Next week's 4C, page-10

Yes, "zero expectations" I'm sure occupy the thoughts of many long-term holders right now for reasons that shone through in the vote-down of Resolution #1 last year ("strike one"). But let's think about what the vote down of resolution #1 means:

1. First, the law creates a 'two-strikes' rule (not 'three strikes and your out' rule than we intuitively think it is). The 'first strike' occurs when a company's remuneration report receives of 'no' vote of 25% or more. This clearly occurred at November' AGM last year (it was more than 58% 'no').
2. As result of the 'first strike', this year the company's remuneration report must include an explanation of the board's proposed action in response to the 'no' vote or an explanation to why no action has been taken. Make of that what you will, but reading between the lines, the law requires them to take drastic action following this 'first strike' and, if they don't, it's curtains for the board.
3. This year they will be facing the prospect of a 'second strike'. Again, only 25% of shareholders votes is needed. Given there were 58% of votes cast 'no' in November last year, my view is that the Board will have to achieve significant improvements in company performance this year to avoid the second strike. This is why this year's AGM is the AGM to attend. If you've never thought about attending an AGM, then this year is the one to think twice about. Because of the 'first strike', shareholders will have unprecedented power at the 2018 AGM that they've never had before - the directors will be on the edge of their seats, as explained in point 4. below.
4. At this year's AGM, if 25% vote 'no' against the remuneration report, that constitutes the 'second strike'. Immediately following this vote, the chair is obliged to put the following resolution to the floor: "That all directors need to stand for re-election." This resolution needs the standard 50% votes to pass, so this is why it's very important that shareholders are there. This is what is referred to as the "spill" vote. If the resolution is passed by 50% of the votes, the entire Board is effectively sacked and they each have to seek re-election. Re-election must take place within 90 days, and so there will be a flurry amongst existing (sacked) directors and other shareholder-endorse directors to get their nominations in and get elected. Just imagine the angst that will be generated amongst the directors if this happens.

For this reason, I believe this is the year that the company will achieve great things this year. Jeff in particular is an extremely smart man. I saw the look on his face as the Company Secretary read out the results. He was uncomfortable. He we ensure that there is no issue with shareholders' perceptions of Board management by the time the AGM comes around this year. The Board will have been completely re-consistuted. Indeed, he may be the only one of the old guard left by November this year and we will all be very satisfied with the quality of direction instigated by the new directors by then. This is why I think 2018 will be the year of OBJ.

J