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Well we never made it to the cycling event. The weather hasn't been that flash but we trust it went off Ok. Actually we sort of left it to the Institute to make the arrangements. We trust they got the cue. They have had quite a bit of contact with Gartz over the years, putting him on the odd committee here and there. That's what such an astounding accountant can expect it seems.

Because of the weather the demand has gone back on for another stage play for the New Year. Well its short notice but hear goes. The title is very dry but we trust that there will be something of interest along the way so read on.

Extract from the Accident Compensation Corporation, Investment Committee meeting, April 2004

A viewpoint of what would properly have happened at this meeting

CAST Well we expect Eion Edgar is in the chair. He attended 8 of probably 9 meetings held for that financial year since he was appointed at the start of the previous August. It might not be immediate obvious by sight but Mr Edgar is an accountant, a fellow of the Institute.

At his side, we gamble, is board chairman, Hon David Caygill, solicitor and former high profile politician, who attended eight of probably 11 of these meetings for the year. He is not a member of the committee so presumably has no obligation to attend, so, most probably, his interest is commendable.

On the meeting chairman's other side is probably Gary Wilson, then Chief Executive of the Corporation, who would seem to have attended all such meetings for the year. He would seem not to be a member of the ICANZ.

Gregory Fortuin could be there. He is a committee member who attended 6 of the presumed 11 meetings but did that year attend all meetings of the full ACC board of which he is a member. Perhaps having a character that looks a bit like him and rather uninterested in proceedings would be the way to handle it.

There is a slight possibility that Board members Brenda Tahi or Ray Potroz could be there. They each attended one or two meetings but are not members of the committee. There should be a few extras at the table who could possibly include them. We shall have to revert to unknown extras, with obscured placenames, for controversial or forthright comment. In reality these extras would have to be the people we have named but we have no-one in particular in mind for the identity of anyone we label as an extra.

The two specialist members of the committee, Trevor Janes and Pat Duignan are also at the table. They attended 6 meeting for the year since 7 November last for their $10,000, possibly all the meetings but they could be one short and hence possibly not there. Mr Janes is a Chartered Accountant.

We are deducing, somewhat realistically, who would be at this meeting because annual report data is available. This will implicate the participants in nothing however since there are lots of good reasons why all conversations about to be depicted might never have taken place to any degree whatsoever. On the other hand many of the conversations seem plausible or what could or should be expected. The idea is that all the characters will act most properly, but how the heck is the conflict going to be handled?

We rather suspect that the Corporation's investment staff members Nicholas Bagnall and Stephen Montgomery, probably also attended these meetings from time to time by invitation, and the scenario is that they too are present at the table.

The aim is to have all the individuals behave as they should and probably would behave. Well that is enough kid gloves. The show has got to flow. Here goes:

Scene: a boardroom. All cast present and seated.


Eion: Well I think we now have the benchmarks refined as much as is possible for the moment. This is an overview committee as I see it. I think we should pick each others brains a little at these meetings for the good of the corporation. Nicholas, Is there anything of significance you know is coming up in the next month that you will have to make decisions on?

Nicholas: Well I have it that there is a float of Feltex Carpets Limited for some two hundred million coming up early next month believe it or not. The firm is eighty years old but this is going to be an Initial Public Offering as far as the rule book goes.

Eion: Oh gosh I could have mentioned that. Our company Forsyths together with First New Zealand Capital are lead brokers for this issue. It is sort of my swan song project as chairman of the firm you might say. We have been putting a lot of work in to try and ensure its success. Together we have come up with some stunning photos for the prospectus and lots of them.

extra Well I never! Who the heck owns Feltex these days and how much are they hiving off?

Eion: Well actually it is an offshoot of our age old competitors in the broking game, Credit Suisse First Boston with extra words on the end - Asian Pacific Partners or something. They have close connections with First New Zealand Capital which evolved from them of course. Competitors they may be but of course they are very fine people or we would have nothing to do with it. Not that I am trying to influence you or your team in any way on whether you are going to take up any, Nicholas.

Garry I am sure nothing along those lines will occur. This fact finding is very useful.

Nicholas: Yes quite so. Its a waste of time trying to lever a sale out of us and I know Eion won't try. Returning to the question about how much, I understand that it is lock stock and barrel that is up for grabs. The vendors are quitting, if it is fully subscribed.

Eion: Yes well that is what private equity is all about. You sort out a business and then on with the next one.

extra These vendors hang out in Madison Avenue I think. Probably recently spending millions on carpeting their offices with the finest of Feltex and perhaps doing the square garden as well.

extra2 How long do you think they would continue to buy from Feltex after they relinquish ownership.

extra Well there are economies if they announce the drop in profits at the same time as they announce that the offer has been fully underwritten but I think they will go on to allow the payout of one decent dividend first. Then the Securities Commission chairwoman will be able to say that all had been going well for some time before the sales fell away. She is really on the international scene these days and will not want to upset anyone in that arena.

Eion: Gee I didn't think there could be such sarcasm at this table.

extra Well I was getting rather carried away but that is the appropriate line of thought when one hears that a vendor is getting right out. And the Government and Commission is always most keen to dismiss any possible scandal. But I expect the minister will put a stop to such questioning with her next round of appointments if these comments get out.

Trevor The Credit Suisse name seems to be fizzing out at the on the local scene. They were of course mixed up in our National Mail purchase which blemished my chairmanship of this committee.

extra Which was the Corporation's broker, C S First Boston or Credit Suisse F B?

extra2 The one that wasn't used by the vendor of the script that was already known to be dud in some quarters, Cliff Cook.

David I thought you investment blokes made a proper mess of that one and said so to the press.

Nicholas: That's quite unfair. You have to lose a little to win a lot in this game. Its the way the odds work.

extra How did Suisse's brokerage operations here come about anyway?

extra2 The firm started off as Jarden and Co. Ron Jarden was the All Black who mastered the up and under but he died early. Chris Liddell was with CS First Boston for some time. He is with International Paper in the US now, could get snapped up by Bill Gates or whoever. And James Ogden came after that but he left in 95. It become First New Zealand a couple of years back but a New Zealand branch is not recognised on the Credit Suisse website.

extra Ogden has been long time on the New Zealand Post board hasn't he. Do you think you would sooner have Jim's job chairing that corporation David?

David Oh I have had a good innings here which is coming to an end and is all I can expect. We might have been duped by Suisse over National Mail and I don't want to see that happening again. They certainly didn't go out of their way to check how National Mail was performing, as our agent.

Trevor Same here, I have had to face quite a few jibes over that purchase. I hope you are not over-influenced by photos Nicholas. Perhaps they can be cut out of your copy.

extra2 New Zealand Post were the people to indicate whether National Mail had seized a hunk of the market. We could have shown some initiative and made an approach instead of just visiting National Mail. Suisse might have had contacts at NZ Post.

extra No need to I suspect, they were in thick with Cliff Cook and Metlifecare whose chairman was on the National Mail board. Brokers with clout I think Mr Cook called them. I wonder who got clouted.

extra2 Has Don Turkington been involved in preparing this prospectus Eion?

Eion: No not at all. He left us last year. He has turned his hand to helping the Institute of Chartered Accountants prepare recommendations on Corporate Transparency among other things I think. I don't think that that report will be very revolutionary.

extra I can just see one of the lady cabinet ministers from Christchurch who appoints us saying "turn again Don Turkington, director of the Accident Compensation Corporation and chairman of its Investment Committee".

David Yes I could well imagine my long term colleagues doing that. There will be a place for his cat too on the investment team if we don't get this Feltex decision right.

Eion: Well I am sure cats have been very partial to Feltex over the years and will continue to be so. The vendors of the company are very decent people let me assure you. We have to consider the holding gains if the offer is over-subscribed.

Garry Yes well I think Nicholas and the team have plenty to go on now. I often wonder what this has all got to do with accidents except that we don't want to meet with one on this issue or any other.

Trevor I can feel another clout coming on!


Thats It! Perhaps a short footnot to say Feltex's 2004 annual report showed ACC to hold 3.81% of the sharecapital as at 31 July that year, a holding which would have cost $9,680,000 at the issue price of $1.70. ACC did not feature in the top 20 shareholders in the 2005 Annual Report of Feltex which indicates that it has sold off extensively in the meantime with the buyers sharing in a loss of that amount as it stands at the moment. Browsers are welcome to send us a video of any production and we shall try and present it on line.

We wish to end the issue with an expression of about this acticle from the highly respected Brian Gaynor on debt fuelled private equity firms. He warns against this phenomena but refers extensively to the Feltex and Trans Rail overpriced sales as examples of the ills of private eqity refering to the eagerness of stockbrokers to promote highly questionable offers to clients. Well we say that they should not be promoting highly questionable offers whether the vendor is a slick overseas based private equity firm, or just Tom, or Dick, or Harry. The responsibility lies with the brokers, auditors and other accountants and professional people and they should be held to account. He seems to liken equity firms to lions at the zoo who if they are not pampered in every respect and feel aggrieved by a mounting interest bill or whatever are likely to lash out and endanger people, in this case by making highly questionable offers.

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