Seven AGM, crazy Perth visit, Fairfax, Telstra, Transfield, capital raisings and much more

February 2, 2010

Dear Mayne Reporters,

Greetings from the favourite Kings Cross internet cafe where at least 30 AGM reports have been filed from over the past decade. The same proprietor is here although the internet is starting to hurt the travel element of his business, which he advertised in The Trading Post yesterday.

First up this week, it was nice to get an apology from billionaire Kerry Stokes today for his excessively combative behaviour at last year's Seven Network AGM.

The apology came privately after the meeting and it has to be said that followed what was a very cordial debate at this year's AGM.

After confiscating the recorder, refusing to webcast and calling security to end questions at last year's AGM, Stokes got off to a much better start this year by webcasting the AGM to the world.

My opening contribution hailed this "Glasnost comes to Pyrmont" approach and from that point on it was a very civilised affair. I also privately apologised for my part in last year's unedifying bunfight, as was summarised by Peter Cox on Business Specatator at the time.

There was still plenty of colourful terrain covered today such as the huge protest vote against Ryan Stokes, the lack of independent directors, Kevin Rudd's recent night in Broome with Kerry Stokes and James Packer's abuse of David Leckie.

But at least it was all done without gratuitous conflict.

The whole meeting lasted 80 minutes, which is a record for Channel Seven, especially considering we got no presentation from CEO David Leckie and the Kerry Stokes' formal presentation was done and dusted in 15 minutes.

Stokes was surprisingly forthcoming in opening up on a range of issues. For instance, he said it was James Packer who suggested Ryan Stokes and Peter Gammell join the Consolidated Media Holdings board as Seven's representatives. This contrasted with CMH chairman John Alexander who told shareholders two weeks ago this was a matter decided by Seven.

No it wasn't. Packer was never going to suggest Kerry Stokes and David Leckie join the board and Seven was smart enough to accept the offer made to the two less confrontational alternatives.

History is made: listen to this Seven AGM audio

Anyway, have a listen to the edited audio of all the questions. The breakdown of the lively exchanges with Stokes, Leckie and friends is as follows:

Congratulations on webcasting and are you going to write up WA News and SMG if things are so rosey?

Can you explain our monster tax bill and is cash really cash?

Explain this $3.5 billion private equity debt and the huge $421m interest bill.

Why have the instos protested against the rem report and why wasn't David Leckie paid a bonus?

The full remuneration report debate

Well done on putting Leckie up for re-election. Is his health okay? And why didn't he abuse James Packer back?

Asking director Dulcie Boling on age, tenure and independence

Will you be adding another independent director considering the protest against Ryan Stokes' re-election?

Why did David Lecki unload his equity play, yet come back for another one?

Is Nine closing the gap on Seven and will Kerry Stokes ever go non-executive?

Media mogulism, thin-skinned PMs, meeting Murdoch and that night in Broome

A crazy day in Perth on Friday

Flying around the country madly attending AGMs has been good sport over the past 10 years but there hasn't been a day quite like Friday.

The alarm went off at 5am and I was on the 6.10am flight to Perth for what was hopefully going to be four AGMs.

However, an unfortunate bit of stretching whilst cramped in the very back window seat on the Virgin Blue flight saw a huge rip emerge in the suit pants. This led to your correspondent parading around Perth for the day with his underpants on display.

Thankfully, I was wearing black jocks and it wasn't too bad when the suit jacket was on but the opening strategy at the AGM of litigation funder IMF was to take up camp in the back row and ask all questions whilst sitting down. Britney Spears was staying at the Hilton that day, but thankfully we didn't cross paths in the lift.

Litigation funder IMF 2009 AGM

As it turned out, there was lots of lively stuff to emerge from the AGM of what is the world's biggest listed litigation funder. We discovered that Brian Burke is a client in the Great Southern action, ASIC tends to follow IMF's leads, Oz Minerals has a big problem for classifying current liabilities as non-current and there's even a bid afoot to get some litigation going over the Babcock & Brown collapse. The audio highlights are available below:

Why haven't we got a majority of independent directors
How do all these bonuses work?
Success fee increase and what are our competitors doing?
Are we collaborating with Brian Burke on Great Southern action?
How are we getting on with ASIC?
Are we the biggest listed litigation funder in the world?
Are we suited to the public company space?
How is Oz Minerals and continuous disclosure more broadly going?
Why haven't we sued Babcock yet?
Only 4 losses in 140 cases, what were they?

All questions

Questions for Cazaly Resources - king of claim jumpers

One of the reasons for this trip to Perth was a chance to attend a colourful AGM at the Celtic Club in West Perth. Being a tiny shareholder in more than 700 companies I get invited to more meetings at the Celtic Club than anywhere else, because West Perth has become a hub for small mining players, of which there are literally hundreds.

They don't get much more colourful than Nathan McMahon's outfit Cazaly Resources, given its record attempting to get hold of Rio Tinto's Shovelenna and Rhodes Ridge deposits through what some critics blast as "claim jumping".

The scene was set in this 5 minute discussion with 720 ABC Perth morning host Geoff Hutchison, conducted from the cab sitting outside the Celtic Club just before Cazaly got underway.

All this big talk about hard questions almost didn't happen because I only bought the stock an hour earlier and clearly wasn't going to be on the register. That's what makes penny dreadful mining stocks fun, because there was no checking attendees against the register.

We can therefore present you the following edited audio highlights from our questions at the Cazaly Resources AGM in a tiny room with about 15 people attending:

How much has all this claim jumping cost us?
Does director Ken Hunter supporting claim jumping?
What process have you been through to ensure the receivers of the selective placement have not voted on it?
When raising capital please look after retail
Do we really need to offer Nathan more options?
Can you tell us more about this new Rio executive?
Has it ever been laid down on you as a board that we don't do any SPPs for retail?
Well done if this placement really is at a premium

All questions

Asking questons whilst over the limit at Atlas Iron

The Atlas Iron AGM wasn't due to start until 3pm and with Cazaly done and dusted by 12.15pm, it was down to the bar for a refreshing schooner of Irish ale. A nice reporter from AAP took some photos and then it was into a cab for lunch at Northbridge with a couple of Perth's best business journalists plus a doyen of the PR game.

Amazingly, they were drinking decanted Stanley cask wine and I'd had a couple of glasses before doing this feisty interview with Lindy Burns on 774 ABC Melbourne about the lack of women on public company boards.

The cardinal rule of not talking about RACV matters since the wife joined the board in 2006 went out the window and the transcript went around the building pretty quickly, prompting a couple of comments over the weekend at the soft launch of RACV's magnificent new Healesville Country Club.

Remember that other rule: don't do media interviews after having a couple of drinks.

Perhaps it was the embarrassment of the ripped suit pants, but the lunch finished and then two of us retired to a pub favoured by mining executies and were served another couple of beers by these Brazilian waitresses. This could have turned into a very Friday Perth day-night, but thankfully the Atlas Iron AGM beckoned so at 3pm I started the sweaty 15 minute hike across town.

In more than 300 AGM appearances, this was the first one I'd attended whilst not being fit to drive a car, but hopefully it is not too obvious if you listen to the audio: One big clump of Atlas questions on Twiggy, rail access and sacked chairman

Skewering the Western Areas board with the assistance of some Dutch Courage

The CEO of Atlas gave a pretty good account of himself and I left thinking he might just be "the next Andrew Forrest" as one of the lads at lunch had mentioned.

It was only a quick 5 minute stroll from Britney's Hilton Hotel down to the Hyatt Regency and I made it at about 3.45pm for AGM of emerging nickel miner Western Areas, which started at 3.30pm.

Now this AGM was something else. For starters, the remuneration report went down but the CEO and CFO refused my calls to have a poll, even though it was easily passed on the show of hands.

In a crowded room full of 50 people, it was a very lonely experience taking on this colourful board given the ASA representative was the only person who seemed to share any of my concerns. Thankfully, the Dutch Courage was elevated courtesy of the long lunch, although it was a bit uncomfortable having all this conflict sitting in the front row two metres away from seven blokes I'd never seen before.

However, Western Areas is a $900 million company now ranked in the top 200 and it certainly arrived when it comes to the corporate governance debate.

Whilst the remuneration report vote was non-binding, four resolutions proposing options for the non-executive directors were all defeated, partly because chairman Terry Sweetman wasn't able to vote his 25 million shares.

Chief financial officer Craig Oliver would also have been booted off the board but for Sweetman's vote and I used this event to strongly argue for the company to treat governance seriously and find itself more than the current two independent directors.

With a 6.30pm flight beckoning, I bolted into a cab at 5pm just as the informal presentations were getting underway. Frankly, I didn't fancy a cup of tea with this parochial home town crowd, especially the grumpy old guiser who told the meeting I was "a bloody idiot".

Amazingly, none of the huge protest votes and debate attracted any media coverage, although this might have been because the formal results of the meeting weren't lodged until 12.28pm this afternoon. Check them out here as I can't recall a voting bloodbath quite like it.

Below is the edited audio highlights, although the quality isn't great because the CEO asked me to turn off the recorder, so I just fiddled with it and stuck it in the pocket:

The big remuneration report defeat - full debate
Please stop recording the meeting and where is your webcast?
Get yourselves some more independent directors
Box tickers, corporate governance and Risk Metrics
The defeat of four resolutions on options for directors
These options for the CEO need some performance hurdles
Where was the SPP after your institutional placement?

All questions

Fairfax AGM scene setter

I've been sitting in the hotel room overlooking Hyde Park this afternoon practising the three minute campaign speech to be delivered at tomorrow's Fairfax Media AGM. However, don't hold your breath for the run of defeats to end in public company tilt number 37.

The Fairfax board revamp sure has taken plenty of twists and turns with David Evans confirming his resignation today, although it doesn't apply until November 15 so there won't be a third vacancy for the four candidates contesting tomorrow's contest.

The Evans conflict was first pointed out in this Crikey story in August and it is good that the regulators have stepped in and forced his resignation given he effectively was responsible for up to four radio stations in some markets through his directorship of Village Roadshow.

I produced this scene setter for Crikey today questioning chairman Roger Corbett's character in light of the Woolworths record on the pokies.

Corbett surely isn't a long-term solution for Fairfax and he's going to be hard pressed to turn the company around. Tomorrow will be Roger's first experience chairing a public company AGM at it certainly won't be easy.

Classic Cornwall

James Packer and interesting AGM season quotes

As we go into the second half of the AGM season it is worth starting the process of gathering our favourite quotes. Two efforts from James Packer at Crown have received scant media attention but were certainly quite interesting. The first provides an insight into boardroom affairs at Qantas and the second explains why Crown will probably never bid for Tabcorp:

“In regard to ‘How does this compare to Qantas?', I am probably biased in this statement but I'd say Crown is much more democratic than Qantas. Geoff ran Qantas like a complete autocracy, and we were all very careful about asking questions”
James Packer, Crown AGM, October 28, 2009

"Our licenses are fundamentally different. In the case of Crown and the case of Burswood, there is a specific license condition, in the agreement between State and Burswood and the agreement between State and Crown, but the government cannot change tax rates without mutual agreement. In the case of the NSW an Queensland casinos there is specific wording that says that the government can, at it's sole discretion, change tax rates. So I think they are fundamentally different licenses. So that's point one.'

"... in relation to Tabcorp, there are no current conversations ... Tabcorp has a wagering business that faces structural issues, real structural issues, and the strength and success or not of that business, I think, is somewhat out of their hands in the sense it is going to rely to a large extent, on court decisions because clearly there are operators who are taking the section 92, freedom of trade between states, approach to the highest courts in the land and are trying to develop new businesses with a strong internet focus. So the wagering business will be an issue, the terms of the licenses will be an issue, and under existing Victorian legislation, the duopoly gaming machine license cannot be owned by the owner of Crown Casino, and that is obviously at the moment an asset that is owned by Tabcorp, and so that asset would have to be separated. But suffice to say there are no present talks, and I think Crown certainly doesn't need to merge with Tabcorp to do well into the future."
James Packer, Crown AGM, October 28, 2009

Waffle-fest at 2009 Telstra AGM

Kudos to the Telstra board and chairman Catherine Livingstone for their commitment to democracy at last week's AGM in Sydney but the decision to have one big jumbo debate with no separate discussion on remuneration or director elections was very disappointing.

I had a series of questions lined up to go but the meeting was suddenly shut down after general business. That said, press coverage this year was far better for the company than last year so hats off to the Catherine Livingstone and CEO David Thodey for being so patient, open, understanding and fair with the typical Telstra shareholder who just wanted to bleat on about consumer issues.

Check out some video of the meeting and audio from our three questions:

What sort of access have you had to the PM and to bully in-chief, Stephen Conroy, over the NBN process?
Can you give us an update of how many people have been recruited to the NBN?
What was the information that most jumped out to you, from the botch up by Senator Conroy tabling the confidential report in the Senate?

Leighton remuneration report debate

There was a big protest vote against Wal King's excessive salary at the Leighton Holdings AGM, but the issue got obscured in part because the debate was pretty lame and controlling shareholder Hochtief made the protest look smaller than it was. Have a listen to the remuneration debate.

Transfield Services 2009 AGM

The 2009 Transfield Services AGM held in Sydney last week was a cracker for the detail of information disclosed to shareholders.

The full exchanges have been packaged up in this single audio file whilst the individual debates have been broken down into the following audio files:

You owe us heavily diluted retail shareholders a share purchase plan
Chairman Tony Shepherd and the Belgiorno-Nettis family both acknowledged the arguments for an SPP after last year's heavily discounted institutional placement and the inability of retail investors to apply for "overs" in the entitlement offer, which finished only 63% subscribed.

Why did the new CEO embrace write-offs when the last bloke said everything was fine?
An interesting debate about the recent US write-off which left the balance sheet looking even more conservative given that the market of $1.7 billion is now almost double claimed net assets.

Well done for putting the new CEO up for election
Dr Peter Goode was elected to the board for three years when the majority of companies use the Corps Law exemption granted to the managing director.

The chairman's margin calls, tenure and Leighton relationship
Tony Shepherd openly admitted to his financial problems last year and also highlighted that he'd resigned from the Leighton-run Aquasure consortium which run the Victorian desalination plant contract. Certainly wasn't a good look to be associated with Leighton after its outrageous $450 million damages claim against ConnectEast, which is chaired by Shepherd and was partly put together by Leighton itself as one of the original sponsors.

How leveraged are the Belgiorno-Nettis directors and are they now over-represented?
Seemed very strange to have the family claim to have no leverage at all over their much-diminished 14% stake when they didn't have the financial capacity to take up last year's emergency 1-for-1 entitlement offer.

Why did you punt PwC as auditor?
The out-going auditor got up to say he was fine with a process that saw his firm kicked out of the audit and also lose Transfield's tax work.

Well done on remuneration and for running an excellent AGM
With more than 90% in favour, the shareholders clearly are comfortable Transfield has alignment with its executives.

Are we reaching a tipping point with the pokies?

Check out Paul Bendat's excellent website for more on Woolies, and this story on ABC TV the 7.30 Report on November 4, 2009.

More Cornwall cartoons for The Mayne Report

Former Fairfax and Crikey cartoonist Mark Cornwall has been contributing his satirical commentary to the Mayne Report since March 2009. Here is a collection of his best cartoons and there are now also some amusing animations. Check out some of his latest offerings through the edition:

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The Mayne Report costs about $70,000 a year to run (assuming I don't get paid a salary) and we moved to a free model in June, after struggling along seeking subscriptions for the first 21 months as we racked up almost $200,000 in losses.

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November 9
donated $50 in cash at today's Seven AGM

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Capital raising profits slow in October

Check out this complete chronological list of all capital raising plays in 2009 and at the bottom is a list of the 17 or so upcoming offers.

There's also this version ranking the top 60-plus plays since January. For the latest shuffles in our ridiculously large tiny share portfolio, check out all trades in 2009 plus the full portfolio of 745 holdings worth just $56,136 . The unrealised losses currently stand at $10,022 and the average holding is only worth $75, so it would hardly be worth liquidating the portfolio given the average brokerage of $20.

That said, all these holdings present a wide range of capital raising offers and it has been a good year playing the margins in a rising market. However, October was our slowest month since the run began in March as these monthly breakdowns demonstrate:

January: broke even
February: broke even
March: $10,170 profit
April: $36,996 profit
May: $31,639 profit
June: $86,600 profit
July: $28,293 profit
August: $12,758 profit
September: $32,229 profit
October: $8901
November profits so far: $12,600

November got off to a good start with gross gains of almost $13,000 in AWB and Elders last week, although there have been quite a few other small losses and the pipeline is looking less attractive than it has since February. Anyway, here is the detail of the latest plays since the last edition:

November 6
Myer: dropped about $500 getting out of $20,000 play which was scaled back to $7000.

November 3
Boart Longyear: $30,000 into two $15,000 SPPs at 27c. Scaled back to $19,500 and exited at 27.5c to make $300.
$15,000 into at $12.40 which closed October 23 with no scale back. Exited at $12.50 to break even.
Elders: $40,000 into two $20,000 SPP entitlements at 15c and received the lot. Exited at 17.5c for gain of $6700.

November 2:
AWB: $40,000 into two entitlements to 1-for-1 offer at $1 with extras. Scaled back to $30,000 and exited at $1.20 for $6000 gain.
Bass Strait Oil: $10,000 into 2-for-3 entitlement offer at 3c with extras. Exited at 3c so lost about $400 getting on register.

All the recent share trades

Check out all the trades so far this year and here's the world's biggest small portfolio along with most of the recent trades below:

November 6
Cazaly Resources:
bought 2,000 at 25c
Myer: sold 1,690 for $3.77

November 5
Transfield Services:
bought 242 at $4.21

November 3
Boart Longyear: sold 72,000 at 27.5c
Brickworks: sold 1,200 at $12.32
Caspian Oil and Gas: sold 26,306 at 1.4c
Elders: sold 267,500 at 17.5c
Isoft: sold 540 at 77c
Reece: sold 16 at $23.85
Willmot Forrests: sold 916 at 41c

November 2
Australian Wheat Board: sold 30,265 at $1.195
Bass Strait Oil: sold 350,755 at 3c
Campbell Bros: sold 18 at $28.91

Latest updated lists:
government bonds on issue

We love a good list at The Mayne Report and have been tracking all federal debt issues since Kevin Rudd decided to go on a Whitlam-esque spending spree last year.

This list tracks all bond and treasury note issues by the Rudd Government since it was elected in November 2007. There has now been more than $40 billion raised since the second stimulus package was unveiled on February 3. The latest are as follows and you'll note that interest rates are well in excess of the 4% assumed in the budget papers:

Friday, November 6, 2009: $700m tender of 3 year bonds expiring in April 2012 were sold for an average yield of 5.02% and was 2.2 times over-subscribed.

Wednesday, November 4, 2009: $500m tender of 10 year bonds expiring in April 2020 were sold for an average yield of 5.64% and was 4.4 times over-subscribed.

ASIC jail list
Is ASIC an effective corporate cop? You be the judge as this is the list of 347 people they have sent to jail since it was established in January 1991.

19 October 2009 - Mr Brett Best, of Middle Park, Brisbane, was sentenced to 13 years imprisonment for various charges related to operating an unregistered managed investment scheme while director of Arafura Equities. He pleaded guilty to seven charges of dishonestly gaining a financial advantage for himself and his company, and one charge of operating an unregistered managed investment scheme.

Press Room and podcasts

As usual, there's been plenty of engagement with the media, starting with our favourite medium, radio:

774 ABC Melbourne - discussing the need for more women on boards in corporate Australia on Friday November 6.

720 ABC Perth - discussing the four AGMs that we attended.

774 ABC Melbourne - discussing interest rates and Peter Costello's new job on Wednesday November 4.

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We have only been twittering for a few months, but now have 860 followers and are regularly dropping out the latest developments from AGMs, capital raising plays and even Manningham Council. Sign up below to get the latest updates from all our activity and check out some of the latest tweets :

2.20pm Nov 9 A great debate at the Seven Network AGM. Listen to all our questions here

9.15am Nov 9 In Sydney for Seven Network AGM. Kerry Stokes has finally agreed to webcast so listen in.

Nov 8 Listen to some cracking audio from the 4 AGMs in Perth on Friday:

5.15pm Nov 6 Just carved up Western Areas directors in Perth whilst over limit after a long lunch with ripped suit pants then did runner to airport. Wow

4.05pm Nov 6 Discussing the need for more women on boards in corporate Australia

2.20pm Nov 6 Chatting on 720 ABC Perth about the AGMs today

12.20pm Nov 6 Walking around Perth with huge rip in bum of suit. Oh dear. Doing ABC Perth after IMF AGM and just before Cazaly. Exited Myer for $500 loss.

8.20pm Nov 5 Heading to Perth at sparrows tomorrow for IMF, Cazaly Resources, Atlas Iron and Western Areas AGMs. A very colourful bunch indeed.

6.20pm Nov 4 774 ABC Melbourne discussing interest rates and Peter Costello's new job

4.19pm Nov 4 Great debate at Transfield AGM in Sydney. Botched Telstra as arrived late not realising was a jumbo debate with nothing on rem or directors

Nov 4 Regular chat with Lindy Burns on 774 ABC Melbourne at 5.40pm

Nov 4 In Sydney for the Telstra AGM. A long drawn out affair but asked these questions

1pm Nov 3 Big Melbourne Cup Day win as just exited 40k Elders and 20k Boart Longyear capital raising plays with gains of $6700 and $300 respectively.

3pm Nov 1 Myer tanks to trade at average $3.90 as $100m worth traded in first 5 minutes. Investors are down $117m, whilst private equity up 600%.

12.46pm Nov 1 Just sent this bumper Mayne Report email edition. Check it out here:

12.22pm Nov 1Fairfax goes live with this on AWB rip-off:

11.23pm Oct 31Finishing another capital raisings column for Fairfax to run tomorrow. Details how AWB shafted its army of farmer shareholders.

That's all for now.

Wish us luck for Fairfax tomorrow and do ya best, Stephen Mayne

* The Mayne Report is a multi-media governance website published by Stephen Mayne with occasional email editions. To unsubscribe from the emails click here.