Report on Silver Fern Farms complaints received by the
Financial Market Authority
This report describes our conclusions following a review of complaints about Silver Fern
Farms Limited (SFF) and its Notice of Meeting and Shareholder Information Pack, dated
September 2015.
Executive summary
The FMA received a small number of complaints in April 2016 relating to Silver Fern Farms Limited and documents
released to its shareholders in September 2015. A complaint was also made about the resolution approving the
transaction (the Transaction) with Shanghai Maling Aquarius Co. Ltd (Shanghai Maling). The complaints and findings of
our review are expanded on below.
The FMA will not be taking any action against Silver Fern Farms or its directors in the matters considered in this report.
Complaint 1: Concern with misleading information
Complainants alleged that the SFF Information Pack misrepresented the financial position of SFF by showing a more
negative position than was the case. It was alleged that the purpose of the negative misrepresentations was to
encourage shareholders to vote in favour of the Transaction with Shanghai Maling. The FMA does not express any
view on the merits of the Transaction.
Steps taken
The FMA engaged with the directors and senior management of SFF to verify whether relevant information in the
Information Pack could be substantiated. We are satisfied that we have been provided with sufficient evidence to
substantiate the relevant information. We do not have any reason to believe the Information Pack was misleading or
deceptive.
We encourage SFF and other companies with seasonally variable financial information to consider how they can
improve the transparency and consistency of their financial reporting. This may improve investor understanding of the
company and allow investors to better assess proposals such as the Transaction. Further detail on our
recommendations is provided below.
Summary of our findings
We note that the Information Pack was finalised on 23 September 2015 and contained forecast financial information
for the financial year-end 30 September 2015. These forecasts included a forecast debt of between $140 million and
$160 million. The actual year-end results, released on 9 November 2015, showed that debt on 30 September was
$121 million. The actual profit and revenue figures were also better than in the Information Pack.
Although the debt position on 30 September 2015 was lower than forecast, SFF’s debt is highly variable and can
change significantly from day to day. Due to the seasonal nature of SFF’s business, the level of debt also changes
significantly depending on the time of year. Given the variability of SFF’s debt and the position taken by SFF’s existing
banking syndicate, we accept the SFF Board’s view that the differences between the forecasts in the Information Pack
and the actual results in the annual report were not material to the shareholders’ resolution on the Transaction.
www.fma.govt.nz
Recommendations
We encourage companies that have high seasonal debt to consider how they can provide useful and meaningful
information to their investors in their annual reports. We note that there was disclosure about SFF’s peak debt in
their 2013 Annual Report, but not in their 2014 and 2015 annual reports. It may also be useful for companies with
highly seasonal debt to report to investors on their average annual debt levels. If this information had been provided
to SFF’s shareholders it would have provided investors with a more transparent picture of SFF’s debt situation that we
understand would have been consistent with the descriptions in the Information Pack.
Complaint 2: Concern regarding type of shareholder resolution
An additional complaint alleged that the resolution approving the Transaction should have been a special resolution
rather than an ordinary resolution. The FMA does not express any views on this complaint and believes this is most
appropriately dealt with between the shareholders and SFF.
If a company breaches the Companies Act shareholders are entitled to take an action to protect their interests. The
FMA will not normally take that action on behalf of shareholders unless that action has a wider public impact and it
falls within the FMA’s strategic priorities. In this instance we do not think it would be appropriate for the FMA to take
any action on behalf of the shareholders.
Notes on the applicable legislation
The FMA is the primary regulator of misleading or deceptive conduct and false or misleading representations in
relation to financial products and services (other than credit contracts). The Financial Markets Conduct Act 2013 (FMC
Act) provides for fair dealing in relation to financial products and services by prohibiting:
 misleading or deceptive conduct
 false or misleading representations
 unsubstantiated representations
 offers of financial products in the course of unsolicited meetings.
Shares traded on the Unlisted market (such as SFF) remain subject to these fair dealing provisions. However, Unlisted
is an unlicensed market (having received an exemption from subpart 7 of Part 5 of the FMC Act), so investors trade at
their own risk and do not have the protections provided by Part 5 of the FMC Act, in relation to: insider trading,
market manipulation, continuous disclosure, substantial holding disclosure, relevant interest disclosures, and the
monitoring of market obligations by the FMA. Trading in shares quoted on Unlisted can only be undertaken via
brokers. Investors should seek independent professional advice if they do not fully understand the implications of
investing in shares on the Unlisted website.
About the FMA
The FMA's main objective is to promote and facilitate the development of fair, efficient, and transparent financial
markets. We take complaints about misleading or deceptive conduct in relation to financial products or services
seriously and encourage investors to contact us if they would like to make a complaint. We do not undertake to
report on the outcome of every complaint but we reserve the right to make public comment where it is in the best
interests of the market.
www.fma.govt.nz