Ann: Change in substantial holding , page-3

Hi Chris, although the news yesterday was very disappointing in light of recent commentary at the AGM 3 - 4 weeks ago which gave the opposite view and a fantastic Contract win last week. But this is a market that will not tolerate anything that is not positive let alone a negative surprise.

The question you have asked is a very good one, but first look at yesterdays volume in excess of 4million. Now the float that sits outside the top 20 & or substantial shareholders depending on how you would like to view it, is about 20% or 31 million shares. 4ml is 13% of this holding, that is very large slice taken out of the smaller retail investor portion, also nearly 3% of the entire float of 158,900,000.

Who was doing the buying?

Peter Masfen a Large & Very Successful Auckland Investor purchased about 2.2 million ( 1.4% ) shares yesterday.

Who was the other substantial buyer? to account for the other 2 million shares although a lot will have also been smaller individual buyers (some I am aware of)

Peter Masfen is Auckland based now at 7.6%

Maui's Indigo Fund at just over 20%, is also Auckland based
Paul Chrystall who heads up the Maui team is also a high profile Aucklander and ex Goldman Sachs - Paul and his Maui team who launched the Indigo Fund are essentially the same team (ex Goldman Sachs) that created the Norfolk Group and listed on the ASX while still at Goldman's Auckland office. Once the team left Goldman's and reformed as Maui Capital, their first Fund - "Indigo" purchased the shares at an average of 67.5cents back in 2009 &10 with the aim of returning 3x the investment to its fund, to which they have a proven track record of achieving this.
Also some other points to consider - part of this Maui/indigo team (and the former Goldman Sachs team member on the creation of NFK) is Glen Wallace the CEO for Norfolk, who is also a director and shareholder/investor within Maui/Indigo and of course Paul is a Director of Norfolk. All these people have an impeccable track record.

Thats a brief background, leaving the obvious questions?
Do these investors no each other?
Now how does Masfen exit Norfolk (7.6%)
How does Perpetual exit Norfolk (14.4% approx.)
How does Maui's Indigo Fund exit Norfolk (20%)
Thats 42 % just there, without having a look at several other longer term substantial holders who have been steadily increasing their holdings over the past 12 months, such as Citi.

What is their end game -this is not a divy play!

Well the Indigo Funds purpose is clear and that is public knowledge to the other substantial holders who have positioned themselves alongside Maui, particularly over the past 12 months. Norfolk's life span within the Indigo fund (3yrs) is now entering extra time and Maui will most definitely be wanting to return capital to its investors.

Maui turned down MND at $1.76 (solid opinion) late 2011 or early this year and they exited their holding, to which Perpetual picked a large portion of.

Perpetual will have meet with Glen Wallace/Paul Chrystall (due diligence etc) before moving to mop up MND's holding and will have satisfied their exit strategy.

Also Maui have launched very successfully their Aqua fund (over subscribed) and with the same cornerstone investor as the Indigo fund, (a Macquarie entity) Macquarie have invested 90 plus Million and you can be sure they carried out a strict due diligence over the Indigo funds 6 businesses which included Norfolk. This will have included scrutinising the funds current valuation of Norfolk ($1.76/share) this figure I have converted from the Indigo's Valuation description of 2.6x their original investment of 11c of Indigo funds employed/ used to secure Norfolk at the average of 67.5 cents per share.
The fund now values this 11cents as 29 cents (2.6 x original investment) 67.5cents x 2.6 = $1.76 per share.
Also note that a lot of Indigo Investors have also invested into the maui's 2nd Fund "Aqua" and will almost certainly be expecting a capital return from the 3 year old Indigo fund.

M&A's often occur around share price events such as we have just witnessed and I am not suggesting that $1.76 is still on the cards.

Norfolk is fundamentally a very strong business and is debt free (net)
It has to be a target especially now. Maui have had several approaches over the past 12 months, who knows there maybe some new dialogue with interested suitors and revised expectations?

Just my view, but it does and has always formed a strong part of my investment case.

Sorry for the length of this once again.