Hon Grant Robertson ,2 MP for Wellington Central Minister of Finance Associate Minister for Arts, Culture and Heritage Minister for Sport and Recreation 23 APR 2019 Jason Walls jason.walls@nzme.co.nz Dear Jason Walls Thank you for your Official Information Act request, received on 27 March 2019. You requested: would like to request the following under the CIA: This report Treasury Report Response to Concerns Over ACC Conduct, provided to the Minister on January 28, 2019. If that document is already publically available please point me to its location asap not after the 20 working days required to respond to this OIA. Information Being Released Please find enclosed the following documents: Item Date Document Description Decision 1. 28 January 2019 Treasury Report: Release in part Response to Concerns Raised Over ACC Conduct I have decided to release the document listed above, subject to information being withheld under one or more of the following sections of the Official Information Act, as applicable: 0 section to protect the privacy of natural persons, including that of deceased natural persons, 0 section to prevent the disclosure of information for improper gain or improper advantage. Direct dial phone numbers of officials have been redacted under section in order to reduce the possibility of staff being exposed to phishing and other scams. This is because information released under the CIA may end up in the public domain, for example, on websites including Treasury?s website. +64 4 817 8703 Private Bag 18041, Parliament Buildings, Wellington 6160, New Zealand 9 robertson aministersgovtnz a beehivegovtnz In making my decision, I have considered the public interest considerations in section 9(1) of the Official Information Act. This reply addresses the information you requested. You have the right to ask the Ombudsman to investigate and review my decision. Yours sincerely Hon Grant Robertson Minister of Finance Table of Contents 1. Treasury Report: Response to Concerns Raised Over ACC Conduct 20190149 MOIA - Binder Page 1 of 6 THE TREASURY Kaitohutohu Kaupapa Rawa Treasury Report: Response to Concerns Raised Over ACC Conduct Date: 28 January 2019 Report No: File Number: CM-1-3-1-9-3-s Action Sought A . Action Sought I Deadlrne Minister of Finance SIigIh\' send the attach\d-letter 8 February 2019 (Hon Grant Robertson) 3 I FE . I, Contact for Telephone Name Paragon Telephone 1st Contact Oliver Martin AQmpI/IAnalyst s?fnanclal w/ <\\F(stitutions A I (mob) Joseph Sent IManagerw IW I I (mob) . . for the Wurster 5 Office Staff (if required) etumtl?le signed rapm?o Treasury. tit-I533 1] I \SeIrd the attar?t?gi getter. - Note any: (- feedback the lity of 3% ??nclosure: Yes (attached) Treasury: 4065836V1 20190149 MOIA - Binder Page 2 of 6 Treasury Report: Response to Concerns Raised Over ACC Conduct Purpose of Report 1. The Minister for ACC has received a letter from NorthWest Healthcare Properties (NWH) expres*sing some concerns over the conduct of ACC in respect of its investment in Vital Healthcare Property Trust (Vitai). The Minister for ACC has asked for this to be transferred to you as it as it aligns with your responsibilities as Minister of Finance. Background 2. NWH is a Canadian property investment trust listed on the Toronto Stock Exchange. Vital is a managed investment scheme which is listed on the NZX. Vital is managed by a subsidiary of NWH, which also owns 25 percent of its units. NWH considers that ACC is using ?aggressive tactics to attempt to create leverage' over NWH with a view to lowering management fees and the exteritof control that NWH has over board composition. NWH believes ACC Is increasingly positioning itseif as an activist investor, culminating in ACC putting forward five resolutions at. Vitai 2018 Annual General Meeting. ACC contends that these resol?tions. viiere put forward in an attempt to get NWH to change a number of its clauses in its Twat Dead that ACC believes are inconsistent with good governance practice (such as that ability of NWH to unilaterally remove independent directors). ACC also sought to bring the tees it charges: and the basis on which these are calculated in line with what it constdei'sto be current market practice. ACC states that it' received substantial caption? for the resolutions it put fonuard and that all of the resoiutions won majority support from unitholders if Northwest 5 own shares are excluded from the resuith .- Annex 1 provIdes more detail as to 5 concerns and 5 response to these . 1.. . .: The Treasury Considers that this iS ultimately an operational matter between ACC and NWH and has reflected this In a draft letter of response. 5: ale-ta?. ,Riecommendiedraction . "We recommend that you sign and send the attached letter to NorthWest Healthcare Properties. .- -. vi Sant manager, Financial Institutions Hon Grant Robertson Minister of Finance T201911 54: Response to Concerns Raised Over ACC Conduct Page 2 20190149 MOIA - Binder 39mm}. NorthWest Value Partners 59(2il'al Dearsst2l(a) . Thank you for your email of 1- December 2018 to .393 Lees- -Galloway regarding your concerns over the conduct This correlsoon?a?nce was passed on to me for response as it aligns with _r_ny' responsibilities as Minister of Finance. - While i note your concems this is an. operatlonal matter for which A00 5 Board and executive have resobIjs?lbility As Minister of Finance i do not intervene in operational matters. encourage\you to work With AC9 to resolve any issues you may have and ensure your joint armaments are appropriately governed. . Thank you again tortaking the timeio write. . . Yours smeareiy . {ii1.Hon Minister: of Finance . Page 3 of 6 20190149 MOIA Binder Annex 1. Page 4 of 6 Response to Specific Allegations from Northwest in its letter NWH has summarised its concerns with ACC's conduct. ACC has provided the Treasury with responses to each of these, as italicised below. 1. Unauthorised and unlawful activity. ?x conduct goes beyond the type of activity necessary to perform its statutory function. We?re not clear what exact aspect of our conduct they are referring to but the importance of a Governance role in active investment management is well established. A00 is expected to invest as if it were a trustee, and we believe that this includes an obligation to work to try to achieve the best possible governance outcomes for our investments. The 3 move to propose the resolutions has received validation through the support from both Institutional Shareholder Services lric it? highly regarded governance advisory consultancy) and the Shareholder AssocIatIen lt' Is not appropriate a public entlItyII id be exercising its influence to modify a governance model that is already heavily regulated. We disagree With the propositIon thief the fact that A00 is a public entity should make it care less about irew its investments are governed. We also disagree with the propds?iohthat NZ Unit Trusts such as Vital Healthcare Tr st been heavily regulated as evidenced by a lack of any regulatory interventions In recent years regarding the governance of Unit Trusts, and also by the fa the: their ?not a company? status exempts them from the .. Tatte'avers Code an many aspects of the NZX Listing Rules In other jitrisdictions- {e?the UK) Unit Trusts are required to have a board that is I independent area manager and which is responsible for regularly reviewing whether teretam the manager This 'Is? net 'eI legitimate use of 3 power to invest its surplus funds. Our response to this is the same as our response to the first bullet point above We. are required to invest as if we were a trustee and this includes working I ga-tOensure that our investments are not adversely affected by poor governance and inequitable treatment. Under the N2 is required to ensure fair and equitable treatment and full protection and security to covered investments. Trade agreements are not our area of expertise but we would be very surprised if the has any bearing here. We would take exactly the same actions if Northwest Healthcare Properties was an NZ company acting in a similar manner, so don?t believe that our actions can be considered as being unfair towards Canadians. 20190149 MOIA - Binder Page 5 of 6 - It is unfair and inequitable for ACC to agitate for changes that undermine the basis of overseas investment in NZ. We do not believe the changes we propose will undermine the basis of investment in NZ. In fact we believe improved governance structures will only benefit overseas investment. . NWH is concerned ACC's tactics compromise the fair and equitable treatment required towards NWH by virtue of its Canadian ownership. Our governance approach is indifferent to the nationality of Northwest?s ownership