In this Issue December 2016 Who pays the piper? 2 City Entertainment Group AGM 29 AIA appoints its 3rd Future Director 4 Methven AGM 29 2016 NZSA Business Story of the year 5 Vital HealthcareProperty Trust AGM 30 A Message from the Chairman 2016 Beacon Award Winner Anounced 6 Mercury AGM 31 Membership Gift Certificate 8 NZ Oil and Gas AGM 32 A small step towards Commonsense Tax 8 Barramundi and Marlin Global 33 Investors have certainly had an interesting year! I hope for most of you it Environmental, Social, Governance (ESG) 101 - Steel and Tube AGM 34 The latest buzz 9 Delegat Group AGM 34 has been a positive one. The dramas surrounding Pumpkin Patch and especially Company Meetings Airwork Holdings AGM 35 Wynyard will have caught out some, but the correction during October should A2 Milk AGM 11 Tourism Holdings AGM 36 SLI Systems AGM 37 not have surprised market watchers. Political uncertainty around the globe EBOS AGM 13 (and at home) along with likely increases to interest rates and inflation and the Veritas AGM 14 Holdings AGM 38 AGM 15 Freightways AGM 39 potential fall in house prices in some overheated areas such as will Genesis Energy AGM 16 Caught on the Net 40 bring challenges and opportunities. So 2017 certainly promises to be interesting. Comvita AGM 17 Branch Reports Tegel AGM 18 Auckland. 42 For the NZSA, it has been another big year. A highlight (or should that Precinct Properties AGM 19 Waikato 44 really be lowlight?) was our success in removing a sitting director at . AGM 20 Bay of Plenty. 45 Membership is at an all time high, and our activities continue to see the NZSA AGM 21 Taranaki 46 AGM 22 Wellington 46 held in high regard across the corporate and regulatory world – even if they do AGM 22 Canterbury 46 not always agree with us. Members’ Issues AGM 23 My thanks go to your hard working directors and committee members, my Hellaby Holdings AGM 24 A warning on Perpetuals 47 PGG Wrightson AGM 25 How good is your insurance cover? 47 EA Jacquie Spillane and all those who have assisted the Association in some Abano Healthcare Group AGM 26 ASA gains $A103,400 after German firm way or written to me with advice or words of encouragement. As always much fined for insider trading 48 AGM 27 remains to be done. The Association is up for the challenge – I hope you will all Southport AGM 28 Upcoming Events 49 come along for the ride! Who Pays the Piper? Beacon Award Winner To everyone, enjoy the festive season, and as always, I hope that 2017 will ASA receives bring health, wealth and happiness to all. “gift” of $103,400 With best wishes, in Insider Trading John Hawkins, settlement

ISSN 1179 -4275 Who pays the piper? On 14 July 1789, the French revolution is a lurch to the right, rising inflation began with the storming of the Bastille. Over and potentially a more interventionist the next five years, thousands, including the US foreign policy -which has its own King and Queen were executed as a whole risks, not just for the USA, but for the new order was established. A dictatorial whole world. bankrupt monarchy led to martial law under So, you may ask, what is the point of Napoleon, and ultimately a democratic this history lesson? Well, in each case republic. the trigger was significant inequality On October 25th 1917, the Bolsheviks between the ruling corporate, financial seized power in Russia and a short time and political elite and ordinary people. later, the whole royal family, including young In every case, those at the top enjoyed children, was summarily shot. A dictatorial, a life of massive excess, eye watering bankrupt monarchy became the world’s first incomes and manipulation of power to communist state. make sure the ordinary people paid up In Romania, a revolt against the corrupt, to maintain their life style. 24 year communist dictator, Nicholae In and Russia, people were Ceausescu began on December 15th 1989. starving. In Romania, it is said that Ceausescu spent By December 24, Ceausescu and his wife were dead. more than 50% of the country’s GDP on his huge The country is now a democracy and member of NATO. “palace.” On June 23rd 2016, British voters elected, by some However, in Britain, the low paid, unemployed, “unedu- margin, to leave the European Economic Community in cated” and those in the neglected and rundown north a stunning “upset”. The outcome in macro-economic ensured Brexit passed. In the USA, the right wing terms remains uncertain, but inflation is sure to rise braggart Donald Trump was supported by a strong initially given the drop in the value of the pound. Britain turnout from poor, disadvantaged and ultra conserv- remains a constitutional monarchy -for the moment. ative groups, many of whom typically don’t bother The reality is that when On November 8th 2016, self-proclaimed billionaire voting. Perhaps they got to the point where they really Donald Trump was elected President of the United the mass of ordinary had nothing more to lose. It seems that the Occupy States, a role he will formally assume on January 20th people are pushed too far, Wall Street protests of a few years ago were indeed a forerunner of things to come – but Wall Street and the 2017. Despite some claims to the contrary, it seems they simply want change. certain that he will favour big business and the wealthy elite were deaf and blind. – his proposals to cut corporate and top tax rates and They don’t care what the The reality is that when the mass of ordinary people greatly alter the low cost “Obama care” health insurance future may hold. are pushed too far, they simply want change. They are hardly “ordinary worker” friendly. The expectation don’t care what the future may hold. They just want to

The Scrip December 2016 2 get rid of the present situation, by force if necessary. their remuneration report – effectively a protest vote by The examples above have resulted in outcomes from the owners of the company, the shareholders. A high extreme left to extreme right and everything in between. profile example was CBA Bank where more than 50% In the most recent cases, it seems to me that the excesses of votes cast opposed the report – well in excess of of some multinational and large businesses have been the 25% threshold. This followed uproar over the “soft” a significant factor in people’s disillusionment. During Executives bonuses, were short term incentives proposed for the CBA CEO who the GFC, large investment banks such as Goldman downgraded to a mere is forced to struggle along on a minimum of $12m for Sachs got handouts and almost immediately reinstated 95% Meanwhile, share- the year. For the first time since 2012, executives did massive bonus payments to the very executives that not get 100% of bonuses, suffering a slap with a wet holders will fork out at had got them (and arguably the world) into the mess in bus ticket as these were downgraded to a mere 95% the first place. The sight of CEO’s turning up en masse least $105m to settle instead! Meanwhile, shareholders will fork out at least in their private jets to beg bailouts made headlines shady and downright $105m to settle shady and downright illegal dealings everywhere. The low taxes currently being paid by made by the bank’s management. illegal dealings made by large multinational companies across the world, mostly In our own back yard, A2 Milk recently held its AGM in the bank’s management. completely legally, are perceived as massively unfair by Sydney. 28% of votes opposed a huge hike in director workers who are socked for 20% or 30% or even 40% fees. There is no doubt that A2 has done well in the last on every dollar they earn. 3 years following a long gestation where performance The most recent data shows that over the past 40 was poor. The directors claimed that the proposal was in years, CEO’s in the USA have gone from a ratio of 20x line with the “internationally benchmarked” recommen- average worker pay to 300x, in Europe about 200x and dations of the London based consultants they appointed Australia about 100x, often with little improvement in and paid. Had they published this document or the performance over time. Locally we see ratios of perhaps executive summary as some companies are beginning 30x. to do, all would have been transparent. But they didn’t. In the UK, PM Theresa May has openly warned that legal A2 has set its base directors fees at 73% of the action to stop Brexit will test politicians “who should not director fees, and its committee Chair fees at 90% resist the will of the people.” She will also force firms In our own back yard, of Fonterra’s. To put this into perspective, A2 which to publish the ratio between the pay of chief execu- does not even manufacture its own products (Synlait A2 Milk recently held its tives and ordinary workers to stem the increases in “fat does), had revenue in 2016 of $352m and sold in four cat” pay. And a ceiling equivalent to $NZ128, 000 has AGM in Sydney. 28% of markets –mostly in Australasia. In 2015, the fully verti- been placed on government advisor roles. Perhaps it is votes opposed a huge cally integrated manufacturing and marketing opera- time to consider introducing similar rules here including tions of Fonterra had revenue of $1,8850m and sold hike in director fees. a version of the Australian two strikes legislation. We all over the world. In effect, A2 is the size of a small have been spared the worst of the excesses. Let’s keep Fonterra marketing division. NZSA did its own research it that way. and came to the conclusion that A2 Milk was seeking The Australian experience this year has seen a signif- 39% above a comparator group for base director fees icant number of companies receive a first strike against and 70% above for committee fees. A2 knew of the

The Scrip December 2016 3 opposition to its fee proposal from most NZ investors and institutions. It got it through only on the back of Australian institutional support. NZSA supports high pay for high performance, but there is a limit to the AIA appoints its 3rd Future Director largess that is reasonable and equitable. I think large companies need to be careful. The “best interests of the company” test uckland Airport’s Board announced surely requires directors and management recently Kiriwaitingi Rei will participate to take note of broader social expecta- Ain the Future Director Programme during tions. In Britain and the USA, the conse- the 2017 financial year. Ms Rei is the chief quence of ignoring these responsibilities executive officer of Maori Investments Limited has led to significant change – almost a and managing director of Tarawera Land soft revolution. If inequality between the Company. She has a legal background and haves and working people continues to extensive knowledge of the tourism, forestry, increase, then political and social unrest is geothermal, agri-business and property sectors. in my view inevitable. That cannot be good ’s Chair, Sir Henry van der for either the risk takers or entrepreneurs Heyden, says, “Our company has benefited who drive economies nor the shareholders considerably from the three Future Directors who fund it. we have welcomed to date. Auckland Airport Those at the top of the corporate, financial strongly believes in the value of the Future and political world would do well to Director Programme and we were proud to remember who pays the piper – the people appoint ’s inaugural participant in do! the Programme in 2013. Our ongoing partici- pation in the Programme helps to promote John Hawkins diversity of leadership and the development Chairman of governance talent. The Board looks forward to Kiriwaitingi joining our discussions over the next 12 months.”

Photo supplied by AIA

The Scrip December 2016 4 2016 NZSA Business Story of the year Tim Hunter – National Business Review For his series of three articles “Potential Fraud at Intueri Group” his year, NZSA inaugurated a “Business Story of the Year” award to try and stimulate interest from journalists working in this area. The judging panel was TIndependent convener and well known former journalist and TV presenter, Janet Wilson, former Editor-in-Chief of , Tim Murphy, and Chairman John Hawkins and Director Martin Watson from NZSA. The award criteria sought stories that were accurate, readable and tackled difficult or complex issues. They needed to be business or financial stories that were intensely researched and demonstrated best journalistic practice. They could be a single story or a group of related articles. The story could come from multiple sources, be it radio, television or print but it must have a text element as part of it. Ideally, they would be stories that start a conversation or bring about change. Tim Hunter’s series of investigative news columns into the affairs of listed company Intueri was the outstanding entry in a field of excellent financial journalism. This was an exceptional example of a deeply informed, intelligent journalist realising the importance of a tip-off, committing time and energy to confirming the facts of that information and reporting in the teeth of denials and obstruction. Hunter’s stories revealed the serious deficiencies, and worse, in the prospectus, practices and performance of a company taking money from private investors. But crucially, they also revealed sustained misuse of public funding from the taxpayer into a sector of real importance to New Zealand’s education and workforce needs. The spotlight shone by Hunter in the National Business Review has directly or indirectly led to multiple inquiries by regulators and other agencies. This was public interest journalism - business journalism - at its finest.” Tim with his award John Hawkins

The Scrip December 2016 5 2016 Beacon Award Winner Anounced he conventional wisdom is that senior executives need a breadth of experience across a range of different enter- Tprises, in order to develop the skills required to perform at the highest levels. They should also go to the “right” school, have a business, legal or accounting qualifications and have spent time in Europe to get an international perspective. Our 2016 Beacon Award winner, Michael Daniell didn’t do any of this! Educated at Hastings Boys High School, Michael obtained his BE (Hons) in Electrical and Electronic Engineering from Auckland University - where he is now a Council Member. Shortly after, he joined a tiny division of Fisher & Paykel Industries devel- oping ventilation systems for hospital patients with serious respiratory issues. 37 years later he retired as Managing Director of a worldwide leader in the treatment of sleep apnea and non-invasive, humidified ventilation systems. Initially working as an engineer, Michael jointly developed five patented technologies relating to humidifiers and control systems, one of these with Lewis Gradon who has recently succeeded him as MD at what is now Fisher & Paykel Healthcare. In 1990 he was appointed General Manager of the Fisher & Paykel medical division, and in 2001 became the CEO and MD he has made to both New Zealand business innovation and the lives of Fisher & Paykel Healthcare when the company was listed. Since of so many people with respiratory problems worldwide, puts him in 2001, FPH has increased revenue 450% and now boasts two state-of- a league of his own. the-art manufacturing plants in New Zealand and Mexico. It exports Michael Daniell is a most deserving winner of the New Zealand Share- to 120+ countries and employs 3500 staff globally. holders Association 2016 Beacon Award. Among many other awards, recent highlights include Fisher & Paykel John Hawkins Healthcare receiving both the Exporter of the Year, and the Commer- cialisation of Innovation for Export Awards in 2015. Personally, Michael was recognised as the Deloitte Top 200 Executive of the Year in 2013, and received the INFINZ Leadership Award in 2015. Michael’s exceptional corporate leadership and the huge contribution

The Scrip December 2016 6 Michell Daniell’s hobbies of tramping and photography are picked up in this Dean Fletcher cartoon presented to him along with the Beacon.

The Scrip December 2016 7 Membership Gift Certificate A small step towards Don’t do it. Do not give them socks!! Give them something that says “I really care about you and your Commonsense Tax future” On 17th November, the Minister of Inland Revenue confirmed Give them a gift certificate in a speech to Chartered Accountants, that “demergers which A paid one year subscription to NZSA do not involve distributions of income to shareholders, should not in principle give rise to a dividend for tax purposes.” He said It’s easy! that he had asked his department to fast track their consulta- You go online: www.nzshareholders.co.nz 1 tions, with a view to introducing a bill early in 2017. NZSA will Click on the ‘Flash-Light’ box – marked ‘Click Here’ 2 be watching this closely. 3 Fill in your details first, followed by your chosen recipient’s de- tails. Follow payment prompts Alan Best 4 We then send it out to you to give to your chosen recipient 5 They send an email to NZSA to redeem with their Membership On CEO pay Number on Gift Cert, we activate membership– and they enjoy, Total remuneration packages are hard to measure and are all thanks to you. often far higher than the numbers quoted in the company’s report. Our view is that CEO pay has often become excessive and are in breach of an implicit social contract a company has with the wider community. Recently a company chairman came to see us and in our discussion we told him that we were unhappy with the large Any questions/need compensation package awarded to his CEO. more information? He told us that the ball was in our court and if we did not like email: ea@nzshare- it, we (and other institutions) needed to push back. holders.co.nz if So, to show our displeasure, when the issue came up at this you do not have years’ AGM we abstained. Next year, if things don’t change we email access please will vote against the remuneration report. write to: P.O. Box 6310, Wellesley St, Ross Barker Auckland 1141 Managing Director, Australian Investment Foundation Good sentiment. Adequate action?

The Scrip December 2016 8 MSCI ESG Key Issue Hierarchy Environmental, 3 Pillars 10 Themes 37 ESG Key Issues Environment Climate Change Cabon Emissions* Financing Environmental Social, Governance Energy Efficiency Impact Product Carbon Footprint Climate Change Vulnerability (ESG) 101 - The Natural Resources Water Stress* Raw Material Sourcing Biodiversity and Land Use Pollution and Waste Toxic Emissions and Waste Electronic Waste latest buzz Packaging Material and Waste SG is a relatively new concept for Environmental Opportunities in Clean Tech Opportunities in Renewable New Zealand investors. Investo- Opportunities Opportunities in Green Energy Epedia explains ESG Criteria is a set Building of standards for a company’s operations Social Human Capital Labour Management* Human Capital Development that socially conscious investors use to Health and Safety* Supply Chain Labour screen investments. NZ Superfund believes Standards environmental, social and governance Product Liability Product Safety and Quality Privacy and Data Security factors are material to long-term investment returns. MSCI is a leading researcher into Chemical Safety Responsible Investment ESG, they define ESG into 10 themes and Financial Product Safety Health and Demographic Risk 37 key issues as per the below table. To Stakeholder Controversial Sourcing make life easier for fund managers, they Opposition also develop a scoring system to rate Social Opportunities Access to Communications Access to Healthcare companies and industries on their ESG risk Access to Finance Opportunities in Nutrition and from AAA-CCC. Health Most investment professionals believe ESG Governance Corporate Board** Ownership** risk has a medium to long term impact Governance on company returns. However when we Pay** Accounting** look into the 37 key issues, we see that Corporate Behaviour Business Ethics* Corruption and Instability ESG risk can also be a short term issue. Anti-Competitive Practices Financial System Instability For example when the bad news around Samsung batteries was announced, it had * Indicates “universal” issues asssessed for all companies in MSCI world an immediate impact on the company’s ** Board, Pay, Ownership and Accounting carry wieght in the ESG Rating model for all companies. Currently, they share price. contribute to the Corporate Governance score directly and 0-10 sub-scores are not available Like many other issues, one needs good Source: MSCI.com

The Scrip December 2016 9 information from listed issues in listed company companies to be able to reporting requirements. analyse ESG risk. The Hong While there is still some Kong exchange requires time before we can expect an ESG information to see NZ listed companies disclosure. They also issue reporting ESG issues in an guidelines on what is easily understandable and compulsory to disclose and comparable format, retail what is recommended to investors should still pay disclose. I particularly like attention to ESG matters this guide, because it is and raise concerns at straight forward and allows company AGMs. For retail investors to compare example under the human companies themselves. capital theme, stock market For example on the darlings the retirement Environmental emissions village sector, have been aspect, companies need to paying aged care workers disclose total greenhouse on average $15.14/hour gas emissions (in tonnes). when the current living Greenhouse gases are wage rate is $19.80/hour. defined as carbon dioxide, There are more and more methane, nitrous oxide, organisations, such as hydrofluorocarbons, the Warehouse, adopting perfluorocarbons and living wages. Would retail sulphur hexafluoride. investors see this as a Earlier this year the medium term concern Too often, executive compensation in the U.S. is ridiculously out of line with Institute of Directors for the retirement village went through 20 NZX sector? performance. That won’t change, moreover, because the deck is stacked against companies and found Ally Cui investors when it comes to the CEO’s pay. The upshot is that a mediocre-or-worse 65% were reporting ESG CEO - aided by his handpicked VP of human relations and a consultant from the matters, but information was highly variable. NZX is ever-accommodating firm of Ratchet, Ratchet and Bingo - all too often receives in the process of reviewing gobs of money from an ill-designed compensation arrangement. Warren Buffett corporate governance reporting requirements. It’s likely that NZX may incorporate some ESG

The Scrip December 2016 10 Company Meetings New Zealand listed companies now usually post AGM presentations by the chair and CEO, on their website. Our commentaries therefore concentrate on the flavour of the meeting and the questions raised by shareholders. We encourage members to use thecompany website, before attending the general meeting, to see what has been said previously, and to familiarise themselves with the latest news. Comments are those of the attendee, who will often be a shareholder in the company, and are not necessarily NZSA policy. Run your cursor over the report heading for a link to the company website

2 nd A Milk AGM 22 November one other, seemed to be connected to our choice of web browser. Link planned to investigate this further. 2 Milk’s AGM was held this year in Sydney. For They were confident this glitch would be overcome for those shareholders who were unable to attend in any subsequent virtual meetings. person, there was an option to attend “virtually” A A2 Milk had a good year in 2015/2016, and to the using the Link Market Services platform. Since there delight of shareholders announced an excellent first were two resolutions that NZSA had concerns about four months of the current financial year. it was important for NZSA to have a representative at the meeting. As proxy holder for NZSA, I was able to NZSA voted proxies in favour of the reappointment of “attend” from my office at home using the virtual AGM the auditors; the re-election of David Hearn and the platform. I had previously participated in the election of Warwick Every-Burns. Getting onto the virtual virtual AGM, which had been a very straightforward NZSA questioned the appointment of Peter Hinton experience. For the A2 Milk AGM, things did not go AGM site was straight- as an independent director. Mr Hinton is a corporate quite so smoothly, but nonetheless the Link Market forward, as was asking lawyer and a long standing partner of Simpson Services platform is a valuable option for companies initial questions and Grierson, the legal firm that represents A2 Milk. Mr to use to increase their AGM attendance. Hinton has given legal advice to A2 Milk over a period voting on the resolu- Getting onto the virtual AGM site was straight- dating back to the time the company was founded. tions. The problem I had forward, as was asking initial questions and voting NZSA does not have reason to doubt Mr Hinton’s on the resolutions. The problem I had was that the was that the webcast abilities and the contribution he can make to A2 Milk as a director. However, NZSA does not believe webcast wouldn’t initially play and when this did wouldn’t initially play and work, the presentation slides didn’t progress along that Mr Hinton should be classed as an independent when this did work, the with the commentary. I was able to call a Link help director. The Chairman gave an outline of the steps line, though during this process the issue seemed to presentation slides didn’t that A2 Milk and Mr Hinton would be taking to support resolve itself. Following up with Link the next day, progress along with the the “independent” tag. These include an agreement which sets out potential issues, and how these will it seemed there had been only a small number of commentary. calls to the helpline (given that approximately 180 be managed, including the sorts of matters where Mr people attended virtually). Two of these, mine and Hinton will need to step away from board deliberations. A2 Milk has also arranged for Andrew Harmos, from

The Scrip December 2016 11 Harmos, Horton, Lusk to advise on issues own comparison, drawing on New Zealand where there may be a conflict of interest. listed (like A2 Milk) companies of compa- The need for all of this surely confirms rable size, complexity and international Mr Hinton should not be classed as independent. that Mr Hinton should not be characterised presence. The nine companies chosen It would appear that our concerns are shared as “independent”. Disappointingly, the included , Fisher and Paykel by others. 19% of the proxies held by the company just released the outcomes of the Healthcare and . The base fees voting and not the final voting numbers. We proposed by A2 Milk were 35-40% above the Chairman in advance of the meeting were do know however, that 19% of proxies held average of the comparator group and the opposed to Mr Hinton’s election by the Chairman in advance of the meeting committee fees were around 70% ahead. where opposed to Mr Hinton’s election. It The Chairman’s justification for the increase would appear that our concerns were shared was unconvincing and proxies held by NZSA by others. were voted against this resolution. Of those The other resolution we questioned, sought proxies held by the Chairman, in the lead up a $350,000 increase (from $600,000 to to the meeting, 28% were voted against the $950,000) in the amount available per fee increase. Clearly there was a significant annum for non-executive director remuner- level of concern around the extent of the fee ation. The company set out in its Notice of lift. Meeting the increases it proposed for the The “debate” around the fee increase did non-executive directors’ board fees and highlight a limitation in attending the meeting committee fees. In the view of NZSA, the virtually. The question lodged by NZSA increases are excessive and not in alignment on the remuneration resolution included with the market. When questioned on this, comment that the proposed fee levels were the Chairman predictably referred to director well in excess of those of other NZX listed “workload”, the international nature of the companies of similar scale, complexity and The Chairman’s answer deserved a company’s operations and a supportive international presence. Though the Chairman follow up response. By the time it had remuneration consultant’s report (are did read out this question, he then attempted been typed and sent, the debate had remuneration consultants’ reports ever not to dismiss it by in effect saying that “A2 Milk “supportive”?). It would have been inter- could not be compared to local companies”. moved on. Had we been physically esting to have seen this report, but of course This deserved a follow-up response, but present, the Chairman would not have shareholders were not given this opportunity. by the time it had been typed in and sent been able to get away with this. The Chairman did state that the remuner- the debate had moved on. Had the NZSA ation consultants were London based and proxy holder been physically present at the that A2 Milk was competing with large inter- meeting, the Chairman would not have been national food companies. So how “compa- able to get away with this. rable” were the comparators chosen by the Martin Watson London consultants? NZSA carried out its

The Scrip December 2016 12 EBOS AGM 20th October early 200 shareholders attended the business and security managers was that such a move was being seriously to learn about their company’s regularly assessed their situation. considered. Nperformance over the past year. All They also had independent reviews The possibility of expansion beyond the divisions of the company performed well to ensure against any possible gaps in current field of activity was raised with above expected levels and are expected their system. He noted that with on-line the potential in Asia being the focus of to continue for 2017, with an increase of trading so prevalent these days there the question. Again this geographical 7-10% in Net Profit was an ongoing battle to ensure all loop area represented both opportunity but Animal Care up 16% holes were blocked. also the need for caution. Although Pharmacy up 49% Max Smith, NZSA board member asked, was of interest, the company considered Consumer goods up 6% “what was the companies policy with S.E. Asia more important, in particular, regard to the rotation of the companies and Indonesia. Contract Logistics up 9% accountants and auditors.” Again Mark The election of officers was by a show of Institutional healthcare up 20% Waller answered “both accountants and hands, and although not preferred by the Prospective acquisitions are measured auditors were tendered for every five NZSA, it was allowed to proceed unchal- carefully, and many are rejected years and they had independent tax lenged as there was nothing contro- because they do not meet the criteria. advisors separate from the auditors. The versial in the notice of meeting. After The merger of the Terry White Pharmacy tax partner was also rotated every five the meeting, executives of the company Group, still subject to final approval by years” including two board members were the regulatory authorities is considered Another shareholder asked. Because advised that the NZSA preferred a poll an important component for the new of the high percentage of revenue and vote. The reasons why were explained financial year. profit being generated in Australia was although Elizabeth Coutts was reluctant Several questions were asked by there was any possibility the Head Office to agree. shareholders. would be transferred to Australia? Mark All three board members up for Robin Harrison the NZSA proxy congrat- Waller replied, “this is a possibility, head re-election were successful in their bids. ulated the company on a job well done office personnel were placed where These were, Mark Waller, Peter Williams and asked, “if the technology was in they are needed. It had already been and Elizabeth Coutts. necessary to split the head office function place to protect intellectual property and Max Smith business information against potential because there is a need to have several hackers.” key personnel in Australia. Mark Waller answered that they The possibility of a share split was raised employed four different platforms across by another shareholder and the answer

The Scrip December 2016 13 Veritas AGM 17th November small group of about 35 shareholders a small fortune in failed litigation as well as A question about the qualified audit was met were on hand for this serial underper- a net write off of $1.6m. Nosh was worse with a blunt response that the company and Aformer. It seems NZSA members may with a $1.9m EBITDA loss. No indication was auditor disagreed on the carrying value of be more discerning as the Association held given about the NPAT effect for this division the Nosh subsidiary. When pressed further, proxies from only a few shareholders. (which was surprising given the newly the Audit Partner from PWC said that they Chairman Tim Cook gave a short presentation opened Pakuranga store). For Nosh, the formed their view based on past perfor- which, in my opinion, skimmed over many of “plan” is new management (now complete), mance and a review of the company’s plans the negatives including any mention of the better marketing and better margins. As for Nosh. Clearly they are less optimistic share price plunging 50% over the year to in 2015, Veritas intends to franchise Nosh than the directors. just 20c. The slides showed that losses at stores. Better Bars was a better story with Another shareholder asked how the “lifting EBITDA level were incurred at Nosh. EBITDA all bars profitable and a limited amount of of margins” was progressing at Nosh. The was down at the Mad Butcher and the only investment planned for existing sites. answer from the CFO was that these had growth area was the Better Bars hospitality The final comments related to claims that improved 2.6% in FY16 and they wanted a division which had a stellar 40% lift. That strategic decisions were taken to sell unprof- further 3.5% over the next 5 years. was fortunate because without it, the overall itable bars, close unprofitable Mad Butcher When asked how many Nosh sites had been EBITDA drop of 8% would have looked very stores and write down impaired assets. That’s franchised over the year, the answer was ugly. The bottom line statutory NPAT was a all very well, but it does seem that plans to “none”. $4.6m loss (last year $3.3m profit). Like improve performance as detailed above have Questions around the Kiwi Pacific Foods many other strugglers, Veritas prefers to use so far failed to achieve any turnaround. The litigation debacle were diverted by saying “underlying” NPAT which excludes “signif- Chair finished by forecasting an FY17 NPAT the board relied on advice from two legal icant items” and concentrates on continuing of $3.0-3.6m, slightly up on this year’s firms, but the arbitrator disagreed and operations. This yielded a profit of $3.16m. adjusted figure. found against Veritas. They decided not to On the plus side, operating cash flow was a Then it was Managing Director Michael appeal because of the additional cost and no positive $1.4m unlike in 2015 when it was Morton’s turn. Only it never came. He sat certainty of outcome. negative $0.78m. there grim faced and made not one comment NZSA observed that MD Morton only attended The Chairman had various reasons for the during the whole meeting, even when 11 of 14 board meetings (78%) and asked result. Mad Butcher faced supply issues, numerous questions of an operational nature if the board was satisfied with that given stronger competition and several franchise were asked. That is simply not good enough. the difficulties facing Veritas. There was no stores failing (similar to last year). The Questioning was at times quite animated. response. “plan” is to find better franchisees, improve Unsurprisingly, the Chairman would not be NZSA told the meeting that the reality was margins and explore international trends in drawn on providing a profit figure for the year that Veritas was effectively at the mercy of meat retailing. He had little to say about to date, given NZX continuous disclosure its bank. Current borrowings were up 163%; how the Kiwi Pacific Foods joint venture obligations. Nor could he give any under- over 60% of “assets” are intangibles (which fiasco occurred. This has ended up costing taking to regularly disclose total borrowings. have little value if the company is not a

The Scrip December 2016 14 going concern); and total liabil- It was pointed out that he had ities exceed total assets. (The been on the board since the Contact Energy AGM 12th October Audit report in the Annual report beginning and he was asked if he he AGM started off technology to improve acknowledges that going concern took responsibility for poor past with a speech in Maori, productivity. The company assumptions are at risk if the decisions. Cook said that in line followed by the board produces 82% renewable company cannot meet scheduled with the board collective respon- T and executives singing a energy, and so is well debt repayments). The Chairman sibility protocol, yes he did, but waiata. Chairman, Ralph placed to meet competition. said that Veritas was profitable would not be drawn when asked Norris, focused on Contact’s This has resulted in a 50% (not at statutory NPAT according if a fresh set of eyes would be people, customers, improved reduction in greenhouse gas to the accounts), had reduced a better option, other than to product offerings, and emissions in the last 5 years. its required debt repayments (to say he was working “hard” to reducing debt. Dennis Barnes, the managing only $330,000 per month) and improve things and it was not EBITDA was $523 million, director stated the company “enjoyed strong support from its easy to get directors prepared Free cash flow $403 million has at last started to see its bank.” That last comment struck to take on companies in difficult (+17%). There was a customer base go up again. a chord with me. I remembered circumstances. Statuary Impediment loss of It has gone up by 4,000 new seeing this statement relating With so few proxies, we were $66 million in 2016 as a result customers since 1st January to the same bank (ANZ) - “The unable to ask for a poll. Several of closing down the Otahuhu 2016. He said they are keen Company continues to enjoy a shareholders including NZSA power station. The company to increase their market close relationship with its bankers voted against Cook’s re-election, in the last two years had paid share from the current and has renegotiated debt facil- but it was passed on a show of out to shareholders $1.16, 21%. The cost to service a ities through to December 2017” hands. made of a dividend payment customer is $106 per year. That was in the Pumpkin Patch Veritas faces a host of difficulties. and return of capital. They 2015 annual report. There is also There were a number of The apparent unwillingness of the are now targeting to return the issue of capital repayments questions from the floor but Managing Director to front share- some $847 million to share- with the ANZ’s requirement for nothing major of concern. holders in a meaningful manner holders over the next two Veritas to reduce debt. No detail The chairman stated none hardly inspires confidence. years. on proposed capital management were received from insti- Chairman Tim Cook did his best was forthcoming. The chairman stated the tution investors so the to emphasize the positives such market was very compet- impression I came away with Asked for his vision for the as they were, but it was obvious itive so that it is important to is that Contact is likely to company, The Chairman said “To that there is little room for improve all parts of Contact’s make steady progress from get back to profitability” and that manoeuvre. I don’t hold shares business. A very important where they are at present. he had only been chairman for in Veritas and I am certainly not aspect was employee one year and progress was being Des Hunt planning on buying anytime soon. engagement, which came in made. John Hawkins at only 56% and which they The only resolution of note was seek to improve. the re-election of Tim Cook. Another key area is using

The Scrip December 2016 15 Genesis Energy AGM 19th October hair, Dame Jenny Shipley did a be stronger engagement with cus- Genesis does not necessarily see Commerce masterly job of introducing each tomers by connection more closely to Commission and EA market intervention CDirector, and the talents they bring them, using data more creatively and as unhelpful but it needs to take more to the board table. She also asked the offering them more options. account of change in the industry and the three directors who were up for re-election • Carbon emissions down by 9% in 2016 impact of, for example, inconsistency and to present themselves. Maury Leyland, year due to higher gas utilization/less complexity of lines company charges as ex-Fonterra, was particularly impressive. coal at Huntly. well as the developing user market ‘beyond CEO Mark England then • Looking forward over the next year, the meter’ including the battery market • Introduced a refreshed executive England expects earnings broadly in which is currently unregulated. Genesis is team, including 4 new members with line with the past year and echoed keen to participate in policy development a strong focus on new technology and Shipley’s commitment to the progres- and review with the EA, CC, Government engagement with customers sive dividend policy. departments and industry participants. • Presented an excellent video which England was an impressive speaker and Hydro Storage currently very high in the cleverly spelled out Genesis’s new dealt with complex topics clearly and simply , less good in the South. With strategy to ‘Reimagine Energy’ This is with humour and flair. hydro, gas, and buying capacity /hedging now available on the Genesis Inves- England then handed back to Shipley to from other generators, Genesis has flexi- tors web pages - shareholder meeting take the meeting through voting on resolu- bility to maintain margins 2016. tions; 1, 2 & 3 on confirming Director There was a series of questions around the • Essentially, this means embracing the appointments, 4 on increasing the Director proposed Directors’ fees increase. Some sweeping changes in options for elec- fee pool by up to 15 % over the next two of these usefully explored the justification tricity consumers brought by domestic years. In discussion it emerged that average and relativity of the proposed increase. solar generation and domestic scale NZ board fee increases are currently 22%. Shipley and Remuneration Committee chair storage batteries, both aspects con- NZSA had engaged with Genesis Board Doug McKay stressed the iterative process nected through smart metering and to give feedback on their proposals and they went through, consulting widely and ‘connected devices ‘ in ‘smart homes’. in a discussion after the meeting Shipley using specialist consultant Korn Ferry to This change is coming and Genesis can acknowledged the input from John Hawkins. benchmark fees and report on trends. This only prosper by embracing it. NZSA discretionary proxies were voted in report is on the Genesis website. • Genesis needs to think about enhanc- favour of the 4 motions. The resolutions Several questions focused on how many ing electricity customers’ use of energy were decided overwhelmingly by poll, and meetings and or hours the directors ‘beyond the meter’ rather than – as the proxy count was shown during voting would work in order to earn their fees. has been traditional – only focusing on for each resolution. NZSA recommends EG “Did they turn up to meetings, and if delivery of electricity to the home. proxies be withheld until voting is complete. they didn’t, would their pay be docked?” • An important part of this approach will Q & A Summary The writer found this line of questioning

The Scrip December 2016 16 Comvita AGM 26th October startlingly naïve and thought here was a very good attendance of share- be conducting a proper poll, meaning under Shipley handled it well, always holders and a number of VIPs including Mr the guidelines of best business practice. He respecting the feedback. The TZhu Guangping, Chairman of Shenzhen assured me this would be the case and promptly Korn Ferry report noted that Comvita Natural Food Co., his wife & a Director proceeded to take the votes by a show of the average NZ Director spends who came from China for the meeting and gave hands; no voting papers were collected! After- around 230 hours a year in an address. wards, when asked why, he laughed and said formal meetings, preparation, Unfortunately, it was hard to gauge the atmos- he had the numbers anyway so there was no follow-up and briefing all on top phere of the meeting as approximately 140 point, but he was surprised that there were a of this. people were jammed into the “beehive” and number against. In response to a question about a further 80 down the corridor jammed in the Resolution 3 was the re election of Luke Bunt electric vehicle trends and Board Room. They could only see the backs who had only attended 70% of meetings. the Genesis strategy, England of some in the “beehive” & half the Board When questioned, the Chairman took over and noted that Genesis is feeding members. Their show of hands could not be basically said what a great job Luke Bunt had this development into its plans, seen/counted and if they wanted to ask a done thus far for Comvita. His missed meetings and wants to make it easier for question they had to come into the “beehive”. were due to his commitments with Pumpkin customers to charge their cars A most unsatisfactory arrangement when there Patch which went belly up the same afternoon. at home. is a perfectly good community Hall just down To me, it shows weakness in a director not to Noting the requirement for the road which could accommodate a lot more stand up for himself! NZSA voted against the diverse skills and experience on shareholders! resolution. the board, Shipley stated that Chairman Neil Craig was still pretty casual in Resolution 4 was the election of Murray Denyer. Genesis was NZ’s most complex conducting the meeting but an improvement on He missed his first meeting which gave him a generator from a fuel point of other years. However, Comvita has continued to 72% attendance but NZSA believe he is a very view – gas, hydro wind and progress and achieve over the last 15 months. good fit for Comvita. On questioning him he coal and had NZ’s largest retail New product development seems to be paying stood up and assured NZSA and shareholders business. off and some smaller product lines such as olive present that in future he would attend fully and Simon Walter leaf extract are showing strong growth. represent the company’s and shareholders’ The Seadragon Investment could be positive interests from hereon in. NZSA voted for the but shareholders need to hear/see a decent resolution. update on this investment. It was requested Jane Lyndon but not really forthcoming. The Chairman Editor: NZSA Chairman has written to the did admit that it was “quite an opportunistic” company about the accommodation and investment. procedural aspects of this meeting seeking to Before the resolutions were to be voted on, as improve the conduct of meetings in future. Proxy holder, I asked the Chairman if he would

The Scrip December 2016 17 Tegel AGM 19th October t Tegel’s inaugural meeting as a listed year. The CEO covered training, health and with regards to Tegel as a company? company, a good crowd of share- safety and animal welfare, all of which are A: He did represent the interests of the Aholders were keen to see how the receiving plenty of focus and reiterated company and all shareholders in the company was progressing and meet the that branding and marketing, new products Board Room, but his comments around directors and senior management. and increased exports were the main Affinity were related to his election and Chairman, James Ogden, who ran the strategic focus. Looking ahead, demand that he was from Affinity Equity. has remained soft but is expected to pick meeting well, noted that all key metrics Q: The escrow provisions meant Affinity up over summer, with results in line with were ahead of the IPO forecasts. Given could sell half its holding in a few months IPO forecasts. that listing was toward the end of Tegel’s time. This could depress the price. financial year, anything else would have The resolutions to re-elect Mr Tang Kok Yew Should shareholders be concerned? been a real surprise on the down side. With and Mr Brett Sutton as directors were easily A: While that was true, the share price proceeds paying down debt, Tegel is now carried by over 99% of votes. Voting was would have to be at $1.86 or above to poised for export growth, refreshing its by poll. NZSA voted in favour as you might trigger this. If that occurred, share- branding and expanding its value- added expect at this early stage when the board holders would probably be pretty happy product line. has had insufficient time, but deserves a (current price around $1.50) The Chair covered off governance and with chance to show its mettle. Q: ‘What do they do with the Chicken an experienced board it is plain to see that There was a good cross section of questions, Feet – are these used as there is a good unlike some recent start-up listings, long some of which are noted below. market in Asia? established Tegel understands what the Q: Why have some of the Directors not A: Tegel is working on potential options market wants and expects in this regard. purchased Shares in the Company – This for selling/export of these and other CEO Phil Hand introduced his management sends the message of ‘Lack of Faith’? parts that are currently by product with team and went on to give a confident A: Kok Yew Tang cited a ‘Conflict of low value. address. Of particular note, he announced Interest’ policy that his organization Q: What impact does bio-security have that Tegel now has approval to export raw (Affinity Equity – a 45% shareholder in on Tegel and the likelihood of compet- poultry to Australia. This is a new devel- Tegel) had in regard to situations where itors coming into NZ?” opment and opens up a large (although they sat as Directors representing the highly competitive) market for NZ exports, interests of that organization. A: At present NZ allows only tinned and one which is not available to any other chicken to enter NZ. NZ takes bio-security Q: From NZSA. Kok Yew Tang said he competing countries because of bio security very seriously and as such has strict “represented the interests of Affinity concerns. measures in place. Equity”. However, NZ law requires While volume rose 9.5%, revenue lagged directors to look after the best interests Q: What access does Tegel have to the at 3.5% because of intense competition of the company they direct (and by Australian market and is it reciprocal?” and a degree of oversupply. Still, NPAT extension, all shareholders). Where A: While recently Australia has relaxed was a useful 29.5% ahead of the previous does his priority of responsibilities lie it’s laws to allow NZ raw chicken to be

The Scrip December 2016 18 Precinct Properties AGM 17th November he big question for everyone at this activity, there are further opportunities for annual meeting was, how did Precinct’s development on these sites. Capital for imported into the country, (due to Wellington properties survive the development is not seen as a problem - our high standards of bio-security) T Kaikoura earthquake two days earlier? policy is to keep gearing in the mid 30% it is not reciprocal (see above Chairman, Craig Stobo, cleared the air in range. With long term government leasing answer regarding tinned chicken). his opening remarks. He reported that, for the Bowen campus in Wellington and Q: Will a potential Inghams IPO in apart from some damage to the building significant pre-commitment from anchor Australia have an effect? services and fit-outs at Deloitte House, tenants at Commercial Bay, Mr Pritchard is A: Inghams is their largest their buildings had escaped damage. He confident in the company’s future. He will competitor and they have been said Precinct staff had responded quickly have been heartened post meeting by a battling in the market for many to ensure the safety of their buildings and Court decision allowing Precinct to complete years. They see little changing. those who worked in them. Further assess- its purchase of Queen Elizabeth square from Tegel is one of the few long standing ments were being carried out. Precinct’s the Auckland Council. companies with a proven track Deloitte House should not be confused with Mr Stobo confirmed a first quarter dividend record to IPO in recent years and it the old Deloitte House in Molesworth St – of 1.4 cents a share with an expectation of enjoys a solid position in its markets. earthquake damaged and now demolished. an annual return of 5.6 cents. Growth will depend largely on export Scott Pritchard, CEO of Precinct’s Two of Precinct’s four independent directors prospects. The news about access to management company, told us that there is are subject to election each year. This year Australia for raw product was a very limited demand in Wellington for corporate it was the turn of Don Huse and Graeme positive step in this regard. Share- office accommodation. Precinct’s strategy Wong. Both spoke to their re-election and holders seemed happy with what is towards housing government depart- were re-elected by a show of hands. As was they heard and following the close ments and is in the middle of a planned authority for the Board to set the auditor’s of proceedings had the opportunity development/refurbishment on its Bowen fees. to sample some of the very diverse campus to meet that demand. In answer Mr Stobo told me that next year he plans to range of products that the company to a question from me, he said costs are offer a webcast of the meeting proceedings. markets. Yum! mostly locked in and unlikely to be materially He has no interest in going down the path pushed up by a probable post-earthquake John Hawkins towards a virtual meeting. Indeed, directors increased demand for building services. and senior managers seemed to enjoy the On the other hand, the Auckland CBD opportunity for face to face interaction with environment has strong demand from both shareholders. corporate office and retail increased activity. Bruce Parkes Eighty percent of Precinct’s development is in Auckland at Wynyard Quarter and Commercial Bay (Downtown). Post current

The Scrip December 2016 19 Cavalier Corporation AGM 22nd November ost of the questions in Bay. (Post meeting, the Godfrey One questioner wondered about the shareholders’ minds were Hirst appeal was unsuccessful). net cost of the vacated Onehunga Manswered in the addresses Current lower wool prices will after building and we established later first by CEO Paul Alston, and then the usual 6 months lag, translate that this was being partly sublet, and by Chair Sarah Haydon. The ration- into $600k pretax for every 1 cent used partly as storage by Cavalier; alisations caused by a massive drop, while increased sales as the shortfall having been provided increase in wool prices, and a flood the new ranges gain traction, and for under onerous contracts, and of imported competition, continue, reduced costs from spinning will therefore not likely to affect future and although the company showed add to the bottom line in 2018. profits. a non-GAAP normalised profit of Questions from the floor asked Inevitably, shareholders wanted $6.3m for 2016 it is forecasting only about gearing – (ND: ND+Equity,) to know when dividends would be $3-5m (normalised) for 2017. 34% in 2016, down from 45% in resumed, but the chair could only The previous AGM promised reduced 2015, but forecast to increase a reiterate that when the restructuring debt, redefined core business, little as investment in new product, was complete, future proofing estab- reduced costs, and increased staff spinning, and sales are approved. lished, and profits had recovered buy-in to the changing processes. NZSA raised the issue of retirement the board would be keen to reward These achievements are well payments to independent directors, the patient shareholder. covered in the annual report, and now restricted to no more than a The resolutions electing Sarah include the sale of the Australian year’s pay. Payments to James $70k Haydon, and John Rae were approved Onterran tile business, sale of the and Hawkins $96k were permitted by poll. I spoke to both and formed Sydney warehouse, restructured under NZX rule 3.5.2 because those the view that the current board is on management and sales, launch directors joined before 2004, and the the right path to return the business of the Siren and Valour ranges of payments were contractual. Sarah to profit, but they will continue to nylon carpet, implementation of Haydon explained that shareholders test the patience of shareholders, the revamped Kaisen productivity must expect a further retirement most of whom saw Cavalier even 6 system, and introduction of the Jive allowance to founding director, years ago as a dividend stock in a wool range based on fresh market Grant Biel who is serving his last mature market. research. term. Mrs Van Camp questioned the Alan Best Still subject to further provisions, are merit of the allowances on the basis the consolidation of scouring, which that these members had not coped is still under appeal by Godfrey Hirst with the crisis leading up to 2014, in the High Court, and combining when the board was revitalised 3 spinning plants (Whanganui and with 3 new directors, and there was ) into one in Hawkes considerable support for her view.

The Scrip December 2016 20 Heartland Bank AGM 22nd November bout 120 shareholders attended. 75k plus 10k committee fees), now 100k A: Heartland is only a small shareholder … Resolutions including the re-election (with no additional committee fees); First and Harmoney team is learning their way Aof Bruce Irvine and John Harvey were rise after 5 years, looking to add Australian and improving; passed by poll with NZSA support. New director and (as it sounds) close to an Q (NZSA): there is currently worldwide director Vanessa Stoddart adds new skills, appointment. some trouble for the banking industry (like which will help with Heartland’s planned Comments: The NZSA supported the Deutsche Bank or as well the big 4 Australian digital developments including customer increase – and the proposal was accepted Banks impacted by apartment speculation in initiation – not just digital banking. (with roughly 11% of votes opposing). Australia) – does the board see any related The presentations of the chair and the CEO Q: One shareholder asked about the benefits risks for Heartland? (Jeffrey Greenslade) are on the Heartland to publish the annual report in Te Reo. A: No, they operate in different market website – they reiterated Heartlands chosen A: Te Reo is one of the official languages in segments strategy to find market niches where they NZ; Q: What kind of acquisitions would they look can operate alone and pointed to outstanding at in Australia? (higher than expected) growth in P2P lending Q (NZSA): Is the board concerned about (Harmoney) and Reverse Mortgages. They the high reported impaired asset expenses A: They are currently looking for “bolt on” mentioned that they would be interested (nearly 9% of revenue)? business to their reverse mortgages, no to buy UDC (competitor, currently owned A: While impairment cost are higher than other specific targets; by ANZ) and have declared their interest to for the big banks, so are their margins. Q: One shareholder expressed her frustration ANZ. Their impairment costs are in line with other that Heartland does not offer cash handling Jeff Greenslade demonstrated (as part of organisations (mentioned SBS) operating in facilities and points to their responsibilities their digital transition) their newest “Open the same field; to teach children in cash handling and saving for Business” offering – online approval of a Q (NZSA): Is the board happy with the (like good old savings account). business credit up to $50k. I was afterwards current credit rating (BBB - which is basically A: Board expressed their sympathies, but quite relieved to hear that the fast approval lowest investment grade rating) – or do they pointed out that cards instead of cash are process is followed by a human verification strive to improve this rating? the way of the future; of the provided information, before the credit A: BBB- would be lowest investment grade, Overall a positive and well managed AGM of is paid out. however while the board is happy with the a company which has, so far, consistently The only somewhat controversial issue was current rating they do intend to further increased shareholder value. They presented the proposed increase of the directors’ fee improve; a solid looking plan forward and intend to pool from $1m to $1.2m, which NZSA had Q (NZSA): Harmoney did not always have significantly improve their digital presence decided to support. positive press for the way they treat their based on the business segments they are Q: Justification for increase of directors’ fee creditors (optimising their fees over creditor strong in. pool? returns) – are they concerned that this could Heiko Muller- Cajar A: Directors fee unchanged for 5 years (was impact on Heartlands brand?

The Scrip December 2016 21 Port of Tauranga AGM The Warehouse Group AGM 25th 20th October November here was a very good turnout of hair, Joan Withers, reported the company had a sound result for the shareholders (approx. 450) at Holy last financial year. They achieved a 12% increase in EBIT and NPAT TTrinity Church, Tauranga, despite the went from $57.1 million to $64.1 million. Same –store sales grew by fact that parking was a nightmare & it was a C 4.1%. Growth came from the Red and Blue Shed Stores, Noel Leeming long walk for some! The mood was buoyant and Torpedo. The only area still of concern was Financial Services. The after a special dividend, the dredging of the board of The Warehouse Group has told shareholders that an impairment harbour to take the new class of container of goodwill in its financial services business is “highly likely” after a weaker- ships completed and working. The original than-expected first quarter trading in the new division. Chief executive, container crane is about to be decommis- Nick Grayston, said the focus for financial services was to start leveraging sioned and two new ones almost assembled. the scale of the group’s retail businesses and continue to drive growth to As proxy holder I congratulated POT for achieve scale. their foresight & vision and it was a great Trading for the first 3 months has been positive and forward projections day when the largest container ship glided so far have been reasonable. Focus has been given to cost control and into the harbour. The foot of the Mount overcoming the weakness in the NZ dollar. and the harbour foreshore to Fergusson The final dividend declared of 6cents per share will bring the total for the Park in Matua were lined with people. The year will be 16cents per share. Port enjoys by and large the support of the community as well as the many local The CEO, Nick Grayson commented they have 6 key result areas: shareholders. 1 Brand positioning and engagement. 2 Products and services. I also made a special point of congratu- 3 BizRewards and education. lating Julia Hoare on her appointment to 4 Digital retailing. the Board. At afternoon tea, the Chairman, 5 Store experience. David Pilkington commented that she was 6 Way of working. shaping up to become a very good director for POT. It was mentioned retail was getting more intense. Their strategy is to focus on continue profit growth. Hopefully next year the company will move their AGM to the ASB Stadium where Joan Withers commented the NZSA has been actively involved in improving parking is a breeze and the capacity much corporate governance in the public arena, which the directors of The better. Warehouse fully support. Joan also gave the Future Director program a big push encouraging other companies to get behind and participate. Jane Lyndon Des Hunt

The Scrip December 2016 22 Fletcher Building AGM 18th October his meeting was held in the newly recon- mixture of housing including social housing consistent over time. structed Great Hall of the Arts Centre but mainly in the mid-range rather than the Q: A resident from Otuataua asked if the Tin Christchurch. The restoration of the top end. They have a significant land bank Chairman or senior management would visit building was a major post-quake project for around the country (including Christchurch’s the proposed development area and talk to Fletchers. East Frame) and are well positioned to build the community including the Save Our Unique The Chairman, Sir Ralph Norris, outlined a mix of social housing, affordable housing Landscape group? The Chairman noted that the company’s financial performance which and slightly more upmarket housing. the group had made their points at last year’s have been very strong for the 2015-16 year Q: In a statement made in 2013 it was AGM but noted that there are fundamental and he pointed to an expected continuation indicated that FB Unite would benefit the differences of viewpoints which may not be through the 2016-17 financial year. company to the tune of $100m. Will it achieve reconcilable. Those areas of archaeological The CEO, Mark Adamson and the Chairman that figure? So far they have achieved or historical significance abutting the devel- responded to shareholders’ questions:- $75m and FB Unite has now been morphed opment area will be protected by a median into the larger Accelerate programme and strip and any areas found to be of archae- Q: Why is there’s no mention of timber sales management expects the residual $25m to ological significance will not be built on. in the annual report? Fletchers no longer owns be exceeded. There are on-going negotiations with local any forests but does, of course, purchase iwi. While he was prepared to visit on-site it significant quantities of timber material. Q: There’s mentioned in the Report of “Signif- icant Items” contributing $37m. Could you was unlikely that the company would deviate Q: NZSA proxyholder Max Smith praised the elaborate on them? The major item arose from what had been approved already. There company for their excellent performance then from selling a quarry asset above its book are similar challenges elsewhere in Auckland asked:- What research and development is value. region arising from higher densification being conducted on laminates to enhance requiring consultation with local groups. its sales? Considerable research has been Q: Was the10% increase in Placemakers’ Three directors were up for re-election; undertaken to improve laminates’ resistance sales made up from trade rather than DIY? Tony Carter, Dr Alan Jackson and Sir Ralph to heat and scuffing on benchtops also to Yes trade makes up the vast proportion of Norris. Each addressed the meeting in turn improve its flexibility to go into sharper sales through Placemakers with wholesale to outline their contributions to the company. angles. They are also now producing anti- counting for over 80%. The voting was held using electronic clickers. bacterial surfaces for use in medical facilities Q: Are there plans to drop the DIY side? No. The system worked well; the results were and fast food outlets. There are develop- It offers good margins. Bunnings and Mitre displayed quickly and all directors were ments of wireless charging capability being 10 target DIY but have difficulty servicing re-elected with overwhelming majorities. I etched into the back of laminates. Overall the trade. left confident that this was now a successful they are working to ensure that laminates Q: Why do the annual accounts record very and well-managed company with excellent are a product for the 21st century. minor plant closures among the “Signif- prospects. Q: You mentioned increasing housing icant Items”? General accounting principles Robin Harrison construction from 300 to 1500. Is it targeting require them to be so listed and follow their a particular market segment? There’s a auditor’s guidance. This application has been

The Scrip December 2016 23 Hellaby Holdings AGM 25th October t was standing room only for this share- would re-appoint him after the AGM and he nominee and Castle is actively supporting holder meeting. Those attending were would retire permanently once the takeover Bapcor. I can sympathise with his position Inot there to hear the good news on new bid was resolved. but he is surely compromised. He and the directions put in place by new Managing Alan Clarke took us through the history of board recognise this and he will take no part Director, Alan Clarke. Their interest was in the company and the planned new direction in the most important issue before the board, the unsolicited bid for the company from focussed on two core business groups, the Bapcor bid. I thought he would have felt Australian raider Bapcor. automotive and resource services. A third honour bound to resign. Chairman, Steve Smith, started off by non-core footwear group would be cleaned Am I being too sententious, or should addressing the unexpected and unsolicited up with a view to a sale in a 2 to 3-year time pragmatism rule the day? I rose to speak Bapcor bid. He said Hellaby’s board considered frame. He noted that it was the automotive to the resolution but Mr Smith called for the the bid opportunistic and did not represent group that Bapcor wanted to get hold of. vote (by show of hands) without calling for fair value. He noted that Castle Invest- We also had presentations from Colin Daly discussion or recognising me. All those at the ments, owner of 27% of the company, had (automotive) and Ivor Ferguson (resource meeting, other than me, either voted in favour agreed to sell to Bapcor. He recommended services). The growth area in automotive is or abstained. Democratically, pragmatism shareholders not accept the offer. Since the in auto electronic and batteries. Hellaby will ruled the day. meeting the rhetoric between Hellaby and seek benefits in scale but first has to improve After the meeting Mr Smith apologised for not Bapcor (supported by Castle) has continued its IT systems. noticing my wish to speak to the resolution. to escalate. Mr Clarke said that the two core groups Mr Clarke told me that he favoured voting Mr Smith then went through the restructuring presented significant investment and value by show of hands as it is quick and easier. and divestments made by the company; creation opportunities for Hellaby share- We may see a change at future meetings. In admitted the FY216 produced a soft result; holders. He urged them not to give them a later discussion he told me he accepts a conceded that declared dividends exceeded away for Bapcor shareholders to enjoy. move to poll voting as inevitable. Hellaby earnings per share – this based on director’s There were only two resolutions before the is also a little different by having all proxies confidence in future maintainable earning meeting. The usual one around auditor’s lodged with the company secretary and he streams. More than once he mentioned fees and the re-election of non-independent being prepared/able to accept proxies up to that Hellaby was a corporate member of the director, James Sclater. Mr Sclater is the the start of the meeting. Post meeting, they NZSA. nominee of Castle Investments. We were told did publish the lodged proxy votes. They The company had been close to finalising the that he had no prior knowledge of the Bapcor were over 99% in favour of the resolution. appointment of two new directors who would bid or Castle’s involvement and he would Bruce Parkes have offered gender and geographic diversity. play no part in the deliberations around the In December Bapcor raised their bid price These have been put on hold until the Bapcor Board’s response. The Board supported his and the Hellaby Board appears to be ready to bid has been resolved. Retiring director, Gary re-election. This rather troubled me. Despite recommend shareholders accept - as long as Mollard, had agreed to stay on to help deal Mr Sclater’s abilities and non-involvement Bapcor allows a Christmas present of a final with the Bapcor bid. Therefore, the board in the Bapcor bid, he is there as the Castle dividend to mop up imputation credits

The Scrip December 2016 24 PGG Wrightson AGM 18th October uperb weather and a beautiful Hawkes Bay there is no formal succession plan in place, and the venue saw about 60 shareholders at Mission whole idea seemed to surprise the directors. They SVineyard. Not surprisingly, the majority seemed to consider they would be able to manage, appeared to be retired farmers. but one hopes the query will give them some food The Chairman, Mr Alan Lai, addressed the meeting; for thought in future. essentially emphasising the improved EBITDA and Questions about a lack of female directors, brought net profit despite a lean year for New Zealand dairy the usual response that the board seek “diversity farmers and the serious floods in the South American of thought”, and consider they already have a well- operations. He congratulated the management rounded and successful board, (one cannot argue team for achieving this result. with that) but would certainly consider a suitable The CEO Mr Mark Dewdney expanded on this female candidate should the need arise. Otherwise, theme. However, a cautious approach to dividend there was no formal plan for introducing ladies to payments was made, down half a cent on previous the board. year, but still providing an excellent yield (about Re-election was sought of Mr Trevor Burt and Mr John 7%) compared to bank deposits and bonds. He Nichol, as well as re appointment and remuneration considered the 2016 EBITDA of $70.2 million to be for the auditors KPMG outstanding but cautioned the forecast for next year Both directors spoke to the meeting, Mr Burt was in the$62 to $68 million range. came from behind the board table and spoke in a Some questions were raised about the level of confident, flamboyant manner. He spoke first in exposure in South America. PGW aims to bed in Maori, presumably as a recognition of his repre- existing operations for the next 2-3 years. The senting the holdings of Ngai Tahu, emphasising he board considers that investing overseas, in Australia was passionate about ensuring the board maintained as well as Uruguay, diversifies the exposure of the “Good Governance”. Judging from some of the company to climatic and other risks when compared mutters and mumbles from the shareholders behind to operating solely in New Zealand. us, his approach was possibly a bit “over the top”. It was anticipated that purchase of “Subterranean The voting was by poll, and all motions passed, this Clover Germ Plasma” from the West Australian was of course a foregone conclusion given that, Mr Government would be a “game changer” providing Lai controls a majority of shares. increased sales in the Australian market. Paul Pratchett Generally, the shareholders were pleased with the results. Mr Lai, via Agria, owns more than 50 % of PGG Wrightson. A query was made about the impact on Wrightson should Mr Lai, in particular, or any other board member, suffer demise. Apparently,

The Scrip December 2016 25 Abano Healthcare Group AGM 25th October hareholders can find presen- The sale of the audiology business Approval was gained to increase tations by chairman, Trevor has allowed Abano to pay down director’s fees. Within the total sum SJanes, and CEO, Richard debt and with $41m of undrawn there is a $150,000 contingency fee Keyes, on the NZX website. These bank facilities it has headroom to for extra work. It has been there are also on the company website continue buying dental practices since 2010 and unused. I was given along with a webcast of most of and/or developing green field sites. an assurance that it would not be the meeting proceedings. What The aim is to grow to hold 10% of dipped into to raise base fees over these do not disclose is that despite the $11billion trans-Tasman dental the next 2 years. the positive results and positive market. For 2016, same store sales Voting was by poll. The numbers reflections for the future, there in New Zealand were up 2.7%. clearly show that Mr Hutson was an obvious tension in the air The fly in the ointment is Australia voted against Trevor Janes and (we won’t be able to detect that where, overall, same store revenue the increase in director’s fees and in virtual meetings!). At the time, was down 3.6%. Richard Keyes abstained in the election of Ginni I put it down to the presence of outlined plans to turn this around Mansberg and Danny Chan. former director, Peter Hutson, who – Abano’s whole growth projections I did not notice any attempt by Mr said nothing at the meeting but rely on them being able to do so. Hutson or his associates to engage displayed his feelings by his voting The key is duplicating the Lumino with shareholders. His written on the resolutions. Now of course strategy through (mostly digital) communications (including his 3 we know he was readying for a marketing the Maven brand. sloppy attempts to get out correct takeover pounce. Talking to Abano’s IT experts after partial takeover notices) do not give Having sold its half share in Bay the meeting I was comforted by the this shareholder any confidence in Audiology to Hutson, Abano is depth of the company’s back room his supposed claims and intentions. primarily a dental consolidator IT structure and the emphasis the Is his bid for a controlling interest under the Lumino (New Zealand) Board places on cyber security. just another of those acquisitions and Maven (Australia) brands with There were five resolutions at the that seem to be so good for the a smaller investment into the high meeting. Authority was given to Australian predator but not so good end radiology sector in Auckland. set the auditor’s fees. Trevor Janes, for the New Zealand shareholder? Ninety-five percent of revenue is Danny Chan and Ginni Mansberg Bruce Parkes from dental with 55% of that in were re-elected as directors. Dr. Australia. Abano’s policy is to pay Mansberg is a Sydney based GP and out 50 – 70% of underlying NPAT in medical media commentator. She dividends. 2016 dividends were 30 looks a really useful addition. Trevor cents a share with approximately Janes indicated that he will step 50% of these reinvested under the down as chairman in the next year. DRP.

The Scrip December 2016 26 Meridian Energy AGM 27th October eridian is the largest of the advantage of any move away from car- other generator could offer them a better “gentailers” with a combination of: bon to renewables. price; they had tried that before and failed. Mrenewable, hydro and wind gener- • The Tiwai smelter which took 12% of Q: How far away are we from solar ation. Primarily New Zealand based with NZ energy would be paying a higher competing with wind on a large scale? a small operation in Australia, Meridian is price for power in 2017 but was still Solar has been failing in price but so too heavily exposed to any changes at Tiwai but the cheapest in NZ. Closure of the has wind. Current modelling suggests some generally the thinking is that a reduction or smelter, if it were to occur, would re- time in the 2020s. closure of the smelter may be positive for quire a minimum of 12 months’ no- Q: The report indicated that more “base the company. Currently it sells significant tice of termination. However, Meridian load capacity” may be required from 2018? electricity to Tiwai at a low margin and this would prefer it to stay. With thermal retirements in the North, and could probably be sold at a higher margin on • In NZ their monthly reports showed with their assumptions of demand growth the general market, even though average hydro levels were currently at 140% of 1.3% pa, an increase in required “base electricity cost will probably fall. On most capacity and they did not need forward load capacity” was anticipated sometime measures including underlying NPAT the cover for the possibility of dry periods. between 2019 and 2022 from renewables; company’s performance was satisfactory. The CEO and the Chairman responded to either geothermal or wind. Meridian was Dividend was slightly increased and a shareholders’ questions:- in a good position to provide more wind special dividend paid for the second year Q: How would they cope with the surplus generation. running. power if Tiwai closed? The upgrade of Q: Is that true of Australia as well; that The Chairman, Chris Moller, outlined the the HVDC Cook Strait link to the North Meridian is well placed to expand into company’s market and financial perfor- Island meant that 65% could flow north. Australia? They are exact opposite of NZ mance which have been very strong since Manapouri was the cheapest generator in with 81% thermal; with most of that from its partial privatisation three years ago. A the country and would be needed; perhaps coal and most of that brown coal which more technical presentation followed from some of the more marginal thermal plants is twice as bad as black coal in terms of CEO, Mark Binns. The particular issues in the North would close! Computer simula- emissions. But there would need to be legis- covered were: tions indicated some surpluses in the short lative changes to ensure new windfarms • Smart metering now covered 90% of term but equilibrium would be restored were viable since they cost about $300m. their customers. within 3 to 5 years. They maintained a The recent major outage in S. Australia led • They operated two windfarms in Aus- strong balance sheet to withstand such their Premier to criticise renewables – this tralia and were testing the viability eventualities. only adds to the uncertainty facing new of solar generation. However, wind Q: Could the 12 month notice be used as a windfarms there. was superior to solar; both forms had lever to lower the power price to Tiwai? The experienced cost reductions in recent Q: If Tiwai is reduced to one pot line or smelter owners could exit the agreement years but returns were low. Meridian closed will Meridian restore the river flow to and then go to the market for power, but no was well positioned in Australia to take higher levels? If not, why not? If the smelter

The Scrip December 2016 27 was to close it would be for experts pricing, interest rates and LGC including hydrologists to model the (Australian Support Certificates) to river flow implications. Management ensure certainty of cash flows. The will be asked to consider the implica- CFO, Paul Chambers, said that inter- tions and report to the Board. national accounting rules require Southport AGM 20th Q: Reference has been made to that the hedges are at “fair market expected demand increases over the values” which can sometimes be October next five years but in recent years it negative other times positive flows in he South Port AGM meeting was a repeat has diminished. Would you comment the accounts, but it does not imply a of previous years’ with record figures for on these figures? Demand since 2006 cash flow effect; they are locking in turnover, profit, share price and dividend. has been flat but influenced a lot by certainty. In the 2016 accounts there T As at last year’s meeting there was a cautious the closure of some large industrial were two large negatives; one arising note by Chairman Rex Chapman and CEO Mark plants. However, there are not many from falling interest rates and the O’Connor as to these trends continuing. They such plants left to close. Furthermore other from rising LGC prices. Both stated that allowance will need to be made unseasonably warm winter weather in were motivated to lock in shareholder for higher repairs and maintenance, notably recent years has cut demand, most value. He noted that accurate predic- the main bridge entrance to the port. Retiring notably hitting the 2016 result by $10m tions of these prices were not possible director Graham Heenan was replaced by Clare to $20m. However, experts’ predic- and so hedging was the appropriate Kearney. The only resolution with any votes tions of GDP, irrigation and population strategy to manage the risk from price against was the increase in remuneration to growth through immigration indicate volatility. In recent years the hedging directors. One a NZSA proxy vote and the other that the assumption of 1.3% demand has largely balanced out. a local shareholder. growth is reasonable. Two independent directors were up The meeting was noted for the attendance of Q: In the 2016 Annual Report (page for re-election; Jan Dawson and Chris shareholder Norman Dickie, a recent birthday 78) hedging with financial instru- Moller. Each addressed the meeting celebrant of 100 years. As long as dairy prices ments are shown to have increased, in turn to outline their contributions stabilise or increase, results should mirror while on page 54 the income to the company. Both directors were previous year’s, As of today, 20 October, asset statement shows hedging resulted supported by the NZSA and were backing per share was $1.36, share price at in an $83m detriment? The hedging re-elected with overwhelming major- $6.08 with final dividend payable November strategy is underpinned by their water ities on poll votes. A resolution for bringing total divvy to 26 cents per share. management modelling to match load the increase in directors’ fees in two demand with generation. It is a risk stages for 2016 and 2017 was also Gary McIntyre management strategy to buy cover to supported by the NZSA and passed by avoid shortfalls. poll vote. Q: Do you expect a similar detriment Robin Harrison in the coming financial year? The hedging is in three things:- electricity

The Scrip December 2016 28 Sky City Entertainment Group AGM 21st Methven AGM 12th October October his year marks the 130th anniversary of the founding of this engineering business, and the he Chairman, Chris Moller in progressing well and on budget, due opening of a new plant in Auckland. A good welcoming a large attendance, for opening in 1st quarter of 2019. T range of samples and a 3D video were available Twas very mindful of the very poor Adelaide expansion was scheduled for to members who arrived early. Chair Phil Lough attendance the previous week at the Z completion in 2020, and the business pointed to increases in revenue and profit, and a AGM, and provided an entertaining video, has been affected by economic condi- decrease in debt, which resulted in total dividends a virtual tour of all of the SKC operations. tions. The 5 star resort in Darwin relies of 8.9c/share, representing 81% of NPAT. They They also provide an envelope including heavily on tourism & VIP customers, and were achieved during a major provisioning and vouchers for car parking, gambling, and has suffered with no direct international clearance of redundant stock, and $3.7m expend- $20 of food. SKC considered it important airport, a local Govt. tax increase, and iture on R&D. Currently NZ sales are 10% stronger to address shareholders at AGM’s. issues of additional gaming licences. than last year, UK is profitable but not achieving The 2016 year was a record for the Directors – Jennifer Owen (Australia) and the top line growth targeted, while the Chinese company anchored on the growth at Murray Jordan (NZ) are to be appointed plant is performing to budget. Though not a major Auckland. The 1st quarter update, being and Richard Tsiang is resigning, while a Methven customer, Masters (ex Woolworths) liqui- 5% down on the comparable period last CEO replacement for Nigel Morrison is dations are disrupting the Australian market. year was disappointing. Auckland was to be announced shortly. (Editor: The With shares issued to all permanent employees lower, the international gaming business appointment of Graham Stevens, ex under the staff share scheme, Methven has been down 20% and Darwin continued its Sun City South Africa, has since been modernised, tidied, and focussed to its markets. downward trend. Hamilton was up 11% announced.) Chris Moller and Bruce CEO David Banfield confirmed the strong marketing and Adelaide flat. Carter were re-elected at the meeting. focus by reviewing the achievements and shortfalls The big news was the recent arrest of Answers to questions: The share price against the objectives set in each market. The goal Crown employees in Macau by Chinese has been affected by the recent cash for 2018 is that Methven will generate and extra authorities as reported in the media. SKC issue, and the news from China. Adelaide $10m revenue from new products. Already the employs only independent contractors parking issues in the riverbank precinct new product introductions in 2016 were greater in China, and complies with the laws of are to be overcome in building project, than all introductions in the previous 4 years. Sales China. None had been detained, but this which the board considers a good long will increase to $130m (circa 30% up) and NPAT will impact the VIP international business term opportunity for SKC. Criticism was of $13m. David defined the key values providing which accounted for 15% of revenue, levelled at Auckland, notably - Action the platform for this growth: Insight drives action; 10% of EBITDA, in the short term. 50% Points expiry, blackjack changes, and the spirit of innovation; respect for our planet, of customers were from China. Other health & safety. The lack of sports bar communities, and team; we’re in this together. Asian markets were being targeted for facilities in Auckland is under consider- The election of Phil Lough and long-standing Richard business. ation in the expansion plans. Cutfield passed without dissent. The board appears The Auckland convention centre was Noel Thompson to have a healthy mix of diversity and experience.

The Scrip December 2016 29 A detailed review of the consti- th tution was not able to incorporate Vital HealthcareProperty Trust AGM 10 November the notice periods requested for he Chairman, Graham Horsley Care sector. shareholder meeting or mandatory welcomed approximately 80 attendees. voting by poll, because these are Claire Higgins was up for re-election and The report and overheads of the address not able to be specified under the T how refreshing it was to listen to a female are available on the Vital website. Graham Companies Act. However, Methven director who was humbled to represent the showed a video of a facility in Hurstville, will adopt both NZSA suggestions. Vital Unit Holders. She recognised that Vital Sydney that the company had purchased The Questions then flowed. Criti- was a defensive stock in turbulent times and in 2012. His presentation was interesting, cisms of chrome plating quality, as Chair of the Audit Committee she had built concise, and used the prior year’s AGM report proxy voting, and the company’s up a productive and respective relationship card as the basis for comparison against this vulnerability to takeover, were with the Auditors. After hearing Claire’s year’s result. all fielded. Two shareholders felt speech I wanted her to be on more Boards. that after 10years of poor results Vital had completed a $160m capital raising, There were few questions, which the in UK, Methven should pull out had more resources, was thinking of long term Chairman took as confirmation that the and concentrate on the Austral- stability and diversification. With regards to management and trust were performing asian orbit. However the company tenancy there had been a risk reduction over well. the past 4 years. The average income expiry feels that the opportunities in Q: Why were they entering into Residential had decreased from 4.4% (2012) to 1.7% UK and Europe are on the verge Aged Care as this sector is under threat from (2016). The Trust was insuring sustainability of opening. Bunnings a major the government in Australia? A: Vital looked to investors with their highly successful customer is expanding there. Other at the core drivers for Aged Care and found capital raising improving liquidity and scala- shareholders asked about bench it was an underfunded growing market. Parts bility on the NZ market. Vital’s gross rental marking when there are no similar of the Aged Care providers have come “under had increased 15.7% over the past year and enterprises in NZ, and competitive fire” particularly recently listed providers and net profit had increased 21.4% to $117.2m. advantage in NZ when imported others for non-performance. Vital would not Vital had the highest Net Tangible Asset in alternatives are so easily available, be in these categories. and batch processing when long run the sector ($1.60 per unit) and the Board Q: There was a 2 for 9 rights issue at $2.08 automated engineering is needed had just approved a 1st quarter distribution now $2.02 is there any reason for the drop to exploit international markets. of 2.125 cents per unit. in shares/units? A: The market has pulled There was no lack of confidence The CEO, David Carr, spoke about the back since capital raising. It was $2.25 at in the answers, but there is no $109.1m gain on property, the highest long the time of issue. Nothing systemic or opera- doubt that plumbing fittings is a term occupancy in 10 years (99.7%), the tional, just a number of global events which very competitive market here and long term goal of WALE (Weighted Average bounce the markets up and down including overseas and that product devel- Lease Term to Expiry), and the $200m capital yesterday’s USA election results. opment in chosen niches is crucial committed over the 5 years. He also advised to expansion plans. that part of Vital’s diversification strategy Jenny Miller Alan Best was to enter the Residential Care and Aged

The Scrip December 2016 30 Mercury AGM 3rd November round 180 shareholders made the long Mercury shareholders. A: No. only to customers. Shareholders were trek out to Mercury’s new AGM venue Joan Withers briefly covered the past year welcome to become customers! Aat Vodafone Event centre in South financials which were solid enough. TSR Q: What did the new Bee logo represent and Auckland on the 3rd of November. was 14% and a special dividend was again how did it reflect Mercury? As usual the company provided plenty of paid as well a slightly increased ordinary A: It incorporates the infinity symbol for razzmatazz with a large display of electric dividend. Mercury has now committed to renewable, a reservoir for water and various vehicles and new solar/battery storage fixed dollar guidance instead of the previous other symbols. Most people when asked did systems on display as well as sponsored band format, and it announced a slightly not associate the previous logo (of the Greek double Olympic champion rower Mahe higher EBITDAF figure of $495m compared mythical God) with Mercury. Drysdale in attendance. The slick audio with earlier guidance. Q: What will they do with the batteries in visual went off without a hitch and was used The CEO highlighted the Research and devel- cars and solar when they die? to highlight some of the electric transport opment facility being built and introduced A: Fudged a bit and said solutions will be options being championed by the company. some new faces on the executive team. He found over time including recycling into other Chair, Joan Withers spent some time talking outlined progress being made in customer applications. about this as did CEO Fraser Whineray. There retention with a net gain of 5000 in the latest is no doubt the company is committed to period and industry leading low churn rates, Q: What is happening to the old Southdown being at the forefront of the change from partly driven by popular fixed rate longer site? petrol to electric cars and is proud of its term deals. Generation was up over 2015, A: Now largely cleared and gas turbines 100% renewable generation. Along with Air (but prices are softer reflecting intense sold. The site is being re-developed as their NZ, they have put in place a programme that competition), and costs were held flat. R and D centre. will see 30 corporates put 1500 new EV’s on Joan Withers and James Miller were both Q: Can they extract valuable minerals from the road over the next 2 or 3 years. easily re-elected as directors with NZSA the geothermal steam? An announcement was also made that Mercury voting undirected proxies in favour. Voting A: Currently not cost effective, but they are had linked with United States company was by poll. monitoring as they would like to do so, if and PLUGSHARE. This will bring a new cell phone There were a number of questions: when it makes commercial sense. app to New Zealand enabling owners to find Q: Did the company have any plans to get The presentations, while very professional, all 500 public and private charging stations financial gains from EV’s beyond the sale of were probably longer at 90 minutes than that are already available and new ones as electricity. most shareholders attention span. Fortu- they are built. A: They certainly would not be selling EV’s nately a generous morning tea was provided There is no doubt that electric cars are the and at this early stage were simply stimu- and there were a number of interesting things future and the company is determined to lating demand and considering how to best to look at with plenty of enthusiastic Mercury be a leader in getting them accepted, but I turn growth into cash. staff on hand to assist with enquiries. did not hear any specific ideas for how this John Hawkins was going to be monetised for the benefit of Q: Would they offer their $500 discount on electric bikes to shareholders.

The Scrip December 2016 31 NZ Oil and Gas AGM 27th October gain 80 to 100 people attended, – future generating capacity has been to $100m which is much less than fair to meet the new chairman, Roger increased 50% i up from 35% in the value AFindlay appointed in February; and 2015 forecast. Cue Energy the new acting CEO, Andrew Jeffries, • As the largest shareholder in Cue En- Also a number of answers including: appointed in August. What a difference a ergy, encouraging cost cutting. • Expect further restructuring in the next year makes! • Screening other potential investment 12 months opportunities. The ‘lower for longer’ strategy adopted in • Cue is definitely a long term invest- 2015 had improved the company’s position Stronger emphasis as shown in the new ment, having excellent assets in a leading to a: sustainability report, is being placed on strategic domicile for NZOG • Drop in the cash burn rate Health and Safety, and social responsibility • Impact of fully consolidating Cue’s • A change in accounting policy, now in both NZOG’s own operation and that of costs into NZOG accounts caused a writing off exploration expenses in the its production partners. 30% increase in consolidated costs year incurred unless it generated funds Oil prices are still disappointing and this is • Cue’s capital demands are high, how- • The share buyback, so far of 64m reflected in a drop in asset values of 43%, ever there is no immediate intention shares or 6% of capital reflecting on- written down by $55m of which the $43m to take the company over, currently going confidence in the company is for Cue Energy. NZOG took impairment shareholding is close to 50% However, the loss for the year was $51.8m on the remaining part of Tui in this financial • Noted there is an excellent working re- (including $41.8m from Cue Energy year and is now planning decommissioning lationship between the two companies Resources) up from $15.5m in FY15 and in 2019. Clipper Permit drop in operating cash flow from $59.3m in Three resolutions including the reelection • More time and research is needed to FY15 to $56.2m this year. Net cash from of Rod Ritchie and Dr Rosalind Archer, were learn about the region and to get to a operating and investing activities increased passed by poll. decision to drill. NZOG was granted an to $21.1m up from $6.7m. A dividend of 4 There were several questions from the extension to its exploration permit cents/share fully imputed was announced. floor, which are summarised as follows: • Deep water wells such as Barque need NZOG will continue tight cost control in the 10 years to bring to production Future Dividends coming year, focusing on: • Clipper is still seen as a game changer • Exploration with the greatest likelihood The Board does not give earnings guidance for NZOG and New Zealand if it comes of a positive return, in particular the and thus will not give dividends guidance. to production Shareholders should take note of the strong Barque prospect in the Clipper permit Other investments? cash flow and imputation credits position and the Great South Basin permit. Po- • The approach is to quantify the risk tential development partners are doing Kupe by balancing the size of the size of the due diligence on Barque. • Ongoing involvement of Origin Energy risk against its likely benefit. • Continuing emphasis for identifying – no change • Noted the strong balance sheet gives future revenue generation from Kupe • Kupe and Tui valuation has dropped NZOG choice

The Scrip December 2016 32 Barramundi 28th October and Marlin Global 4th November • Intention is to look closely at near field opportunities where isher Funds manage the share price. The comparison with possible (less expensive and investment portfolios for both, the Fisher managed fund portfolios less negative publicity) FAustralian shares for Barramundi return was questioned. It was later Implications of change in chair and Global shares excluding Aust. & confirmed that they were the same and CEO? NZ for Marlin. for the comparable period, except • No change in strategy Annual results for both companies for the additional layer of costs • cting CEO had been in were disappointing. Barramundi NAV ($500,000 est.) for maintaining the role for 4 weeks as at return was 6% resulting in a total a public NZX listing entity. All the AGM, the Chair hinted shareholder return of .4% reflecting investment portfolios were the strongly that Andrew Jeffries the reduction in the share price. same, being, either Managed Funds would be confirmed as CEO Marlin NAV return was a loss of 6.7% or listed vehicles and the Directors (no announcement has been resulting in a total shareholder return (same for both companies) has made) loss of .3% taking into account its not had any reason to change the • Noted also 30% reduction share price. Both company’s shares manager recommendations. The in head office staff as part trade at a discount to NAV. They both Director’s main responsibilities was of the overall cost reduction pay a quarterly dividend based on 2% capital management, share buy-back strategy of NAV to provide a return to share- policy and corporate governance. Christine Pullar holders in the last year greater than The Chairman indicated that a listed earnings which does get confused vehicle was still appropriate, was reviewed 4 years ago, and that most Editor: On 16th November NZOG with the actual performance. portfolio companies have a discount announced the sale of its holding Warrants on issue expired during the to NAV. Buy-back policy was also in Kupe to Genesis Energy for year – Barramundi take up (47%) at questioned. $168m. This should benefit both close to NAV and Marlin below NAV parties, but in particular allow and not exercised. Due to the poor Another asked about another Warrant NZOG to diversify its exploration performances the warrants gave issue as it provided an incentive to and cash yielding assets, and little or no benefit to shareholders. gain from share appreciation. This distribute $100m to shareholders. Fisher Funds management contract was being considered, and has since It is expected that shareholders has been renewed for a further 5 been implemented. will support the resolution to be years for both companies. Noel Thompson put to them on 16th December. Q & A – The performance of both Barramundi & Marlin were questioned by several members, especially the

The Scrip December 2016 33 Steel and Tube AGM 17th November Delegat Group AGM 6th December

round 65 shareholders and employees attended the 63rd hether it • No material dam- uity is $313.9m. Steel and Tube AGM. Chair Sir John Anderson opened was compla- age had been Net bank debt Athe meeting. Results-wise it has been solid year for S&T Wcency, sustained at any $282.7m. Re- considering the difficult conditions brought about by low steel perpetual Viaduct of Delegat’s sites tained earnings prices. The problems with substandard seismic mesh and pile parking tribulations, from the Novem- and undrawn casings have impacted the NPAT by about 2 million, but more or a reluctance to ber earthquakes. syndicated bank significantly, going forward, have tarnished S&T’s reputation. give up a sunny • Global case sales facilities $67.3m Steel prices have rebounded a bit from the decade lows of last Auckland afternoon, were up 9% to provide adequate year and the outlook for 2017 is mildly positive. the number 2,411,00 cases funding for the attending this year’s • NPAT of $37m capital invest- Sir John has aged over the last few years and signalled his meeting was down was up 8% on ment programme intention to retire in 2017 when another two directors are on the usual turnout. the previous and growth plan. recruited (I’m not sure if that means the board will expand or Of those who did year. • The group has that another director will retire). attend, Executive • A fully imputed appropriate CEO Dave Taylor spoke about the year gone, and gave more Director, Jim dividend of 12c inventories to detail on the quality issues, compliance, and standards, but Delegat, seemed to per share was achieve future didn’t say any more than has been reported in the papers. know at least half on paid. A 9% in- planned sales Personally, I feel that S&T didn’t move into damage control mode a first name basis. crease on the growth. soon enough and lost an opportunity to be leaders in moving The post meeting prior year. • The group has the industry forward. S&T is one of five suppliers/distributors wine sampling had • During the 15/16 achieved strong affected by the quality issues. There are been several small the flavour of an year $113.8m year to date acquisitions in the past year that are performing as expected. (extended) family was invested sales and is on These are part of a strategy to provide non-cyclical/non steel barbecue. in developing track to achieve earnings to offset the cyclical nature of the steel business. Mr Delegat and growth assets the full sales Overall Dave is a little more optimistic for 2017 than he has Managing Director, and a further growth goal. been in previous years with an H1 expected to be consistent Graeme Lord, gave $50.8m will Exchange rate with 2016, but a much improved H2. an overview of be invested in volatility makes Resolutions were voted on by poll (a shareholder had requested the year’s activity. 2017. This capi- it difficult to this prior to the meeting) and all were passed. Their reports and tal investment forecast financial supports the performance but, Questions were mostly around the quality issues and not really the accompanying Group’s plans based on prevail- answered all that well. At the end I took the opportunity to note overheads are to grow sales to ing exchange that NZSA favours voting by poll and requested that this is done available on the NZX 3,401,000 cases rates, forecast for future S&T AGMs. website. We were told that: by 2021. 2017 operating Martin Dowse • Shareholder eq- profit is in line

The Scrip December 2016 34 with (record) 2016 performance. Director, looks a good replacement for • Weakness in the pound will drive up Jane Freeman. All resolutions were subse- Airwork Holdings AGM the prices of Deleegat wines sold in quently passed on a show of hands. 26th October the U.K. Usually, an increase in directors’ fees • Director, Jane Freeman, was retiring draws some discussion from the floor. Not hairman Mike Daniels commented on after 10 years on the board. so this time – although I did hear some last year’s very good result, ahead of On to the resolutions. Atypically for mutterings. Perhaps this is because it is Cforecast at $24.6m mainly due to the Delegat, this was all a little sloppy. the first rise since 2007 and is only for an 93% increase in the Fixed Wing Division, which completed the refurbishment of 6 First, a Notice of Meeting with detail on the increase to a $400,000 total. Also, despite 737-400 freighter aircraft for customers resolutions was posted to shareholders the increase in the pool, Mr Delegat in NZ, Australia & Europe. The Helicopter (some even brought their copies to the said he had no intention to immediately Division also increased performance in spite of meeting). The Annual Report and notice increase the amounts currently paid. He challenging conditions in the resource sector. posted on the NZX site just recorded the said his was a simple company and while Notable achievement in the year was gaining time and place of the meeting. For those the directors were very competent, they USA FAA approval for helicopter maintenance shareholders using custodial services and were adequately paid for what they did. at the Ardmore facility. The updated outlook other non-recipients of posted copies the A refreshing view from a chairman who was for profits to exceed year’s result. agenda was a mystery. I raised this before owns most of the company. Would an the meeting with Messrs Delegat, Lord and independent chairman be so candid? Takeover Offer: Dated 5 October from RIFA CFO, Murray Annabell. All were mystified. At question time we learnt that: (Chinese company) for a conditional partial Mr Annabell told me he had sent the NOM • Oyster Bay sales in Australia were takeover for up to 75% at $5.40 per share I found on the NZX site and after a query similar to New Zealand on a per capita with a minimum acceptance of 50.1%. Parties from a shareholder, sent another with the basis. associated with non-executive director Hugh full agenda. He planned to check why it • Delegat has over 500 hectares in land Jones holding 58.9% have agreed to sell was not posted. and planting in the Barossa Valley and into the offer. A committee of independent Directors, Mike Daniel & Rob Flanagan have The resolutions before the meeting were: this, along with production from con- been set up to consider the offer, have issued The re-election of director Alan Jackson; tracted growers, is sufficient to ser- a “don’t sell” notice, and appointed Grant the election of newly appointed director vice growth plans. Samuel for the target statement. Shelley Cave; and a 33% increase in the • There is strong sales growth for the Directors’ Remuneration pool. In opening, Rose wine. (I later enjoyed my sam- Attendee’s Questions: There was good Mr Delegat said that he held proxies repre- ple) discussion from members on the proposed senting 86% of share capital in favour of • There are no trade barriers expected takeover and notable comments were; the first two resolutions and proxies repre- to exports to the U.S.A. as the U.S.A. Hugh Jones was asked why he was selling senting 94.5% of shares eligible to vote is also an exporter of wines so any his major shareholding in such a successful on the third resolution. trade tariffs would be counter-produc- business to overseas control and said he tive. Mr Jackson and Ms Cave spoke to their had met the Chinese purchasers who were nomination. Ms Cave, a former AIA Future Bruce Parkes involved in the manufacture of parts for

The Scrip December 2016 35 airlines and believed they were a good fit and was satisfied with the offer price. He Tourism Holdings AGM 18th October would remain interested in the business. It s extra seats were brought in, it with its 4wd leasing option; Telematics was suggested the price was too low at 10x was a pleasure to see a majority to help driver economies and behaviour; earnings for control of the company. At the of women at the board table. Mighway, the Uber-style private leasing listing in 2013 Mr Jones indicated that he A Chair, Rob Campbell, did disclose the agency; Customer experience tablets would like to scale down his holding, but proxies early, but otherwise there was in each vehicle; Waitomo enhance- the illiquidity of the shares has not allowed little to criticise. With record revenue ments; and the outperforming new this. He also said there was little interest (up 18%,) and an increased return Seattle branch. These will all continue from within NZ for his shareholding. on funds at 15.1% (up from 12.9%) to add value, by increasing returns Another member said that the Chinese plus an increased dividend, share- and trimming the amount of capital did not have a good reputation, and was holders were in the right mood. There needed. Grant emphasised the drive to concerned about critical maintenance and is a video of proceedings on the THL sustainability involving measurement of aviation standards established at Ardmore. Investor website. Rob summarised the emissions, trialling of electric vehicles, In answer it appeared that the purchaser challenges for the future. International and driver education to protect the is to retain all management and current success, he claimed, was dependent on natural environment. Tourism in NZ is operations in NZ. In the purchasers presen- 3 characteristics: not a boom because that implies there tation, it was stated that China was a huge 1 An open and global platform – THL could be a bust, but it does require undeveloped market and an opportunity had diverse brands and messages communities to invest in infrastructure for Airwork to promote its aviation business and needed to consolidate and in partnership with operators. in China. Airwork has the majority of its tailor these to consumers in each Questions covered Chinese inbound income from outside NZ. market. tourists, Lions tour prospects, compe- Being a partial takeover, acceptances above 2 Collegial relationships, so that net- tition from the new Australian IPO 75% would be a pro-rata allocation. The working made accessing THL ser- Apollo, and segment report on the company is to remain listed on the NZX. vices as natural as turning on the JustGo UK subsidiary – all of which had Possible directorate to be 2 independent water tap. some negative connotations, but which and 3 non independent Chinese having 3 Personal relationships whether pointed to market opportunities too. board dominance. digital or face to face. Tourism is The resolutions to elect Debra Birch, about interaction with people. The company has 809 shareholders at 26 Christina Domencq, and Kay Howe were August and there will be many investors THL had achieved a leadership position well supported. interested in the outcome of this proposed in self-drive tourism, and needed to Alan Best takeover. It requires many conditions to be embrace the challenge of new technol- met and could take some time to conclude. ogies like autodrive. Standing still, he said, is the riskiest proposition. Noel Thompson CEO, Grant Webster, explained 6 successful initiatives in 2016: Flex Fleet,

The Scrip December 2016 36 SLI Systems AGM 4th November LI Systems has been in existence for ongoing improvements to their software and of options or similar schemes? 15 years and listed just over three their sales strategy which they expect to be There are no direct tax obligations to SLI Syears ago. Its software development yielding sales improvements. because obligations are on the employee. team is based in Christchurch although the The following comments and questions were The statement in the Annual Report by the majority of its workforce (sales promotion) posed by the NZSA proxy holder:- Chairman and the CEO was full of “PR speak” is overseas. It is a Software as a Service Looking at the recent collapse of Wynyard which masks the underlying meaning. Several (SaaS) provider of software to companies to and its over-optimistic revenue forecasts is examples were given including: ”revenue improve their on-line retail and commerce there a similarity with SLI given the downturn decelerated” instead of saying “revenue websites. in their ARR? Are SLI’s expectations for dropped”. Shareholders would appreciate Although its shares had peaked at $2.80 in improved revenue too optimistic? explanations being made in plain English to early 2014 they now trade at about 45 cents SLI has not made explicit predictions on clarify rather than obfuscate. and the company has yet to breakeven. The revenue but they are carefully managing They would take these comments on board annual accounts show a loss of $0.6m down the company to live within available cash and hoped that the explanations given from a loss of $7.1m the previous year. Net and capital. Shareholders should take confi- during this meeting came across clearly. cash flow was $1.2m positive, a big -turna dence in the way these have been managed round from the $5.8m outflow a year earlier; The Annual Report says that the company over the last 12 months. just as well because they only hold $6.7m policy is not to pay a dividend; which is fair cash. Would they clarify the statement in Note 22 enough as the company is not make a profit. of the accounts relating to “Share Appreci- But it is a negative statement for the longer However, their ARR (Annual Recurring ation Rights”? They appear to be a method term and would the board consider a policy Revenue) had dropped by 3% to $31.2m by which extra options or cash payments can of returning a portion of future profits as which is a decline from its previous high be given while also incorporating payment dividends? growth rates. This drop resulted from the for any growth in the prior share price. loss of three major clients; two of whom The board will consider this suggestion. went bankrupt and the third was acquired. SLI has to remain competitive in the market The following comments and questions were for talent particularly in the USA and options The Chairman, Greg Cross and the new CEO, posed from other shareholders:- are part of the remuneration package to Chris Brennan, who had started the role only Will they make a profit this year? stay competitive. The introduction of SARs a year ago, addressed the meeting to explain was to give greater flexibility in rewarding SLI does not foresee profitability this year the company’s performance. They noted executives. but rather sometime in the more distant the success in turning round the outflow of future. cash compared with earlier years and the Would they comment on the tax implica- SLI derived 20% of its revenue from the UK. big reduction in the annual loss; empha- tions of SARs for SLI and the executives After Brexit and the decline in the £ will this sising their intention to live within their concerned because the IRD has signalled its adversely affect the company? capital and not return to shareholders for a intention that tax will be payable on gains further cash injection. They also outlined the made between the granting and the vesting There has been no downturn in sales within

The Scrip December 2016 37 UK but the adverse currency movement has SLI products are protected by copyright. Has the board considered moving away from been offset by changes in the Australian However most of their competitors are its NZX listing? exchange rate. much smaller and SLI has more resources The board continues to reviews its financing Does Google pose a potential competitive to innovate and improve their products options with a view to maximising share- threat? such as their recent personalisation search holder value. engine. Google had introduced an appliance search With so much of their revenue from the product some years ago but they discon- What will happen if you lose more customers US, does SLI take steps to protect against tinued it. There is no indication of Google next year? We lose some customers each exchange rate movements? They have a moving into their space. year but it is balanced by the enrolling of natural cover because so much of their costs new customers and improving the returns The performance of SLI has been abysmal are also incurred in the US. They do not take from existing customers. and the share price has collapsed. The forward cover. Chairman and the Chief Innovation Officer What is the competitive threat facing SLI? At last year’s meeting we were told that SLI should be replaced. Competition varies from country to country was moving to signing contracts on longer The share price is not controlled by the with US being the toughest. However, the terms. Has this happened? company and the board has been working technology used by SLI has a learning Yes, they have been signing more multiple tirelessly to improve the company’s component which yields far higher year contracts with longer termination position. They have made great progress in conversion rates than their competitors. times. The major reason for customer loss has controlling costs to live within their means What is SLI doing to improve its PR? and the accounts reflect that success. They been when customers re-platform and drop A new marketing officer has just been are confident that they are working towards the search engine. So it’s not usually a loss appointed and the need for improved improving the value of the company. SLI to competition. SLI continues to attract and presentation of the company locally was has Accounting Rate of Return (ARR) of retain customers. noted. $31m spread over 576 customers so the Oracle is your biggest competitor; are they company is robust financially. Perhaps troubling you? There were three resolutions and the NZSA discretionary votes were cast in their favour. the recent share price decline reflects a They have an inferior product and are not All were passed by pole vote. mistaken belief that SLI is like Wynyard. cloud based; we do not directly compete. What’s to stop competitors copying SLI? We continue to co-exist. Robin Harrison Skellerup Holdings AGM 26th October he annual report and presentations on the Skellerup website Shareholders were satisfied that Chair, Sir Selwyn Cushing, after give a very good summary of the global reach and market 50 years as a company director, could still add value to Skellerup Tsegments of this industrial seller. To hold up in the face of and passed the resolution for an increased directors’ fee pool on dairy and mining recessions has been due to product development the understanding that new directors would be required soon. The of synthetic rubber components amongst a range of manufac- addition of Alan Isaac has strengthened the audit and risk talent, turers around the world from Mercedes cars to Charlotte pvc pipes. but it is likely that another director with international experience

The Scrip December 2016 38 Freightways AGM 27th October will be sought. ue Sheldon, chairperson, growth, diversification by industry The opening of the Wigram plant in November, on reported on sound revenue and identifying suitable acquisitions. time and within budget was seen by CEO, David Mair, Sgrowth and continued cost Information management division’s as symptomatic of the resilience built into Skellerup’s control, which saw NPAT ($54.4m) 2016 performance was strong with culture. Similarly, the development of Masport USA go up by 8%. Consolidated operating increased utilization of facilities, the from a vacuum pump distributor to a “plug and play” revenue of $505m for the 2016 full successful integration of a number pumping system with easy installation coupling, year was 5.4% higher. EPS was up of smaller acquisitions, and a partic- which saves hours of installation time, is an example by 7.7%. Freightways has around ularly strong result from Shred –X. of customer led change. North American sales now 3,700 people on its team in NZ and A purpose-built facility in Sydney top New Zealand’s and with coordination between Australia. The executive team is allowed the relocation of 3 opera- Christchurch and Auckland development teams, strong and experienced, with the tions into a single site, and further distribution in North Carolina, and manufacture in average executive having worked benefits should flow through to the Vietnam, USA offers greatest sales opportunities. for the group for around 16 years. bottom line. David’s forecast however, was for a small increase in Earlier this year Freightways started Resolutions. NPAT for the 2017 year, because low prices persist in transitioning from a fleet of Convair dairying and mining. aircraft to newer larger Boing Mark Rushworth, ex MD of Lion Questions covered the marketing of the vacated 737-400 aircraft. The directors Nathan with a deep understanding Christchurch site where liquefaction has limited declared a fully imputed final of distribution on both sides of the the future land use. David Mair explained the long dividend of 14.5c/share, without the Tasman, was appointed a director in gestation period for new components from new choice of a reinvestment plan. September 2015, and was confirmed at the AGM, along with Mark Verbiest. specification through sampling and fine-tuning, The Express packaging and business Roger Corcoran was to be re-elected adoption by a manufacturer and then the marketing mail division saw increased activity but has decided to step down. programme by the manufacturer or merchant from some existing customers distributor. Skellerup’s board therefore focus on and further new business. Overall I raised the question about the speeding up the development cycle and will continue services were enhanced, and the undercurrent of dissatisfaction to spend over $4m /year in the foreseeable future new aircraft will provide interisland amongst contractors who are unable on new products in cooperation with its customers. capacity for many years to come. to recover their rising costs. Dean Bracewell, the MD explained their SKL reflects Sir Selwyn’s concentration on strong The new purpose-built facility income was rising because the operating cashflow(up 13%) conservative gearing, in Christchurch airport, has an company is feeding them more work. and high dividend payout (9c/share out of net automated freight handling system, I am not sure they would have been earnings 10.7c/share,) but we would like to see more enabling the consolidation of 3 work satisfied with this answer. growth given the market demand for water piping, centres into 1, and providing airside milk protein and food safety. access to aircraft. Further oppor- Des Hunt Alan Best tunities will come from organic

The Scrip December 2016 39 Caught on the Net

If you are going to sin, sin systematically and Bengt Holmström—received this year’s The nub of this Newfound blog piece is that Nobel Prize in Economic Sciences for their No, enjoying a gin and tonic does not if you are going to sin by being an active insights into modern contract theory, specifi- mean you’re a psychopath cally how businesses and organizations can investor, make sure you are consistent in Another of those false news stories to have better understand and design contracts in your approach and invest for the long term. captured the headlines after being shared the “real world,” with all of its complexities They offer three simple observations: there more than 300,000 times on Facebook. and uncertainties. Contracts help us to is no holy grail of investing; successful Psychologist and regular gin drinker, Megan be cooperative and trusting when we may investing is on part intelligence and on part Wills, posts that most University research otherwise be disobliging and distrusting. discipline; and don’t put all your eggs in one findings should be taken with a grain of salt, More strategy basket. More or dash of bitters. More How to find high quality smaller A female portfolio manager at Pimco Jack Bogle. From zero to hero explains the real reason more women companies Michael Regan interviews Jack Bogle, the do not manage money Over 80% of ASX listed companies with a founder of Vanguard Index Funds, in a market cap below $100m are currently Women make up only 10% of US mutual Bloomberg article and covers his 65 year loss making and another 90% of the same fund managers. In a Market Watch opinion career. Bogle says we are in the middle of companies do not pay a dividend. Roger piece, Beth MacLean offers her views on why a revolution caused by indexing which is Collinson, in a Livewire post, identifies 2 this is so and how to change the imbalance. shifting the allocation of stock market returns simple filtering steps to help weed out the More away from Wall Street to Main Street. More under performers. More Company directors can be held legally Studying household finance to improve Big Decision ahead? Just roll the dice liable for ignoring the risks from climate people’s financial decision making. change The status quo has a strange hold over us says It has taken a while, but economists have Tim Harford, the “Undercover Economist”. At least that is a legal opinion on the situation come to realise that household spending Too often duck difficult decisions and we stick in Australia as reported in a piece in The does not follow the classic economic textbook with the devil we know. He suggests that if Conversation. Now, would they pay any fines models. Romesh Vaitilingam summarises we are truly undecided about a change of or would they be passed on to the company the findings of conference held this year to direction we should just toss a coin and get shareholders? More discuss the current research into household on with it. More Nobel Prize in Economics awarded for financial decision behaviour. More modern contract theory Two professors and economists—Oliver Hart

The Scrip December 2016 40 Five ways to spend with more social The case for phased retirement The 9 (bad) habits of highly ineffective purpose this Christmas In the same way that flexibility has come investors - the common mistakes It’s the season of giving – and spending. to the workplace - where, when and how investors make While the common adage is that money can’t we work — so, too, has arrived the age of In the upside-down world logic that applies buy happiness, others have suggested that the tailor-made retirement says Stewart to much of investing, there are a bunch of if your money isn’t buying you happiness Friedman, professor of management at mistakes investors often make which makes it then you are spending it the wrong way. Wharton University. Phased retirements, harder for them to reach their financial goals. Danielle Logue offers five global trends that bridge jobs, “un-retirement” and second Shane Oliver, head of investment strategy at are creating change for good and enable you and third acts have caught on. Workers are AMP Capital, looks at nine common mistakes to take action. More demanding it to help pay for their longer investors make Developing bank stress test scenarios lives, and firms have good cause to accom- More modate the idea that work does not one day For the past three years, the Bank of England Common mistakes of momentum simply stop. More has carried out an annual ‘stress test’ of the investors Is dividend investing dangerous? UK’s largest banks. To do this, it designed a Gary Antonacci notes that chasing perfor- narrative-based stress scenario in 2014 and New Zealand investors seem to have long mance should not be subject to myopia, 2015. The goal was to determine the banking made up their minds on this question. Not irrational loss aversion, or other psycho- sector’s resilience to pertinent threats. so in other markets. While this Newfound logical biases. Even Daniel Kahneman, the However, changing scenarios each year research piece has been written for US father of behavioral economics, admits to makes it difficult to judge how banks’ overall investors, it does provide a good review of being influenced by behavioral heuristics vulnerability to risks changes over time. This the topic. More More is why – beginning this year – the Bank has Should Australian companies set Bruce Parkes also run an Annual Cyclical Scenario (ACS). executive pay to a US benchmark? More Or NZ to Australian for that matter. Julie Twitter influences investor behaviour Walker and Reza Monem offer different whether companies intend it to or not opinions. Reza notes that, “(if) Australian After studying 3516 corporate announce- CEOs were under-paid, we would have seen ments published by Australian listed our top CEOs going overseas and taking companies, Maria Prokofieva found that leadership of larger, better firms. Australia companies that tweet corporate news and would have been a country that exports CEOs. financial results can significantly affect stock But statistics show quite the contrary. In ASX prices even if the company’s tweets contain 200 firms, 80% of the CEOs are either born no new information beyond what is already or educated overseas so we import talent”. posted through the stock exchange platform. More More

The Scrip December 2016 41 Branch Reports

Branch Contacts Auckland Stuart Gray [email protected] We recognise that branch reports in our newsletter do not adequately represent the expertise and preparation of those presenting to us. Waikato Marie Hutchinson [email protected] The work of these professionals who give their time is appreciated by Bay of Plenty Jane Lyndon [email protected] all who attend. Members are encouraged to refer to the individual Taranaki Grant Langdon [email protected] company websites for the latest news and disclosures. Wellington Martin Dowse [email protected] Canterbury Robin Harrison [email protected]

Auckland.

Upcoming Auckland Branch Meetings 16th November since September, employee pay and meeting with a perception was now 335 times. All at Alexandra Park Convention Centre, Green Lane. 7pm tea & that interest rates In NZ CEO and coffee – 7.30 pm start Paul Glass – Devon funds were rising, world Directors remuner- Dates for 2017: Speakers yet to be confirmed Management. . growth recovering, ation has doubled Wednesday 15th February Wednesday 26th April and a withdrawal of and is trending up, Paul’s Market View interest-sensitive benchmarking on Wednesday 21st June Wednesday 20th September address is available foreign ownership. Australian levels. on the NZSA website. Wednesday 15th November In Australia the He cautioned that Corporate system of remuner- Please mark the dates in your diary now the share market Governance changes ation reports in the is likely to lack had led to more Annual Report, was direction based on respect for the NZ Company Visits not working, with overseas events. market than the “wild Friday 17th February: The visit to the Biodiesel plant is now west” era 10 years consultants using NZX market has done full. Please advise Fiona if you wish to be added to the waitlist. ago. Executive and company compar- well in recent times. Director Remuner- isons to ratchet up Please register with Fiona Gray – [email protected] However, demand ation still need to pay scales. During for yield stocks in be resolved. In USA this period Return a low interest rate Ex. Remuneration on Equity has not environment could averaged $12.4m increased mainly due be over. Market pa. In 1965, t was to the preference for was down 11% 20 times average buy back of shares.

The Scrip December 2016 42 Company visit – Ryman’s latest village. hen we first invested in Ryman, back in Ryman operates a continuum of care, from aged the early days of it being a publicly listed care and rest home, right through to hospital and Paul questioned the skill set Wcompany, our sharebroker tried to talk dementia care. This continuum of care is one of of Board’s as more important us out of it. Fortunately, we didn’t listen. But is Ryman’s points of difference from their competition. than the need for independent there still a problem of perception out there in the Village amenities are resort style. The village at directors, the need for marketplace and with the general public? There Howick covers 4 hectares and residents come from mandatory rotation of audit are now so many players in the retirement village a 6km radius. Ryman now has thirty villages and firms, and control over termi- industry, that some feel the market is becoming 30,000 residents and they foster a ‘family culture’. nation payments to CEOs and saturated, and yet Ryman has comprehensive directors. figures showing that demand for retirement village Questions: living should dramatically increase because of the growing demographic of the elderly. Then there’s Trump USA Policies? – Infra- the increasing need for hospital and dementia care structure spending likely to beds and the lack of supply. increase, but US debt levels are already high. Market reaction We were just a small group of fifteen attendees = US bond interest rates rising when we met at the new Bruce McLaren Village and commodities like Dairy & in Howick. Our host, Ryman Corporate Affairs Iron Ore increasing. Manager David King, had carefully explained that because the village is people’s homes, he didn’t Shareholder AGM’s meeting want to be taking large groups through. (David attendance v webcast. has very kindly offered, however, to host another Generally Institutions do not group of fifteen Shareholder Association members attend or take an interest in in the future as we have a lot of interest being governance although policies shown in another visit). of some do vary. Passive Funds also do not attend. David began by explaining that Ryman employs 4,000 staff; they are very long serving and the Noel Thompson company likes to promote from within. The David said that “Fixed fees are a great seller” and company has a ‘beginning to end’ operation. “We Ryman enjoys “the benefits of increasing scale must,” he said, “understand our jobs in detail”. The with good access to capital”. The company has company employs 150 construction staff and they had 14 years of underlying profit growth and they take on apprentices. Each village has three to four target 15% p.a. growth in underlying profit. It is gardeners. “We control it ourselves” he added. early days but to date Australia is proving more Founder Kevin Hickman stated when the company profitable than New Zealand. Returns are much started in 1984 that “Everyone had to have their bigger in Auckland and Melbourne. We “Always own bathroom and their own dignity”. price below the market” when selling new units in

The Scrip December 2016 43 Waikato an area David said. In Auckland they price ichael Spaans, a is traded, of which New markets. Starbucks in China $300,000 below the average housing price. Director of Fonterra Zealand supplies about 20 use New Zealand product, Ryman growth is self-funded. An interesting Msince 2013 spoke billion litres (including milk McDonalds in China source point David made is that the Devonport recently at the Waikato that they source from other cheese from Fonterra. village will free up approximately 400 Branch. countries such as Australia Classes show chefs how to houses, which is a huge help in the Auckland Fonterra was created from and Chile). New Zealand and use product, such as Anchor housing market. several co-operative dairy Australia still provide over cooking cream in New David pointed out that, for the company, companies to ensure the 95% of their milk supply. York. The margin has been “Innovation is going on all the time”. He processing of all New The milk powder auctions increasing with a high return finished by saying “The key thing in the Zealand’s milk daily. Our are a means of showing on capital. Fonterra trades in future will be how many people need care”. pasture-based industry is price transparency regarding over 100 countries. Fonterra the Fonterra Shareholder can easily switch between We concluded our visit with a tour of the the only way that we can Units in the share market to streams (e.g. powder, butter, village. compete internationally. Milk production rose through the evaluate the success of their cheese) depending on return Is it the case that Ryman is still under- year to 90 million litres per strategies which are: but requires increased valued by the market, given their rate of day in October. This supply Volume - producing and capacity. growth, their profitability, the fact that they is converted to products sourcing milk Their world production is are mostly self-funded and the growing such as powders, which can described as a multi-hub demographic of elderly? Personally we Value - putting the milk into be stored and re-constituted strategy with the overall aim have seen several lots of friends move into value-added products and later. to support product out of New retirement villages, and we’ve observed Velocity - includes speed to Zealand. For example, by that, with the people we know, the situation Internationally, world market, efficiency, and debt investing in Chile, advantage has been needs based and their decisions production is over 406 billion reduction. litres per year, rising at over can be taken of the lower have been made independent of the state of The overall strategy of 2.0% per year. Most of this tariffs that apply when the housing market. And will Ryman’s move Fonterra and its brands is is behind borders and trade product is exported to Brazil. into the Australian market have a positive to optimize New Zealand barriers. Fonterra state it is Access is to be secured into effect on the value of the company? milk, build/deliver/grow, vital that the New Zealand Sri Lanka and Indonesia Fiona Gray develop markets, invest in Government has renewed (where New Zealand product milk production (including energy and commitment to is combined with local overseas). Part of the its trade agenda to combat product for consumer sales). business is termed ‘Ingre- current rhetoric and actions It is also a de-risk view, such dients’ meaning consumer towards protection by some as the supply of ingredients and food service, with value of our trading partners. for Australia and Europe. added items that are used Fonterra are looking to About 60 billion litres in the commercial or home

The Scrip December 2016 44 optimize their manufacturing footprint in Europe. Bay of Plenty. Two-three joint ventures are being developed in the UK, and they are looking for partners in the October meeting - Dean CEO appointment is one of the United States. Anderson NZX Smart most important duties. Shares. Within New Zealand, the strategy is to deliver The key areas of recent change higher value at velocity. It has 85% of New Dean explained how Exchange are: Zealand’s production. But by law, they still must Traded Funds could fit into an Risk identification and mitigation investor’s portfolio. EFTs provide supply their competitors (those factories without Health and Safety farm contracts such as the new factory at Pokeno). liquidity, and diversification at Transparency of executive This amounts to about 50 million litres per year, low cost, and NZX now offers remuneration and how it is about 2% of their total milk supply. Fonterra 23 ETFs, and achieving lower measured has 58% of the ingredients market, 8% of the fees for the $1.6b invested, as food services market, and 12% of the consumer operational costs are spread Directoral scrutiny of public markets. Yet, despite this consumption and over growing fund sizes. offers, and the liability attaching supply in New Zealand, over 97% of their product Christmas meeting: Joan to this. is exported. Withers, Chair of Mercury, Ian Greaves Product differentiation is important and Fonterra and company director. brands are quite strong. They promote the nutri- Joan, speaking candidly with a 2017 – First meeting – 24th tional advantages of grass feed supply, images deep knowledge of governance, February that tell the Fonterra story. Nutrient and effluent covered a wide range of points: Shareholder Discussions at Gate management means a lot with participation in Board positions in larger listed Pa Bowling Club Rooms – 3pm the clean streams accord, riparian planting, and companies are keenly sought. healthy rivers. There is a hold on taking new Jon Murie – Craigs Investment High professional reputation suppliers from forestry conversion – the extra Partners - The year past and the of candidates lessens risk for a farms would increase the impact of farming on our year ahead. company rivers, a cost that would falling on their existing Jane Lyndon farmers to help rectify. Identify candidates who are not overcommitted Cliff Thomas Institutional investors assess directors’ commitment Board performance reviews are regular and professional Diversity (not just gender) assists in the rigour of debate and investigation.

The Scrip December 2016 45 Taranaki Wellington Canterbury eptember 28th we had a presen- hank you to branch members and the ur committee expanded in October tation from Gordon McLeod committee for your support during with the addition of one new member, SDeputy CEO from Ryman T2016. It has been another busy year OMichael Midgley; bringing our committee Healthcare. Ryman always has a good and we have had a great variety of meetings number up to seven members. Unfortu- story to tell, what a consistent set and speakers, some earthquakes, a bit of nately, Michael who lives in Rotherham, North of graphs. We were then treated by flooding and the Trumpageddon Canterbury is very close to the epicentre of the Ryman to drinks and nibbles. Next year will be a bit like this year with 14th November quake. Michael has survived Jonathon Glass from J B Were & Co branch meetings on the second Tuesday of unscathed but his house has not! spoke on the 11th of October. He each month (March to November), inter- The committee meets monthly to progress the spoke on the different asset classes esting speakers and the 2017 National interests of members and at this and switching from shares to bonds AGM in August in Wellington. Other than time of the year has been busy with a number of and vice versa which led to a very that I’m hoping for a quiet year with not company Annual Shareholder Meetings; organ- useful discussion, one of the best we too much excitement. ising proxyholders and preparing questions. have had. I leave you with several quotes from the We have held two recent events for members. Bryce Barnett from Augusta Capital is Don… The first on 11th October with Tony Carter to speak on December the 6th. As he • What separates the winners from the (Chairman of Air NZ and F&P Healthcare). The lives here in New Plymouth he won’t losers is how a person reacts to each second with John Ryder (co-founder of Ryman have far to travel. He will speak on new twist of fate. It is a mistake to Healthcare and author) on 17th November. Both their company and also their funds try to look too far ahead. The chain of events attracted larger than usual attendance management business (property destiny can only be grasped one link at and were held in the new Christchurch RSA syndication). It should be interesting a time. building. As usual the presentations were comparing that to listed property. After • I try to learn from the past, but I plan followed by refreshments and an opportunity the presentation it is our intention to for the future by focusing exclusively to talk with the speakers and other members. adjourn to the restaurant of the Club on the present. That’s where the fun Five new members joined up after the Ryder for a meal and a few drinks. is. presentation. As this is the end of the year I would • Anyone who thinks my story is any- We will conclude the year’s activities for our like to take time to thank all of the where near over is sadly mistaken. branch members on 8th December with our people who have done presentations All the best for Christmas and I look forward now traditional End-of-Year social and quiz over the year. We do realise that it is a to seeing some of you at our next branch night hosted by Peter Heffernan. This will be big ask of all of you to travel to us and meeting in March 2017. a fun evening of entertainment and enlight- I assure you all that it is appreciated. Martin Dowse enment topped off with seasonal refreshments. Happy Christmas everyone Robin Harrison Grant Langdon

The Scrip December 2016 46 Members’ Issues A warning on Perpetuals ome members of NZSA have had a bad ordinary shares, perpetuals reflect investor time with Perpetuals. One bemoaned a demand. They can be illiquid and bearish when How good is your S37% loss of capital value in MTF perpetual investor sentiment turns against them, and preference shares, and a 25% capital loss on easier to trade when economic conditions are insurance cover? ASB prefs. NZSA’s “Investing” course does more buoyant. So the price will not always be a Nature’s November rattles - felt cover this topic, and some of the information is straight reflection of the interest rate. The credit by many of our members south of set out in The Scrip April 2016 - Bank Capital rating (usually included in broker summaries), Auckland - has compelled many of us 101. is below that of the group issuer, e.g. ASBPA is to review once again our insurance rated lower than CBA the bank that owns ASB. Today’s NZDX listings include 27 different hybrid policies. securities ranging from those with no fixed Advisors generally favour a mix of shares and Freelance journalist, Diana Clement, maturity date (true perpetuals and preference bonds. Bonds give the certainty of a return a finalist for our 2016 business story shares,) to those with maturity dates set well based on interest rates, security of an asset award, submitted a portfolio based into the future. Perpetuals and other hybrids backing, and priority in the case of liquidation. on her investigation into the culture are often issued by banks because they qualify However, you have to take into account the and conduct at Youi. You can find her as Tier1 capital, i.e. they will not be backed by time cost of money (inflation) and ensure articles here specified group of assets, and will carry increased the interest properly compensates for this. risk in the case of winding up. Those issued by Ordinary Shares, by comparison yield a return Youi subsequently pleaded guilty companies are often convertible notes, and are based on the higher risk, and a share in the in the District Court to 15 repre- a useful entry point if you ultimately wish to capital growth of an enterprise. sentative charges and has also been fined a maximum $100,00 by the NZ own ordinary shares in the company. Perpetuals cloud the issues, and investors Insurance Council for not conducting You have to look out for the reset provisions, should look closely at the terms of issue, the their business in accordance with the because most perpetuals provide for the regular climate for interest rates, and market sentiment Fair Insurance Code. resetting of interest rates, at a set premium over towards the issuer, and the security. As always: a benchmark such as the 1 year or 3 year swap don’t invest if you don’t understand, and seek Do Youi’s TV ads make you cringe? If rate. Unlike bonds whose capital value tends advice if you are tempted into the hybrid they do, trust your instinct. to rise as interest rates fall, perpetuals lose market. Bruce Parkes capital value as interest rates fall. With interest Alan Best rates at all-time lows and forecast to rise, this might be a better time to invest. However, like

The Scrip December 2016 47 ASA gains $A103,400 after German firm fined for insider trading erman construction company had become aware of Leighton’s expected results announcement. Hochtief, the controlling shareholder financial result for the year ending December Hochtief held a 55 per cent stake in Gin Australian engineering contractor 31 that it ought to have reasonably known Leighton, which changed its name in March CIMIC Group (formerly Leighton Holdings), was insider information.It was also found 2015, for several years until it starts buying has been fined $400,000 in the Australian that Hochtief had used the information to shares in the Australian contractor in 2013. Federal Court after being found to have extend the completion date for the acqui- As of this week it holds over 70 per cent of engaged in insider trading, reports the sition of Leighton so that it could purchase CIMIC’s shares. Sydney Morning Herald. The civil case was the shares. The name-change coincided with allega- brought by the Australian Securities and Justice Michael Wigney said the public was tions of corruption within the contracting Investments Commission. Hochtief has entitled to expect that a corporation of group. also been ordered to pay ASIC’s costs. the size and status of Hochtief would have Bruce Parkes systems in place to ensure insider trading The Court saw the Australian Shareholders did not occur. Association as the representative body for “While the contravention did involve retail shareholders carelessness and inadvertence, rather than actual knowledge and deliberateness, the careless was such as to amount to a Hochtief has also entered into an enforceable serious failure to exercise appropriate care undertaking with ASIC that will see it make and diligence in the circumstances,” Justice voluntary contributions of $103,400 each Wigney said. “It resulted in significant to the Australian Shareholders Association, trading in a major Australian public company the representative body for retail share- which, because it involved insider trading, holders, and First Nations Foundation for its had the capacity to significantly undermine adult financial literacy program. The court the integrity and efficiency of the relevant found Hochtief had purchased shares in securities markets,” Justice Wigney said. Leighton Holdings, ahead of the completion “It was by no means a victimless crime: of its $1.15 billion hostile takeover of the victim was the market,” Justice Wigney Leighton while it was in receipt of inside added. information. The ASA raised concerns about Hochtief’s Hochtief admitted earlier this year it trading in Leighton in February ahead of the had issued instructions to buy 200,000 release of the 2013 results given that it had Leighton’s shares on January 29, 2014 several board seats at Leighton, a period for a total consideration of $3,244,156.97 known as ‘blackout’ period that restricts using insider information.The court found company directors in trading ahead of a Hochtief, through its chief financial officer,

The Scrip December 2016 48 Auckland Education Courses 2017 Upcoming Events Western Springs Community College is planning 4 courses for each subject in 2017 For more information go to Branch section of NZSA website Website: www.leisuretimelearning.co.nz/ businessandfinance 2017 Our courses are right for new investors, for current February 15 Auckland Branch meeting investors who need more knowledge, and for those who want to understand their Kiwisaver investments. February 21 Waikato Branch meeting

February 24 Bay of Plenty Branch meeting Course1. Investing for your future – general investing principles - 2 x 2hr sessions March 14 Wellington Branch meeting th Commencing 15 February 2017; Tutor John March 23 Waikato Branch meeting Hawkins Price $75 incl GST; plus $20 for the NZSA course April 18 Waikato Branch meeting book April 26 Auckland Branch meeting

Course 2. Sharemarket basics – understanding how and why to invest in shares. Commencing 7th March 2017; Tutor Jacquie Hagberg – 2 x 2hr sessions Price $75 incl GST; plus $20 for the NZSA course book

Tell your friends, family, and work colleagues about these informative courses. You don’t have to be an NZSA member – just keen to develop your understanding

The Scrip December 2016 49 NEW ZEALAND SHAREHOLDERS ASSOCIATION INC PO Box 6310, Wellesley Street, Auckland 1010, Phone (09) 309-9768 Website – www.nzshareholders.co.nz Chairman John Hawkins [email protected] 021 640 588 Secretary/Treasurer Chris Curlett secretary-treasurer@nzshareholders. 021738032 co.nz Governance Issues Grant Diggle [email protected] Legal & Regulatory Gayatri Jaduram [email protected] Legal & Regulatory Daniel Wong [email protected] Auckland Issues Andrew Reding [email protected] AGM Co-ordination Max Smith [email protected] Company Research Martin Watson [email protected] Co-opted Associates Proxy Co-ordination Jacquie Hagberg [email protected] Corporate Liaison Des Hunt [email protected] (9) 521 6117 The Scrip Alan Best [email protected] (9) 524 0317

Disclaimer

Comments or information contained in this newsletter or other editions of The Scrip, or within courses conducted by the NZ Share- holders Association including related course books, should not be construed as providing investment advice under the provisions of the Securities Markets Act of 1988 or its Amendments, or the Financial Advisers Act 2008. The point of our activities is to provide you with Editor Alan Best the tools needed to enable you to assess investment proposals, and decide for yourself. Layout Bruce Parkes

ISSN: The National Library has allocated the International Standard Serial Number 1179-4275 to The Scrip so that researchers will have access to our material.