course that's all set out in clause 7. My first point is: to me that seems a really weird definition. And it's a weird definition in a sense that if you are going to pay the money in the form of a dividend—and I don't know why the bill refers to "releases"; it seems the most absurd definitional usage of the word. If you are going to use that distribution from the fund why would you be transferring it in the form of allowing the council to offset rates? Because one might argue that that's not necessarily meeting that requirement. So the first thing is the purpose statement in it.The second thing: I'd have to argue that the way that the fund has been set up and defined in this bill is very unclear and if I was a director on this fund I would have a great deal of difficulty personally because it states that "the PIF should be managed and applied with the intent of"—and this is the important bit—"maintaining or increasing the real value of its capital unless the Council considers on reasonable grounds that [the benefit of investment outweighs the loss and the reduction in the capital of the PIF is best to achieve that outcome]". Now if you're a fund manager—and I note that they've got Mercer managing this fund—"maintaining" and "increasing" are quite different. If you're maintaining a fund you're going to put your money into low-security investments such as Government Treasury stock. The investment strategy around maintaining a fund is absolutely different from what you might do if you're going to have a perpetual fund where you're trying to use dividends or distributions to fund other social economic environmental cultural wellbeing things. The investment strategy lacks an absolute clarity. And personally I find this bill very very woolly. I think if I was a director and asked to go on this entity I would be looking at this and saying "Who the hell drafted that?"The third thing I'd have to say to you is that there is no definition—from what I can see—around dividend policy. I looked at what the dividends have been over the last few years. Sorry I've only had the chance to do this quite recently—in the last 10 minutes actually—but the level of dividends that have been paid out has ranged from $22 million down to $5 million. So having clarity for the investment fund to know what the policy around the release—or in fact the distributions—is I think absolutely essential because working backwards until you know that you cannot know how to manage your investment decision-making and the nature of investments you're going to have in there.The fourth things that's missing is that it doesn't talk really about risk. It doesn't provide absolute clarity around risk and so we've ended up—and fine; the bill will go through—passing a bill which I think in time will prove to be actually quite deficient. Who has the ability to refine this up and grip it up to make it useful for the people who have actually got to manage this fund I'm not quite sure and maybe the select committee has worked through that but it's not evident from the documents. The other thing is and I think I heard Barbara Kuriger early on talking about it it does seem strange—the three options that the council looked at to set this framework up for this bill are that they lay out the three options. I'm just not quite sure why we ended up coming through the House and whether in fact it's because principally the New Plymouth District Council didn't believe that they could manage and work within the framework of requiring a 75 percent approval and therefore wanted to rely on the legislation. I'm not quite sure. I didn't hear the arguments from the select committee members for why this is actually required and maybe I missed that and I apologise if I haveBut this bill—fine; it's going to go through—I actually think has got a huge amount of deficiencies in it but it will hopefully get to an outcome which will mean that there is a long-term fund that offers long-term benefits to the good people of New Plymouth."