In this Issue December 2013 The Pennies and the Pounds 1 The best and the worst of the NZX50 since The Pennies and the 2009 3 NZ Windfarms AGM 25 The 2013 Beacon Award 4 Skellerup Holdings AGM 25 Pounds Takeovers Panel provides easy to read guides 5 Kathmandu AGM 26 New Regulations for providers of custodial Pumpkin Patch AGM 26 espite changing to decimal currency in 1967, here is services 5 Barramundi Fund AGM 27 an old saying that still rings true. “If you watch the Company Meetings Marlin Global Fund AGM 27 pennies, the pounds will take care of themselves”. In Telecom AGM 6 Precinct Property AGM 28 D other words, do the small things well and the big outcomes Fletcher Building AGM 7 Contact Energy AGM 29 will eventually follow. Hellaby Holdings AGM 8 Chorus AGM 30 Mighty River Power AGM 9 Vital Healthcare Property Trust AGM 30 When it comes to their shareholders, it seems that some Michael Hill International AGM 10 AWF SGM 31 companies are forgetting this maxim. Over the past year we Ebos AGM 11 Bathurst AGM 31 have seen increasing evidence of inadequate or potentially Sky City Entertainment AGM 12 NZ Oil and Gas AGM 32 misleading information being provided in resolutions and TeamTalk AGM 13 Auckland International Airport AGM 33 notices of annual or special meetings. In most cases this is Heartland Bank AGM 14 Caught on the Net 34 unlikely to be a deliberate attempt to confuse shareholders. Cavalier Corporation AGM 15 Branch Reports But it does raise questions about, if the company can’t get Freightways AGM 16 Auckland 35 the small things right, what are they doing with the big stuff. Sky Network Television AGM 16 Bay of Plenty 36 Equally important is how companies react to feedback on Trade Me AGM 17 Waikato 37 such issues. The Warehouse AGM 18 Wellington 37 Some matters may seem trivial. For example, a few companies Abano AGM 19 Canterbury 37 are still using a two-box voting format which many share- Port of Tauranga AGM 20 Upcoming Events 37 Lyttleton Port Company AGM 21 Members’ Issues holders who want to appoint a discretionary proxy find Metlifecare AGM 22 Political donations - A tax on shareholders’ 38 difficult to interpret. The outcome is that many shareholders PGG Wrightson AGM 23 Hard copy harder to get 38 don’t bother to vote and others don’t succeed in making their Vector AGM 24 intentions clear. This accidental disenfranchisement is unsatis- factory. A recent example is the KIP SGM form. The Association ISSN 1179 -4275 has been actively pushing a simplified and Another more problematic example is that of director and the higher fee pool would be standardised format that makes the whole A2 Corporation. This company has done very needed to fund this. Had this information process much easier. All the companies we well in recent times. Shareholders are happy, been available to us, (as it apparently was have contacted on this including KIP have and have approved significant director fee to at least some institutions), we may well been very willing to review their documen- increases on several occasions. This year have come to a different conclusion when tation to make it more straightforward. We we opposed the increase being sought and formulating our voting intentions. But how encourage you to either vote or appoint the suggested based on our own fee survey that shareholders are supposed to know what NZSA as your proxy so that you can have a a lower figure would be more appropriate. We they are not told is beyond us. Once again, voice. were criticised by two large fund managers only those actually at the meeting got the Of more concern are annual meeting resolu- for taking this stance “because A2 is in an full story, and everyone else was to some tions that do not reflect the reality of what is international growth phase and it needs to extent disenfranchised. intended. Both NZX rules and the Companies bring on (expensive) overseas directors with It is also interesting to note that the AGM Act have provisions that in essence, say that the appropriate skills which is why they need results were not posted until 25 November shareholders must be given sufficient infor- the extra fees and pool”. and as at the time of writing, Mr Hinton’s mation to make a properly informed choice. Now, we would have no argument with that. resignation has still not been notified – so This is not happening in all cases. But it was not what shareholders were asked much for continuous disclosure. Jason’s The Warehouse recently asked for a signif- to vote on. Resolution 6 asked for permission Travel Media (which just went into receiv- icant increase in the director’s fee pool. to increase the board to 8 to allow a further ership) was recently censured by NZX There was no detail about what the extra appointment. Resolution 7 asked for a 140% for failing to notify a director resignation amount was for. So at first glance, you could increase in the director’s fee pool. The notes as required under rule 10.7.1.d. Is it any be forgiven for thinking this was just another showed this would fund a 41% increase different for A2? example of snouts in the shareholders for the chair, a 76% increase for director’s So why are we concerned about these trough. In fact, that was not the case at base fees plus extra committee fees. It also minor details, some would say. After all KIP all. Members who receive email pulses will included provision for the extra director. and WHS are tracking OK and A2 is going know that on enquiry NZSA was provided When formulating our view, we attempted gangbusters. What does it matter? detailed information showing individual base to contact the company by phone (cut off It actually matters a lot if we consider where fee increases (the first since 2011) were only signal), registered office (no-one could help) a lack of attention to detail can end up. about 4%. The balance was mostly to provide and email (no reply). So as any shareholder Diligent is a case in point. This company has for an additional director. Our members may would do, we relied on the information identified and exploited a niche worldwide have been able to vote from a position of provided. At the meeting the reality was market opportunity and has gone through knowledge, but everyone else who provided very different. Julia Hoare, a capable NZ a huge growth phase. To some extent, it a proxy could not, as the detail was only based accountant was up for election which appears that this has led to a lack of time presented to those few at the meeting. The made the board total 8. Therefore resolution being devoted to ensuring details and obliga- Chairman acknowledged that the Warehouse 6 which we supported was appropriate. tions are properly considered and actioned. should have done better/ will do better in But then it was announced that Greg Hinton What started as a problem with accidentally future. had stood down to make way for an overseas overpaying CEO bonuses has morphed into The Scrip December 2013 2 a whole series of disclosures of there may be no pounds. The administrative and accounting NZSA will pursue issues that The best and the worst of the shortcomings. The company is we see as material to ensuring now working through restating a properly informed market. its annual accounts for the And we will make sure those NZX50 since 2009 past several years. Individ- complaints are taken seriously ually, each matter is not that by the NZX and regulators. n his recent talk to Auckland Branch, Brian Gaynor showed the dramatic, but taken together We are not trying to win a following slide which is based on Total Shareholder Returns of the they create a pattern that is popularity contest. We are here INZX top 50. hard to ignore. The distraction to ensure shareholders are all Firstly, the success of the top 3 is the result of recent runs in the share these problems are now treated equally, and that in the market rather than dividends or real earnings growth. They do not causing, the direct cost and words of the FMA, markets are pay dividends. This Brian observed, suggested that investors were the impact on management fair efficient and transparent. becoming more confident. time and effort are difficult I think most of you will have Secondly, in this climate of growing confidence, share selection is to gauge, but they are likely had a good run with your always important. It was less important in 2009 after the GFC, than to be substantial. In the investments, despite some it is today, after a recovery. Makes good sense, but of course techni- meantime, the shareholder is headwinds toward the end of cally, it’s not financial advice. suffering the consequences. the year. In a cowardly act of While accepting that there the first order, I have decided Best and Worst Since March 2009 are other external factors also not to risk my hard won crystal- in play, the company’s share ball-gazing reputation from Xero +4,974% NZOG (6.5%) price is now below where it the last two years by second Diligent +2,767% Contact Energy +26% was when these issues first guessing what 2014 will bring. A2 Corp +1233% Trustpower +31% surfaced, at a time when the However, I can assure you that market as a whole has moved the hardworking members of Ryman +608% F&P Healthcare +34% up strongly.