for which only projections can be given. The Financial Reporting Standards do not provide clear guidance on this point and the Commission referred this matter to the Institute of Chartered Accountants of New Zealand (ICANZ). Corporate governance issues There was some confusion as to the role of PricewaterhouseCoopers (PwC), as financial adviser to Vertex, concerning PwC’s responsibilities in relation to the prospective financial information. Clear lines of communication at the appropriate levels were not apparent on this issue. There is currently no professional guidance for auditors concerning their role in engagements that involve an examination of prospective financial information. The Commission has referred to ICANZ the question of whether such guidance is desirable. There was a lack of understanding by several Vertex directors about the options for presenting the prospective financial information required in the offer documents. In particular, some directors did not appear to know that prospective financial information in a prospectus can be presented as either a forecast or a projection. In addition, there were deficiencies in communication of information about the performance of the individual business units from management to the Vertex Board. The Commission did not find evidence to suggest that the directors of Vertex believed the offer document was misleading. Nor did it find evidence to suggest that at the date of allotment the directors knew the offer document was misleading. The report is available at www.seccom.govt.nz. Vertex - insider trading inquiry The Commission inquired into trading in the shares of Vertex Group Holdings Limited during August and September 2002. On 4 September 2002, after Vertex announced a downgrade of projected earnings and revenue, the NZSE referred the matter to the Commission. The inquiry considered whether any insider of Vertex, who had advance knowledge of the content of the downgrade announcement, may have traded in Vertex shares, or may have tipped another person to trade. We reviewed trading and identified sellers of significant amounts of the shares in the period before the announcement. Significant volumes of shares were traded on 27 and 28 August (722,115 and 304,505 shares respectively). Daily average volume at the time was around 100,000 shares per day. One party sold a considerable number of Vertex shares ahead of the downgrade. We questioned this party about the circumstances of its trading, its knowledge of the company and its reasons for selling. The party's broker was also asked about the circumstances of the sales. After thorough investigation, the Commission found no evidence that this party knew of the downgrade in advance. Vertex provided us with names of people who knew about the content of the downgrade announcement before it was released (insiders). There does not appear to be any connection between any insiders and any sellers of Vertex shares during the review period.   HONOURED Securities Commission Member Colin Beyer has been made a Commander of the Order of the Lion of Finland. The award, granted by the President of Finland, recognises Colin's service as Consul General of Finland in New Zealand for more than 10 years.   Warning - endeavorplan We warn people against paying money to a website investment scheme "endeavorplan". The Commission has banned advertising for the scheme because it has no registered prospectus or investment statement. This website appears to be administered by a company in the West Indies called Endeavor Portfolio Corporation Limited. The website states that its founder is Mr. Victor Cattermole who, we understand, is a New Zealander living in Wellington. The scheme invites people to contribute money using a credit card. It is said that these funds are then invested, through a Hong Kong company, in a British Virgin Islands fund called CSA Absolute Return Fund Limited. The scheme offers commissions to investors who introduce other investors. How to Contact Us Securities Commission Level 12, Reserve Bank Building 2 The Terrace, Wellington PO Box 1179, Wellington Telephone +64-4-472 9830 Facsimile +64-4-472 8076 Email seccom@seccom.govt.nz Website www.seccom.govt.nz REGISTER NOW... on our website www.seccom.govt.nz to be alerted to new information as it is posted on the site. Enter your email address in the registration box on the home page and we will let you know when important new items are available. The views expressed in The Bulletin do not necessarily represent the formal views of the Securities Commission, whether on securities or other matters.

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THE BULLETIN April 2003

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