IMF (AUSTRALIA) LTD
IMF - 2008 Annual General Meeting - Mr Rob Ferguson, CEO
Friday, 7 November 2008 10:00am
Consensus Data
| Broker | EPS (A$) | Sales (A$) | ||||
|---|---|---|---|---|---|---|
| 2009 | 2010 | 2011 | 2009 | 2010 | 2011 | |
| RBS Morgans | 0.00 | 0.20 | 0.30 | 0.00 | 37.10 | 50.30 |
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Mr Rob Ferguson
Fri, 7 Nov 2008
10:00am Australia/Sydney
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IMF (AUSTRALIA) LTD (IMF)
ASX code: IMF
Website: http://www.imf.com.au/
Industry: Diversified Financials
Principal Activities:
Provision of litigation funding and support services to insolvency and legal practitioners.
Address:
, 32 Martin Place, Level 5,
Sydney
NSW
Phone: 02 8223 3567
Fax: 02 8223 3555
Executives & Directors
Mr Robert Ferguson , Non Exec. Chairman
Mr Hugh McLernon , Managing Director
Mr John Walker , Executive Director
Mr Michael Bowen , Non Exec. Director
Mr Alden Halse , Non Exec. Director
Ms Diane Jones , CFO
Ms Diane Jones , Company Secretary
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IMF (AUSTRALIA) LTD (IMF) Events
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IMF (AUSTRALIA) LTD (IMF)
| TPI: Clarification on todays media | Tue, 9 Mar 2010 |
| New Funding Agreement - Transpacific Industries | Mon, 8 Mar 2010 |
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PRESENTATION BY MR. ROB FERGUSON, CHIEF EXECUTIVE OFFICER OF IMF (AUSTRALIA) LTD (IMF)
“2008 Annual General Meeting”
http://www.brr.com.au/event/53546
FRIDAY, NOVEMBER 7, 2008, 11:00 AM.
IMF Annual General Meeting of IMF Australia Limited. My name is Rob Ferguson and I’m the Executive Chairman of IMF.
10
Before we start the formal business, I’d like to introduce my fellow directors, John Walker, next to me, Michael Bowen, Hugh McLernon, and Alden Halse. The company’s secretary, Diane Jones, is in the audience and (inaudible) (00:00:29) and Colin Pavlovich from Ernst & Young is present and Colin’s our
15 auditor.
Today’s meeting, we’re here to conduct the formal business as set out in the notice and at the close of the formal material, I’m happy and all of the other directors are happy to answer any questions. The only items on the agenda
20 are the four items set out in the notice on meeting. After each items are read out, I’ll be inviting comments from the floor and after any discussion, I’ll be asking for a show of hands.
We’ve all received the notice of meeting detailing the business to be dealt
25 with today and if there are no objections in an effort to expedite matters, I move that the notice of meeting be taken as read. All in favour that? Against? I declare the motion carried.
Proxies, just to note that proxies we’ve received, 73 million proxies
30 representing 62% of the shareholders of the company and these proxies are available for inspection. That’s a pretty good turnout. I think it’s better than…the numbers are better than the US elections in terms of percentages. The previous minutes…the minutes of the last annual general meeting of the company were held on the 16th of November ’07, there available at the
35 meeting if any shareholder wishes to inspect them. I move that the minutes of the annual general meeting held on the 16th of November ’07 be taken as read and that (inaudible) (00:02:05) as a correct record. All in favour? Against? Carried.
40 A table of financial statements for the company for the year ended 30th of June ’08 to give the director’s declarations or director’s report and auditor’s report. If there are any questions on these reports, can we have them at the end of the meeting?
45 What I’d like to do now is give you an overview and get out of the way. This is an overview of 2008. A little out of date because it doesn’t have a cash as it is now but just to get through it quickly, for the fiscal 2008 year we had a tremendous increase in profit as you know, settled a large number of cases, as more elaboration on that later on in the slides. We got in $52 million compared to $23 million. We’ve paid our first franked dividend, we strengthened our balance sheet with an increase in net assets to $67 million. The claim value got up about $1 billion, although I would caution there are issues in terms of collectability of those claims.
5
In terms of the settle percentages we’ve had in our past history because some of the continuous disclosure matters, we ended up with very large piles of claims but the amount that’s available to collect is probably not as large, well certainly not as large, certainly not as large as we would like and we
10 would be relying on insurance policies and those sort of things. The good part of that that was given the fact that we’re having a lot of the continuous disclosure matters going to administration means that we’re probably less likely to have to run expensive court cases, so collectability might be down in terms of quantity but cost in terms of proceeding on these matters is down
15 and down quite dramatically. We saw the conditional settlement of Aristocrat and that become unconditional in August. We saw cash got a $51 but that’s a lot better and we’ll see a better slide on that later, and we’re debt free, which is a wonderful position to be in this environment. So our earnings per share up to 15 cents, diluted 14.7 return on assets, a good figure, 17.7 return on
20 equity, 25.5 and no debt.
Looking at the matters, a particularly good year in Western Australia that they dominate the list, virtually the top six or seven or maybe even more transactions particularly the Wright matter, and of course what we’re talking
25 about here is fiscal ’08. Aristocrat came after this, just generally, a very good diverse collection of matters and pretty good ratios, too, in terms of how much we spent and how much we got back.
Cash up to $83.5 million, we’re budgeting that to go a bit higher based on
30 some downer and some other matters that are sort of in a bag, but we are in a position where we’re going to start paying tax during this fiscal year, and so that will put a little bit of a dent in that but we’re still looking at a very, very strong cash figure.
35 Investments, you can see investments come down. That reflects the maturing phase that the business has gone through in terms of the pipeline. I use the analogy of ripe fruit with had a lot of ripe fruit to pick and that’s been reflected in the investment portfolio coming down. We are adding new investments as I talked about a minute ago, primarily in the disclosure area, but we’re not
40 putting a lot of money into them. Also, for the reason that I mentioned, but also for the reason that I’ve mentioned but also we’re just careful about spending money on matters where we’re not sure what the recoverability is. So…and when we look at that $20 million figure, we’re disappointed with that. We said to ourselves why aren’t writing more business in this environment?
45 Seem to be the ideal environment for us and I think it’s a combination of the continuous disclosure matters being the early things that happen in a financial crisis or finance driven recession, but I think it probably takes a lot longer for the other matters to emerge. I heard somebody commenting on the financial crisis here today and we use the analogy of it. It’s like a train wreck or car smash where a lots of injured people and lots of bodies and the authorities are out just gathering up the bodies and gathering up the injured the people taking to the hospital and they’re not really concerned about blame at the minutes. Blame’s probably a fair way away because everybody is just
5 concerned about survivability and getting the system back on a proper kilter. Once that’s done, I think the blame will inevitably happen and the blame phase is the phase where we should see these matters emerge and I’m sort of reminded that some of the matters that we’re looking at now like Sons of Gwalia go back to the early 2000 period and so the whole insolvency area,
10 there does seem to be tremendous lags in that’s certain we have to keep reminding ourselves that when we get disappointed by the matters emerging. What we ideally would like is a well-balanced portfolio of continuous disclosure matters, insolvency matters, and corporate matters and I think that will emerge over the next three or four years.
15
Moving on. Settlements, since balance state Aristocrat a fantastic result and that was a really good effort particularly on behalf of the Sydney office. Shenton Park, Concept Equity, and Downer, a more recent one, and Downer is an interesting one and it’s a continuous disclosure matter that followed on
20 from the Aristocrat settlement. I think the message has got out into the legal market place about sort of unofficial precedence in these disclose matters, not precedence that have been established in the court but precedence that have been established in mediation and negotiation which has made defendants I think fairly realistic and often the defendants or usually
25 defendants are backed by insurance companies and I think they’ve got a lot more realism about the chances of success and the dubious nature of continuing to defend and run up cost and run up cost on our side which we ultimately have to pay. So in the case of Downer, we saw a very profitable settlement and a fairly minimal outlay. In fact, most of that outlay was our own
30 overhead and the legal cost were a very small part of that, probably earning $300,000.
Capital management, the buy back was announced in February with Board zero shares. We haven’t got very good brokers on the case. I think our main
35 problem is that we’re very mean. We have sort of a mean attitude to buy back rather that one that looks to buy just a little bit below the market. I think the buy backs there really in the event of somebody coming along in a very illiquid environment and wanting to get rid of a large parcel and us being a sort of a buy of last resort but imposing a last resort price as well.
40
The Convertible Note Redemption that was done during the year and that had the benefit of cancelling a large number of options that would’ve meant dilution for us all and so that was a good result. The dividend we’ve talked about... and on capital management, we’ve got this proposal for a reduction
45 of capital for up to $10 million with the tax department. It’s not clear what the result would be. They haven’t given us a final indication but it may be somewhat lower than that amount when we finally get the approval, if we get approval.
In our 2009 forecast which we made at a very early stage for a company with such earnings and predictability, we made that at the early stage because of the (inaudible) (00:11:43) credit amount that was so large so it virtually underwrote profits for the year. We still going well in regard to that forecast,
5 that was a conservative forecast given that it was announced so early and that forecast does give us the capacity to pay very good franked dividends during the year. As to how much we’re going to pay, we’re still debating that and we’re just waiting to see what happens in terms of the ATO on the capital reduction before we give better guidance on that.
10
So this is the forecast for the year, first half better than the second because of Aristocrat. The cash balance very healthy. The capital return we’ve talked about and franked dividends we’ve talked about.
15 In terms of the climate, it’s obviously positive for us and bad for most of the rest of the world and we’re hoping to build a strong portfolio over the next several years. There is increase in competition, the main domestic competition of substance is (inaudible) (00:12:45) aligned with an American funder but no doubt that we have people competing, although one of the
20 areas that we thought was perspective for competition were hedge funds or hedge fund related top businesses. They’re obviously got their own problems so that lessens the amount of money available for competition when essentially we’re in a business where we’re making an isolation risky investments in a portfolio. I think you can see the results that works out very
25 well in a portfolio and risk capital at the minute is sort of non-existent in the market place, so I think it will be harder for people to emerge as strong competition at certainly at the size that they’ll need to be for a lot of the actions that we’ll be competing for.
30 New Agreements, Centro Credit Corp, and ABC, they’re all continuous disclosure. Pan Pharmaceuticals a very interesting one, another disclose matter. We’re very happy with that matter. We like the risk reward, even though we’re going against the come off but there’s already been a settlement in a related matter there and it’s not a matter that’s I believe
35 expensive to run, although it’s very complicated because we’ll be looking to establish what damage was done to a lot of the people that bought product off Pan and were badly damaged by that. There’s probably a couple of hundred different businesses and we’ll have to look and analyse all of those different businesses and prove, financially prove what damage was done, well in fact
40 that Pan was put out of business and Pan accounted to something like 70% of the shelf space.
OPES and Beconwood are two interesting cases to do and they’re actually examples of things that have emerged fairly early in the financial crisis and
45 that’s because of margin lending and the way margin lending and its problem show up when stock markets go down, so those activities are sort of related to continuous disclosures and that they’ve wrote out in front in terms of the cycle.
Nothing else of particular and note talk about there, so we move on now.
A European Joint Venture, we started up an operation based in Dublin to do in particular cartel matters in Europe with an emphasis on the UK. What we
5 found is the environment is a lot tougher there in terms of the (inaudible) (00:15:37) and we anticipated but also given the significant appreciation of the Australian dollar against a Euro, there’s something like a 30% increase in the cost of doing business over there and that’s obviously a major change and the global economic crisis, even though it should throw up plenty of
10 opportunities over there as I’ve indicated that should throw up plenty here as well. One of the reasons that we went there was that it was in an environment where we’re worried about our capacity to build the portfolio here because the financial crisis really hadn’t started in any substantial way but I think we’re more confident about matters emerging in Australia, so we’ve decided to
15 withdraw. It was an expensive exercise but all of the costs have been provided for in terms of write-offs or in terms of taking into account in our forecast, so the cost will not affect our forecast.
Just one final thing, we’re in a new environment in terms of compensation
20 where appropriately compensation is under great scrutiny, so I thought it would be worthwhile to just elaborate on the way we do things here in terms of bonus and remuneration. We have a bonus scheme that has worked, has been in place for the last two years and it’s something that we’ve been, as a Board, we’ve been not a participant in the scheme and the other two Non
25 Executive Directors have worked on with Diane to fine tune. We started off working on the basis of looking for a target return on weighted net assets and we worked on 15% in ’07 and then we tweaked it up to 20% in ’08. That meant that we had to get to a target of profit of $6.4 in ’07 or $9.4 in ’08 before there was any cut in, any (inaudible) (00:17:55) for a dollar. The actual
30 pre-tax in those two years meant that there was a potential for a cut-in. The cut-in was $1.8 in ’07 and $15.4 in ’08. That then produced a maximum bonus pool of $0.6 in ’07 and $5.4 in ’08 but then we’ve got an additional check-in balance where there’s a cap of the bonus pool in any one year and it can’t be any more than 100% of the total base compensation and that’s
35 approximately $3.9 million, and se we ended up the actually bonus pool paid was $0.3 in ’07 and $2.8 in ’08. That bonus pool as a percentage of the maximum that is related to the cap was 53% and 73%. So even though we had this large pool, we didn’t pay it all out so we looked at that as a maximum amount, but then we also looked at that in a subjective way about, and
40 thought about how the business have gone, took into account the fact that the year was a culmination of many, many years of building the business, so the end of a drought and a particularly good period and also individual performance. If we then look at the metrics of how a bonus compared to the total profits of the company, the bonus pool was 4% of pre-tax in ’07 and 11%
45 in ’08 and our total wages and bonuses a percentage in ’07 was 47%, in ’08 32%, so actually going down in the last year. I think that sort of reflects, I think they’re fairly good statistics for what’s predominantly a people business, a service business where the large amount of your cost is wages.
I think that’s it. Diane, isn’t it? Any question on that presentation?
Q (inaudible)? (00:20:19)
IMF Well, I think as a set-up we’ve been tweaking it and I think it’s probably…I
5 wouldn’t say it’s fixed but as, you know, because I wouldn’t want to be locked in forever but I think it’s fairly, you know, it’s a fairly firm figure now. When you come in…during remuneration in a business like this it’s very hard because of the volatility and also of a long (inaudible) (00:20:57) and nature of matters, you can have tremendous work being done but no success even though you
10 might have something that’s on the verge, so it’s really difficult to come up with something and that’s why we’ve fiddle around a bit.
Q (inaudible) (0:21:14)? Certainly the investors today (inaudible)? (00:21:32)
IMF I think that $15.2 would have been primarily Aristocrat, I think Diane would
15 know because that was about $12.5.
Q How are the recent developments with regards to ABC impact IMF from decline? And I’m specifically referring to the appointment of (inaudible) (00:21:56) is it?
20 IMF Well Andy appointment of (inaudible) is the administration.
IMF Speak up John.
IMF What…the claim is in regard to two years of misleading the market in regard
25 to what was the real business and its profit. So there’s a very large nominal claim in excess of $500 million. We have 20% of the share register as clients currently. So the appointment of an administrator clearly takes away in broad terms the capacity of getting any value for the business for the shareholders in all likelihood, so you’re left with a structure priority under the act and what
30 currently we have is a charge which was created in June of this year so four months old, it’s green, this indicative…
Q What green?
IMF It’s not six months old so in other words under the Corporations Act, if at the
35 time the charge was granted the company was insolvent, then the charge is void as against that the liquidator, if a liquidator is appointed. So, the claim continues, the sense of value of claim continues, it would be far more valuable if that charge is determined to be void. I don’t know the value if any of the Sons of Gwalia claim, if it’s not declared void, but in addition to that
40 there are the usual circumstances of looking at the DNO policy in regard to increasing the pool available and that’s only available to people who claim on the policies so it’s not available to the general body of creditors and secondly any order to claim that may be available particularly for audits for the ‘06 and ‘07 year in regard to ABC.
45
IMF (inaudible) (0:23:50) is the sign and it was the sign that they can (inaudible) and day out, but the cost in which they filed (inaudible) (0:24:20) administration policies, and if you can think of that it should have this meaning on the cases we would use (inaudible) (0:24:34) it was very good (inaudible) (0:24:38). I did not say whether this (inaudible) (0:24:43) what they’ve done, you might have say this (inaudible) next time (inaudible) (0:25:28) a hundred. It’s looks that…
IMF 500.
5
IMF It obviously (inaudible) (0:25:46).
Q This is I guess a related question but can you explain more about the relevance in terms of recoverability…I mean, you’ve talked about the charge
10 you shown whether that could be valid or not and that be approved lie down the track but also in terms of the recoverability issue comment more about directors insurance and the relevance to that about the possible recoverability for some of these actions? Thank you.
IMF One of the major (inaudible) (0:26:25) is the fact that this insurance is
15 (inaudible) (0:26:31) and you probably (inaudible) (0:26:29). So we are (inaudible) (0:26:43) an extremely high probability, so there’s indeed (inaudible) (0:27:08).
IMF There’s also the circumstance where the receiver goes in on the charge but
20 the administrators left without any money and without any books and records. So, he’s very needy in regard to resourcing, and so you’ll find in this ABC and Allco-type situations, the administrator who’s there for the company as distinct from the receiver, whose there for the reported secured creditors, will want funding. And so that’s another way into the project, not necessarily
25 through the shareholders but potentially directly funding the external controllers.
IMF (inaudible)
30 Q Can you just expand on the capital return, in a bit more detail other than, you‘re not sure what’s going to happen with the ATL?
IMF Just what sort of detail would like?
Q Well, how… you said that it may not be 8.3 cents. What it might it be? What
35 do you expect?
IMF Well, we don’t know because we’ve just had vague indications from them but it might be…
Q Or what are the issues, I’m a naïve expert, naïve in this?
40 IMF So am I. I think they’ve complicated tax issues but at the end of the day maybe we’ll end up with maybe a 10%, 15%, 20% discount on that figure but we don’t know. We might begin up with the whole figure. ATL will give us a figure and we’ll just have to cope it, that’s the way the system work.
45 Q You’re saying you don’t understand why they might discount that?
IMF And we expect to get that on the 14th of November, so it’s pretty close. Sorry, what was that question?
Q You’re saying you don’t understand why they would discount that? You have no understanding of that?
IMF No.
5 Q Nobody knows?
IMF Diane has understanding of it about…
Q Diane?
10 IMF There is an element of subjectivity that is (inaudible) that we have been (inaudible). When you (inaudible) have had anything to approve or (inaudible). We had worked very closely (inaudible) and we came up with a number of calculations and what’s going on (inaudible) calculations complied with ATO’s views on capital returns. Now, we thought we did the right thing
15 but there is this element of subjectivity that tax (inaudible) can applied and may or may not apply in this case, so we just have to wait and see what the tax office says in their preliminary ruling back to what which we hope to receive on the 14th, look at it, simply agree, and may be talk to catch up, if we don’t agree, but it’s (inaudible) to say.
20
Q Alright, thank you.
IMF Subjectivity means once approved, (inaudible) that’s the only basis we only answer (inaudible).
25 Q Okay. If that doesn’t take place, we obviously got a lot of cash locked up in the business and I’m sure, you more than anyone would have release it, various scenarios that you’re investigating directionally provide…
IMF Yes.
30 Q … because you’re going to give guidance on dividend policy, can you go on a far greater detail on that?
IMF Well, I don’t want to do that now, we’d rather wait to see what happens with the capital return, but as you can see we’ve got plenty of dividend-paying capacity in the coming year and that’s something that we’ll clarify after we find
35 out what the situation is with the capital return.
Q Sorry, I guess you guys also have to be mindful that you know, you build your book, you’ve got to fund those actions, sometimes it take a lot of time so you can’t just really throw your cash.
40 IMF Yeah. I think…
S (inaudible)
IMF Yeah, but… we have, but…
45 Q No, but you know, I know that (inaudible) in the 4 or 5 years every first (inaudible)…
IMF Yes, that’s true…
Q (Inaudible)
IMF Well, sorry but… no… you’re right, you’re right, but just on that $20 million this year we virtually earned it. So, that’s largely reflected in the $90 million apart from the (inaudible). So, but look, I take your point and what we will do is give an indication of what we think. You’re right, we talked about $20
5 million before, we need to give guidance as to what we think is the amount that we need going forward as a base amount, and we’ll do that once we’ve got clarification on the capital return and then we can give guidance on the dividend as well.
10 Q (Inaudible) even take forward the market (inaudible) and the value of (inaudible) give and take or (inaudible). What’s the marketing plan? (inaudible)
IMF Well, frankly, my marketing plan is to write more business and get more profits and the market will work out, had a value or so. I don’t think we should
15 be valued on a multiple and I’ll save it to the market unless we can establish a portfolio that’s got no holes in it, no sort of weak spots in it in the future. If we did that, then you’ve obviously, you could value us on a combination of a (inaudible) or PV. But, I think, the best way to value us is, looking at the total portfolio and discounting effect, and I think our job is to just keep
20 increasing the portfolio. We’ve got an… internally, we say to ourselves why can’t we double the portfolio? Now that’s a big ask, but that’s the thinking that we’re applying in this market place. If we can do that over the next 3 or 4 years, I think that will provide something that the market can sit back and value and start to feel more comfortable about looking at how it’s kind of,
25 have the earnings are going to come out of a longer term and what that’s going to mean in terms of dividends and therefore, feel more comfortable about putting a high price.
Steven?
30
Q Steven (inaudible), Chairman, the Babcock & Brown Power meeting starts in 20 minutes, just around the corner. I know there is smorgasbord of opportunities out there for you in this market, but you’ve done (inaudible) party managed (inaudible). The Babcock & Brown Power situation is the
35 worse of any that’s over a hundred million phased out last year, have kept (inaudible) million, so it’s just outrageous, why haven’t you been in the market actually starting some actions or making some noise around that whole route?
IMF Well, we’ve looked at Babcock & Brown Power, there’s a collectibility issue
40 there, obviously, but also the Babcock & Brown disclosures, and I’m talking more about disclosures as compared to these agreements, the disclosures are very carefully worded. There is a legal culture in Babcock & Brown and so I think that we’re very aware of disclosure, we’re now doing these things. So, from a phasing, we had it looked it up, we continue to monitor it but there
45 is this collectibility thing, we don’t want to spend a lot of money on things like that given that issue.
As to the agreements, we saw the RiskMetrics report a year ago that they had put out, we had a close look at it. I thought it was a brilliant report but I
don’t know that…at this stage, we’re not aware of any particular irregularities, but I think we’re now in an environment where you can start to scroll through documents and that something we’re very good at, getting down right into the depth of documents looking for the things that were inappropriate or things
5 that indicated for disclosure and that’s a process we’re starting to do now, but that’s… as you know, a lot of these documents are only now starting to be revealed, so there’s plenty of time to do that especially given this collectibility issue and that sort of putting through document is a bit more orientated towards documents put out by larger organizations that there isn’t
10 such a collectibility issue.
Q This is not the end of full client demand in there, you know what I mean. Shareholders have come to understand that they’ve (inaudible) we want to see…I can see that (inaudible) but we haven’t see a way of
15 (inaudible) in this many problems yet and it may (inaudible) they don’t yet understand compared to the problems of (inaudible).
S Well, I’m on all those registers and I’m happy give you a wife, key for some action there. There’s just one other situation that I wanted to mention today
20 was Toll Holdings, we had some figures come into the market through RiskMetrics that $55 million was paid out to a bunch of executives on a series of unbelievable assumptions, buying out their options, assuming a share price of between 30 and 40 bucks, it’s now below 8. Clearly now that this appears in the market, the market was completely misled, the shareholders are
25 completely misled on the basis the assumptions surrounding the payout and surely, these have not our action there to recover $30 or $40 million from, particularly, little on the raw storm, (inaudible) is you’ve got plenty of cash recovering for shareholders. Have you had a look at that one?
IMF Yes, we have. (inaudible) eluded us probably about the same time as he
30 eluded you. So, we’ve had a looked at it and we will continue to have a look at it, but our initial feeling was that it was very difficult, and maybe John would like to elaborate.
IMF We’re not activists. We’re litigators seeking recovery for the victims. The
35 victim, if there is one in any of these management agreement structures and I think I’m sympathetic to your views, we’ve talked about it before, is the company. The actual loss to the shareholders, if it is $50 million inappropriately either through breached fiduciary duty or whatever, lost to the shareholders. It’s quite a small amount in comparison of the capitalization of
40 the company, so even if there was a shareholder claim, the question is whether it’s sufficiently material and sufficient enough to appetite of victims to get together to make the project worthwhile. The real project there is the company’s project, the company is led by the Board. It’s very unlikely the company will take that action, so it’s left to a derivative suit and
45 unfortunately in Australia, we don’t have a derivative suit like in New Zealand where shareholders can get the company to take the action if the court considers it as appropriate using the company’s money. Now, you know, that’s something for reform book that we do our share lobbying, but that’s not our business.
IMF The another possibility, Steven, is ASIC could put itself in the company’s shoes. They’ve done it in the case of Westpoint and that’s something we’ve... clearly, ASIC should have a look at it and given the profile of it and given the
5 concentration on commentation issues now, there’s a chance may be, but we’ll have a look at it.
Q You said you negotiated (inaudible) in the last 18 months or so, we understand how important to receive amount of ammunition (inaudible) and
10 the more you can (inaudible) to be able to provide (inaudible).
IMF When the bag was 115 million, we didn’t look real mean. So, now with 80 to 90, we look really mean, so you know, it’s improved a lot.
IMF As you said, I think, 2 or 3 weeks ago, we should change our motto, what was
15 it Hugh? Basically, prepare for war to achieve peace.
IMF Steven, on this Babcock & Brown thing, I’m not a lawyer but it seems a hard road to go down because even though the market cap of Babcock & Brown is $100 million, I don’t know what it is. I’ve done a billion dollar transaction, they
20 pay 1%, $800 million fee. Their argument is, well, we could have got UBS to do that and UBS’ fee is 1% or thereabout, that’s a $100 million.
Q (Inaudible)
IMF Sorry?
25
Q One percent is ten.
IMF Sorry. Yes, yes (inaudible).
IMF You’re an (inaudible).
30
IMF Well, the $100 million would have been an accumulation of those sorts of fees on a very large transaction, I’m sure, and that would be their defence, that if they went out into the market, they would have paid a comparable fee. Now, that might have sort of put have been an icing on a cake, but I just think
35 it’d be hard to go and get them.
IMF Alden, this is (Inaudible) a shareholders (inaudible).
Q Is it likely that you’ll be looking at the institutions, sort of, short… and involving
40 short selling particularly in the light of the huge losses, what price are they getting their shares back up and were there any losses to trust this and fund managers. Are they your targets?
IMF Not particularly, I mean, short selling… criticism of short selling in general, I think, sort of shooting the messenger. Eddie (inaudible) was a great critic of
45 short selling, but I don’t think that that was his real problem as we’re starting to see now. So, look if some irregularities emerge... there was one particular irregularity emerged when we, I think, it actually was with ABC where we’ve found out that there was very heavy short selling of ABC that was probably based on inside information. If we could establish that and go through and identify that short seller who happened to be in a different jurisdiction, then we’d look at it, but we had a quick look at it and looked too hard.
IMF (Inaudible) on those sort of (inaudible) that means that if you take that sales
5 (inaudible), so I think, short selling (inaudible).
Q As you mentioned early, there’s some increased competition, for example, in some of the continuous disclosure actions (inaudible) fund deposit overseas into this. Given in some of these cases, there’s going to be overlapping
10 claims, the IMF back claims, and so the Slater & Gordon claim. This, you came up, of course, in Centro last month about the state of action and a judge in that case (inaudible), said no, I’m going to grant the stay of action. You, guys… you and Slater & Gordon have to go away and cooperate and so forth. So, can you…given that these overlapping claims might be a continual
15 feature over the next year or two, can you comment on what your strategy will be to, I guess, expedite these matters?
IMF (Inaudible)…
Q Yes.
20 IMF (Inaudible)…
IMF Yes. It remains to be seen whether or not that particular judge stays on the case because he lost $1,700 of Centro money himself. Look, it’s a very interesting issue and where it pans out, nobody knows. It’s a new
25 circumstance. The judge in that case sought to bring in learnings from America to see how we resolve these conflicting claims because, clearly, it’s inappropriate for two claims to precede dealing with the same issue. It’s inefficient, it’s time consuming, and the courts were a public… provision of a public service at public costs. So, you know, my sense is that it’ll be a
30 practical solution that in the event that that two need to proceed, then there’ll be housekeeping mechanisms whereby the solicitors agree upon what the portion is done by each and really, you only end up having one process, but the two law firms coming together to seek the trend, create one project with hopefully one cost. Now, that is not going to happen in a broad sense, but
35 that’s the objective. Trying to get one party out, I think it’s not likely to happen. I think it’s probably what’s more likely is that the people who end up achieving the greatest support for their case from the market will end up running the case, and so that the party who doesn’t have that support is likely to look for some other project to fill their time in.
40
Q John, is there an opportunity here for (inaudible) or it can be (inaudible) case (inaudible)
IMF (inaudible).
45 Q You know, the third party as so to say, is there an opportunity (inaudible).
IMF That’s exactly the way that the discussions, sort of, progressed.
Q We would love it if you’ll be able to (Inaudible).
IMF Yes.
Q (Inaudible).
IMF Sorry?
5 Q (Inaudible) performed?
IMF We haven’t talked about…we’ll be paying a dividend, but we haven’t talk about on how we do it. There’s one argument that says, given that we’ve earned the money, and a lot of the money, and we’ve got cash in the bank, we should pay earlier rather than later. That’s a strong argument, I think, get it
10 out of the way because the whole idea is to get the money out because it’s a drag and it’s better off in the shareholders’ hands.
On that, just on that, as a shareholder, (inaudible) support if it’s possible to pay an interim dividend to sort of smooth the dividend out, stream out through
15 the year rather than just having one big one at the end of the year.
IMF So, you haven’t got any cash pressures?
Q No, that I was just going to comment. My question is regarding the Pan
20 Pharmaceuticals action, you mentioned there’s some complication regarding that as far as the company is that business relied on Pan Pharmaceutical, so that might take some time up. But, given the come off has already settled the action with selling earlier and the payout was quite significant because of the embarrassing, I guess, evidence that came out in court. Do you think there’s
25 any possibility virtually splitting this case into two in terms of the two parties that damaged one, shareholders, and two, the other businesses, and presumably, it would be putting aside the liability issue, it would easier to demonstrate the amount of damages against the shareholders, so that it might even be a bit of more of a short term objective and demonstrating the
30 damage against the businesses, might be it be more of a long term project so…
IMF Yes.
Q You know, if you were ultimately successful against the come off and
35 perhaps, hypothetically, now out of court settlement, would it be possible to sort of split that into, sort of, two segments as I mentioned.
IMF Yes. Yes. Unfortunately, we’ve commenced the project on behalf of shareholders and on behalf of what they call, sponsors, their customers of Pan, to a large extent you’re right. Shareholder’s claim is cleaner in regard to
40 the loss than sponsors who have lost of profits and ups and downs in demand and supply. The trouble with the shareholder’s claim is that it may not be viable. There is a law in Australia which basically says that the company is the proper plaintiff for losses occasioned to it, not its shareholders, and so the law basically says, the shareholders are only entitled to receive damages that
45 are not reflective of the company’s loss. So, it’s just very… it’s looking… we’re currently determining whether or not the shareholder plan is going to proceed, but it’s looking unlikely for that reason.
Q (Inaudible) as s shareholder?
IMF No, he got to sign to the company’s claim. So, in turning the (inaudible) phenomenal amount, assigned the company’s claim against the commonwealth to Jim and Jim settled that claim for a portion of the money that he received. I don’t know how or what the split up was between the
5 company’s claim and his claim, as a shareholder or related party that lost money, but my guess is, is that the vast majority of the value of that settlement came from the company’s claim being set.
IMF Okay. No more questions? Sorry, you got a question?
10
Q (Inaudible) in terms of (inaudible)
IMF We’ve got a list.
Q (Inaudible)
15 IMF Look, we just started to know… is the answer. Now, the one real… the main variable in our business model that we have no control over is timing of exit.
Q (Inaudible)
IMF Sorry. Mediation.
20
Q Mediation. (Inaudible) John mentioned earlier, (inaudible), but the reality (inaudible)
IMF Yes.
25 Q (Inaudible)
IMF They’re reducing (inaudible), what I mean by that is, we have gain settlements (inaudible) and where, more often than not, (inaudible) I would think this isn’t very (inaudible) answer (inaudible) is that it is (inaudible) we really don’t know if how long it would take (inaudible).
30
IMF Yes, 15%.
Q (Inaudible)
IMF (Inaudible)
35
IMF It is reducing that we’re doing it (inaudible) is to do it on a portfolio basis. So, we still have some (inaudible) in our portfolio that are older than you would have. So, you know, the numbers that coming down but they’re not coming down as quickly as you might… (inaudible) you know, the (inaudible) three
40 years and then they come down to 4 or may be 3.5, but they’re coming down slowly.
Q Just one (inaudible).
IMF Yes.
45
Q (Inaudible)
IMF I think it’s, well, it’s (inaudible) in the sense of we haven’t got anything else in mind. So, there’s no over capacity from the analysis we’ve done, maybe in the future, there might be a capacity created by subsequent events in the balance sheet, but there’s no overcapacity for more I can gather.
Q (Inaudible)
5 IMF Yes.
IMF Okay. We’ve got some resolutions now. The first one concerns more re-election, so I’ll get Hugh to handle that.
10 IMF The first resolution is that the company will re-elect shareholder Mr. Rob Ferguson as the Director of the company. The following ballot proxies have been delivered, in favour (inaudible) against (inaudible).
IMF (Inaudible)
15
IMF (Inaudible) all those favour (inaudible)
IMF (Inaudible)
20 IMF Yes.
IMF I think that since the (inaudible) I think the shareholders (inaudible) institutions (inaudible)
25 IMF Thank you.
IMF I should formally declare that motion carried.
IMF Resolution 2, Diane, relates to the re-election of John Walker as a Director of
30 the company. The company received very strong proxies for that, 66 million for and about 170,000 against. I move that the form set in the Resolution of the Notice, to be put. I’ll ask for somebody to put that. Second, done. Those in favour?
35 IMF (Inaudible)
IMF Against? Congratulations, John.
Resolution 3 relates to remuneration report, again, we’ve received
40 overwhelming proxies in relation to remuneration report, 65 million to 400,000 against. Can we have somebody put the Resolution as set out in the meeting? Second, those in favour? Against?
IMF (inaudible)
45
IMF Carried. Capital return? Again, we’ve got similarly strong vote for the capital return. Can we have somebody move the Resolution as set out in the Notice of the Meeting? Second, those in favour? Against? That’s carried, as well.
So, that concludes the formal part of the meeting. Anymore questions? I’m happy to take them, but also there are some refreshments up the back.
Anymore questions? Okay. Thanks for coming.
PRESENTATION CONCLUDED
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