Ann: ADDRESS: PGC: Chairman's Address to PGC

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PGC
28/11/2012 16:01
ADDRESS

REL: 1601 HRS Pyne Gould Corporation Limited

ADDRESS: PGC: Chairman's Address to PGC AGM

Notice to NZX
28 November 2012

Chairman's Address to PGC AGM

This past year has been one of refocus for Pyne Gould Corporation Ltd. It is
now a debt free holding company with key investments targeted to provide long
term value for its shareholders.

From April 2nd this year PGC became 76.77% owned and control by Australasian
Equity Partners No.1 LP, a limited partnership controlled by Mr George Kerr.
Mr Kerr was appointed the Managing Director of PGC following the sudden
departure of the previous MD Mr Duncan on April 26th.

Mr Kerr's plans for PGC have been well enunciated in the annual report and I
will cover a few of those key points again today.

By way of background it's important to go back to 2009 when the company
raised $272.5million to strengthen the balance sheet of its subsidiary Marac,
this was done to ensure it had sufficient strength to survive the stresses of
the Global Financial Crisis and grow. This capital raising was largely
underwritten and supported by Mr George Kerr.

 Marac subsequently merged with the Canterbury and Southern Cross Building
Societies to form Heartland New Zealand ltd a move that further strengthened
all three. PGC facilitated and supported this move during the merger and
later by underwriting a capital raising to allow Heartland to buy the finance
arm of PGGWrightson. Our plan was that this would provide Heartland with the
added strength and depth to apply for and hopefully get a banking licence.

In late April this year the FMA began an enquiry into a loan provided by
Perpetual Trust's Cash management fund to Torchlight. This enquiry continues
and has been well publicised. Our view has consistently been that the loan
was very sound and well-secured; however we have consistently co-operated
with the FMA.

Consequently the loan, which was not due for repayment until January 2013 was
repaid early in July; 83 days after Perpetual's request for Torchlight to do
so. In relation to those enquiries we were pleased with High Court Judge
Heath's findings of September 7th that the FMA's section 25 notices were
unlawful.

On the 2nd of May our then auditors KPMG took the unusual step of resigning.
Again this was well publicised but what wasn't so well publicised was the
fact that we very promptly replaced them with PwC. Our audit by PwC has been
extraordinary thorough this year and besides PGC receiving an unqualified
audit certificate a significant error was uncovered from the previous year's
audit that required a restatement of the results for the year ending June
2011 to line up with those for this year. The restatement centred around the
RECL agreement between PGC and Heartland and while it had a net zero impact
on both the Profit and Loss account and the balance sheet it was a very
important to have this error corrected.

Perpetual Trust has been restructured with the corporate trust business sold
and the Personal Trust and Wealth management business distanced from PGC's
involvement with a new and entirely separate Board. Both these changes were
completed in conjunction with and the knowledge of the FMA.

In August we mentioned that the Personal trust and Wealth management parts of
Perpetual would be offered for sale. At the moment we are in final
negotiations with a number of parties and we will shortly choose one with
which to finalise terms.
The core business of PGC is now focussed on Torchlight with its 19.7%
ownership of Torchlight Fund No.1LP, the 100% ownership of Torchlight's
General Partner plus the 100% ownership of Torchlight No.2 which is currently
an incubated in-house fund. This focus is one of long term and patient
involvement, success will not come quickly but we are confident of the value
lift over the medium to longer term.

Torchlight No.1 Fund LP earlier this year acquired a senior debt position
from the Bank of Scotland secured over all the assets of Residential
Communities Ltd (RCL) a position that will bring significant value to
Torchlight and PGC over the next few years. Torchlight No.1 also has a
cornerstone shareholding in Lantern Hotels previously IEF entertainment ltd
an Australian listed pub owning entertainment group that was acquired at
close to half its NTA and which at the moment is successfully being
restructured for growth.

There have been a lot of "nay-sayers" with regard Torchlight, but as you have
already heard today Torchlight is well positioned and tracking to achieve a
return of at least 20% over the life of the fund. This will impact positively
on the PGC balance sheet through its unit ownership and as well the General
Partner's performance fees during the life of the fund.

Torchlight 2 working with the property team has been steadily turning the
residual Marac property assets into an investment in RCL which like in
Torchlight No.1 will bring significant value to the group over the longer
term.

The two other but smaller businesses within PGC, where we have cornerstone
shareholdings are EPIC and vanEyk. EPIC is a firm with growth opportunity via
its 17.5% interest in MOTO the motorway service provider in the UK. Van Eyk
is a leading independent Australian Asset Manager and research house where
our interest was acquired at a time when the value was at a significant
discount to its NTA, and we expect van Eyk to grow its value over the next
year or two in line with its growth plan. van Eyk currently has A$1.2b in
Funds under management with support from 1000 financial planners in
Australia.
As you can gather from this the majority of PGC's investments are now outside
of New Zealand, and as a consequence the board is seriously considering the
domicile of the company, and remaining in New Zealand is a very unlikely
option. The final country of residence is yet to be decided, and once it is
the market will be advised and due process followed.

The current status of the company is one holding assets invested for the long
term with sufficient cash flow to cover its now much reduced running costs.
One needs to recall that when PGC was split into two last year the dividend
opportunity rested with the in-specied shares in Heartland while the slow
capital value growth opportunity remained with PGC. We were left with
Perpetual and the "bin-ends" of Marac's difficult property assets, both
mortgages and properties. As I mentioned earlier the team have steadily
reinvested these "bin-ends" through Torchlight 2 into quality property
associated discounted debt instruments.

 PGC is unlikely to ever pay a dividend as we mentioned at the time of the
share split. We have $97.5 million of net assets and we want to ensure that
over a 10 year period we are getting a return that exceeds 15% and we believe
we can achieve this. However if as a shareholder you are looking for
quarterly growth and returns then PGC is unlikely to satisfy your
requirements.

For those of you who want to remain shareholders for the long term we welcome
your involvement and shared ownership of the company.

Thank you for your attendance here today and I look forward to talking with
you later and if required discussing the firm in more detail than is often
possible in an open forum.
End CA:00230356 For:PGC    Type:ADDRESS    Time:2012-11-28 16:01:49