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January 2012 Edition ----

WE start the year with a plea for anyone who wishes to stop the (partial) sale of certain state owned SOEs, and has a few dollars, to apply to the Court to have John Banks and Peter Dunn declared to have been constituency candidates for the National Party in the 2011 general election with respect to section 192(2)(a) of the Electoral Act 1993. Such a declaration would mean that the National Party is entitled to two fewer list candidates although it would probably regain one of them if MP numbers were brought back up to 120(+1).

Messrs Banks and Dunn were "constituency candidates for that party" ie the National Party because the National Party said that it would like them to win their respective constituencies and, at their request, assisted them to win by recommending them to its members and supporters. The nominal National Party candidates in the two constituencies concerned did not actively seek votes for themselves, saying that their objective was to campaign to maximize the National party vote in these constituencies.

Any prospective financial supporter for this action is welcome to contact us or a solicitor of their choice so that corrective action can be got under way.

Well as it stands 2012 is being billed as the year of the Mighty River Power Initial Public Offer. This IPO is likely to resemble the 2004 Feltex Carpets IPO in at least one respect, that being that the dominant female director of each company at the time of the IPO will be one Joan Withers. If it goes on to perform like Feltex the Mums and Dads will have lost a further billion or so within a year or so.

In 2002 Feltex Carpets was in serious trouble with the size of its bank loans relative to its profitability but nowhere will you read about that in the Feltex Prospectus which Ms Withers had her photo inserted into. The 2002 trouble was relieved by the raising of a $50m debenture. As we understand it was a condition of the debenture was that it be repaid by from an IPO selling the company, which duly happened.

It is obvious that this 2004 Feltex IPO was a Government sanctioned action to raise funds to allow NZ athletes to win gold and silver medals at the Athens Olympic Games by cheating. Ms Withers has bought into this crooked proposal and allowed herself to become a director to make the shares attractive to "Mum" of the many Mum and Dad amateur share investing teams.

We have many times gone over crooked aspects of this Feltex Prospectus. We start at page 37 where a graph shows the "size" of the Australian Carpet Market for the previous 11 years. By size is meant the volume (sq meters) supplied to the market (manufactured plus imported less exported) not actual sales although this is not made clear in the prospectus. It is stated that in the period 1993 to 2003 the compound average growth rate of the "carpet market" was 1.7%. The figures of only two years were used for this calculation and one of these, that of 1993 was the most remote hence the least significant of the years shown. That year had the lowest size, at least since 1989. The proper treatment of these figures, as Ms Withers would surely know, was to use regression analysis on the 10 most recent annual figures to predict the market size for 2005 and compare this with the actual size for 2003, showing a drop of 3%. This drop indicates what the 2005 Feltex sales should be adjusted by to account for market size. Instead they used +1% pa or +2% based upon their crook 1.7% calculation, giving a result 5% higher than it should be.

Then we have the 1% pa assumed increase in market share when market share was being lost at the rate of 5% pa but this fact has not been mentioned in the prospectus.

Ms Withers quit Feltex on the second profit downgrade announcement just when it needed good directors very badly. She had been there for about a year which would hardly meet Mums' expectations. This was so she could join Fairfax Media and purge its staff by close to half. Anyone likely to write an objective story about Feltex we suspect went off down the road. Her tenure at Fairfax ended before too long and she went home "to spend more time with her dog". Luckily for the dog but not for anyone else she then lands top jobs at Mighty River and TVNZ to go with her Auckland Airport directorship which she had held onto all along in preference to trying to get something back for the Feltex shareholders.

We must mention too the deputy chairperson of Mighty River Power, one Trevor Janes. Mr Janes has been a director of the Accident Compensation Corporation and chair of its Investment Committee until about 2002 when he lost these positions in favour of one (now officially of course Sir) Eion Edgar. At the end of Mr Edgar's three year term during which $9m was "donated" to an Olympic cheating fund and associated hangers on while pretending to the public that it was making an investment in Feltex Carpets, Mr Janes returned to chair the Investment Committee until January 2011, but did not become a director again.

When he was Investment chair the ACC also made an "unfortunate" investment of half a million dollars in National Mail shares. About ten days later National Mail said it was going out of the mail business which it had invested heavily in and ACC lost almost the lot. ACC said it made it investment because of its confidence in a new National Mail director Peter Fitzsimmonds but it should have known or been able to find out that the vendor of these shares was Cliff Cook who was director and largest shareholder of Metlifecare Retirement Villages, of which Mr Ftizsimmonds was the chairman, his primary job.

The broker for Mr Cook in this transaction was Credit Suisse F B while that for the ACC was C S First Boston, or perhaps it was the other way around. So much for the principle of having an independent broker. These firms officially went out of business in NZ soon after that with First NZ Capital being formed to take over the cliental. Soon after in April 2004 the afore mentioned Feltex IPO featured the words Credit Suisse in the name of the vendor (who was selling the whole lot) and the promoter, and First NZ Capital was one of two lead brokers. The other lead broker was of course was Eion Edgar's firm Forsyth Barr. The Feltex job was to be Edgars "swansong" as chairman at FB from which he resigned soon afterward. But on the Feltex collapse he "came back" and has remained chairman ever since.

We tell these stories to tell you of the quality of Mighty River. The buyers will not be able to change the directors because the government will still own 51%.

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