Transcript of 2000 NAB AGM

CHAIRMAN, MARK RAYNER: In addition, Mr Stephen Mayne has been nominated for the board by his father. Details of Mr Mayne's background and experience also appear in the Notice of Meeting. Mr Mayne, are you here with us today - good. As an appropriate courtesy to you, I invite you to come up on the stage and speak to your candidature for two or three minutes. Would you like to come up to the microphone over here please. Mr Stephen Mayne, ladies and gentlemen.

STEPHEN MAYNE: Thanks for the opportunity, Chairman, I appreciate it very much. My background is I'm a business journalist over the last 11 years and I've been coming along to these annual meetings over that period and have become very frustrated at the level of debate in Australia at annual meetings. You have seen time and again how a board might not perform very well and then you have the annual meeting and the shareholders both big and small aren't really putting the appropriate pressure on the board to maintain performance. So I have basically taken a position where I am going to try and create a greater culture of shareholder pressure in Australia and where necessary stand for board to really put the pressure on and to make a point. So in the case of the NAB, the platform on which I am standing is that they become a more active fund manager.

The NAB controls about $60 billion in funds under management and if they stood up at AGMs around the country, they would apply a lot more pressure, they would have credible comments to make, there would be a much better debate in the community, in the press generally, about how corporate Australia is performing. Australia's corporate performance is pretty ordinary if you look at these following statistics. There is only about 40 Australian companies, the NAB is one of them, thankfully, which are generating more than $200 million a year in revenue offshore, yet there are about 160 foreign companies who are generating more than $200 million a year in Australia. So we've got the worst foreign investment ratios of any western economy with the exception, thankfully, of New Zealand. So our corporates haven't performed. Our sporting legends have performed, but our corporates haven't performed, so we've got to put some pressure on, and the NAB, thanks to taking over MLC, would be a great vehicle through which this could happen.

In terms of my specific candidacy, I did work as the banking writer at The Age for a year, so I do know a little bit about banking and I've developed a fairly unique knowledge of corporate, the corporate sector in Australia and corporate governance through going to a couple of hundred meetings over the years, running for boards, raising questions. So I think in terms of adding any value to the NAB's funds management business, I think I could actually contribute something constructive.

The NAB's board is, I guess, what you would call one of the classic, with the exception of Catherine Walter, old boys network boards. There's too many miners and engineers on it and there's not enough people with specific financial markets and banking industry.

Now, Don Argus, the former CEO, loved it that way, because it was a management run company, whereas I think it's probably about time that the board got some more people with relevant experience. But, unfortunately, they haven't given you an opportunity to realistically put me on the board because of the voting system they have adopted. They're telling you that there is no vacancy for me. Now, who are they to tell you that? It is your company, you own it. Four directors have resigned during the year, so there's plenty of vacancies. I think the constitution says that there can be like, it might be 13 or 14 directors, so there's plenty of room in the constitution for me to be elected, but, they have said that there's no spot for me and I think that's actually an inappropriate voting system, because it means I've got to get 95 per cent of a vote and knock someone off.

Now, I don't want to stand here and say this particular director is terrible and you should vote against them, but that's what I would have to do to get on. So the system really is flawed. It's very undemocratic and it's very arrogant in my view of the board to tell the shareholders what the optimum size of the board is. So, I guess, I'd love your vote today. I don't think I've got any chance realistically. I do think that in the case of the NAB I probably could add something given that I have got a background in banking and insurance writing, that I worked as a press secretary with Jeff Kennett for about a year and a half, so I've got a good understanding of how governments work, and government relations is a very important issue for the NAB going forward.

So thanks very much, Chairman, for the opportunity to speak to the meeting and if you want to vote for me I'd appreciate it very much.

CHAIRMAN RAYNER: Thanks Stephen. I don't think there's any real need for me to respond in any length to Stephen. I think there are just a couple of points I should make. You know, really, I think, many of the things that Stephen says are things that we would all agree with and I must say I am delighted to hear him acknowledge that NAB is one of the few performing major corporates in Australia which fit in his definition of success. I think he did, he said it was one of 40, and I think if you think about 23 per cent annual return on shareholders funds over the last ten years, you would have to say something is going on right here. Just on the question of active funds manager, I think we have to recognise that the principal board of NAB is not a fund manager, it has several subsidiaries which are in the fund management business and which are also in the nominee business.

In the case of nominees, we don't decide what the vote might be. Whenever a vote is required, we contact all of the people on whose behalf we hold shares and ensure that they understand the issue as presented by the directors of the particular company and seek their advice, their instructions on how we should vote, and if we don't receive instructions, we do not vote for the shares on which we don't receive instructions, we have no right to do so. In terms of funds under management through our direct investment subsidiaries, our job is to make sure that we have the right people or to make sure that the management structure and systems get the right people in the fund management role and that they manage those funds in the best interests of the people on whose behalf they are working. And that really is the job of this board and I'd have to say, I don't think the job of this board is to itself insist or indicate how our fund managers should vote.

I should also make the point, of course that through MLC, a substantial funds of the funds is actually placed with other managers rather than managed by the MLC itself. As to the old boys network, I reject that suggestion. And as to this being a management run company, I think in one sense that's right - all companies are run by their management. The role of the board is to select the chief executive to approve the senior management, to oversee and approve the strategy, to monitor its application, to monitor the results of the company. The board is not here to run the company, the board is to oversee management to make sure management is performing. If it's not performing in the best interests of the shareholders, then the job of the board is to be rid of it.

On the issue of board numbers, once the constitution of the National provides that we may have a maximum of 14 directors, minimum of three, and that the directors shall decide what the number of board members and the what the size of the board will be at any time. That I think has been the situation - certainly many years longer than I've been on the board, and I think it makes sense. In the present climate we have reduced board numbers considerably to eight at the present time, and the reason for doing that is to ensure that if over the next year or so we're able to find a substantial acquisition, we do have the flexibility to increase the board, perhaps with some of the directors of the company with which we might merge, in order to bring such an acquisition or merger to a successful conclusion. So there is a very good reason for our setting the board at the size we have at present.

In terms of board composition, I would have to say our policy for a long while has been to - apart from a couple of specialist roles - to generally look for people of broad experience, and we tend to focus first on people who have filled chief executive roles in substantial companies, preferably with wide international activity and experience, because we find they bring the balance of experience inside and an overall understanding of how companies work, and where the pitfalls might be, which is I think the best guarantee that the board will work effectively.

STEPHEN MAYNE: Chairman, I probably won't go into all the detail as you suggest. A lot of those issues were more written in a journalistic context, and as this is more of a shareholders meeting, I think it's probably - particularly on this resolution specifically - not appropriate to go chapter and verse into what was I think a 3,000 word article. I guess in terms of the actual specific candidacy in relation to that, on the whole sort of PR disaster front, which now seems to have got itself into more trouble - I guess in relation to my candidacy, that's something - an area, understanding media and understanding government, is a skill that I think I could bring to the board. I do think the specifics of those cases should be raised later.

I was just hoping to comment on some of the other directors up for re-election. In relation to Mr Tomlinson, I think it is fair to say that he's probably got more directorships than anyone else in Australia. And that by any measure, he is stretched. And he's actually been juggling his directorships. I remember seeing him at the Amcor meeting last year, and he was saying then that he had given up his Mayne Nickless directorship because it clashed with his Medweb directorship. And in agreeing to come on to the NAB Board, he had to surrender his Suncorp Metway directorship.

So not only is he too busy, but he seems to sort of pass the parcel a little bit. But then again, I think he is exactly the sort of director that the NAB needs. He's the only one on the board who's got extensive financial markets experience, and he should be encouraged to put more time on this board, to stay on this board and to give up some of his other boards. We don't want to get another miner or another engineer onto a bank board. I think it is relevant to talk about what happened when he was at National Mutual. He sold control of that business to the French at $1.25 a share. They're currently trading at about $3 a share. So certainly in my view, as a former National Mutual shareholder, I think he severely undersold that business. And I think at the time rebuffed a number of Australian approaches to take over that business. I think it's quite ironic that you then had, under Mr Tomlinson's leadership - you have the National Mutual entering into a merger with MLC. They've valued MLC at about $2 billion, and the share price of the National Mutual peaked at $4.08 on the day before that merger fell apart. I guess my point from the NAB's point of view is where was the NAB. You're trying to buy National Mutual at $1.25, and where was the NAB in trying to buy MLC at two billion?

ACTING CHAIRMAN: Mr Mayne, could I ask you to keep to the subject we're discussing and not debate the pros and cons of - - -

STEPHEN MAYNE: Okay, I guess my point is - the key point to Mr Tomlinson is that he sold that business, control to the French at $1.25 which is about one third of what it got to when they almost bought MLC for half what we bought MLC for.

On his Reckon Chairmanship, there's two accounting software companies out there - Reckon and MYOB. MYOB has been a stand out success - the share price is up 400 per cent from the float. Reckon has been an absolute bomb, and I think it is now trading at about 30 per cent of what it was, and shocked the market with a $20m loss a couple of months ago, which would suggest that perhaps the chairman hadn't been putting enough time in keeping an eye on the accounts. Of Mr Rayner, I make the point that Pasminco has been one of the worst mining stocks out there. He's chaired that for the last few years. It's fallen about 60 per cent from its peak, and I guess specifically on that question of the funds management conflict of interest, I would've been hoping that MLC and the NAB would be putting a lot of pressure on the Board of Pasminco to lift their game, and maybe changing some of the directorships. I suggest that because Mr Rayner is Chairman of both the Fund Manager Company, the ultimate holding company, and Chairman of the badly performing company as well, that his fund managers under him are going to say "Whoops, we're not going to upset the chairman".

On Catherine Walter I think there is also a bit of a conflict of interest potentially. She's a Director of the Australian Stock Exchange, which is one of the greatest monopoly rorts ever brought to bear in Australia. A $25,000 investment in ASX is now worth $2 million. They are absolutely ripping their customers off. And one of their biggest customers is MLC. We're the people who trade the shares and pay these ridiculously high fees to the Australian Stock Exchange. My view, that as the second biggest company listed on the market, the NAB - as a listed company, and MLC as a powerful fund manager - should be knocking the Stock Exchange into shape and telling them to stop gouging all their customers and extracting monopoly rents. But I suspect that because she's on both the customer and the provider in this case, that she probably wouldn't do it.

Lastly I'd like to comment on the way we're handling the proxies here. Shareholders should be shown the proxies before we vote. I want to know if I've got ten per cent or 20 per cent of the vote, and I want to know whether all the other directors have got 96 per cent or 97 per cent. We should be informed on what's happening with those votes, and I'm actually prepared to move a resolution to this meeting now that after the discussion, but before the poll, we be shown the proxies. It's also important, I think, for the board to spell out what they're doing with the open proxies. I presume that they'll be used against me and in favour of the incumbent directors. But you should tell us that, and you should show us the size of the open proxies at hand here. Otherwise what I suspect might happen is the notice that goes to the Stock Exchange later on will roll them all into the one count, and we won't know what the actual primary vote was and what the separate open votes were.

Lastly, if shareholders tick four boxes in favour of the incumbents and leave mine blank, is that deemed to be an open vote which can be used against me? Or is that deemed to be a complete vote? I've had a big problem with the NRMA on this issue, where they said "Only tick three boxes, leave the fourth one blank", and then they went ahead and used the fourth one as open proxies against me which in my view was unconscionable.

So could we see the proxies and could you address those issues as raised, thanks very much.

ACTING CHAIRMAN: Thank you, Mr Mayne. As the chairman said earlier, we did not propose following on from last year to show the proxies before the vote, for the reasons that he explained. As regards the open votes which lie with me, on this occasion I do not intend voting the open votes, and I think where they are both left open, it's considered as an abstention, and is not recorded. So thank you, Mr Mayne. We're over here?

STEPHEN MAYNE: Chairman, just a couple of quick points. Firstly, who was the independent adviser who looked at this package and said it was okay? Also, I think changing the hurdle, I agree with what Mr Curry said before but I think agreeing to change the hurdle for next year is a bit like closing the stable door after the horse has bolted. I think Don Argus is probably today more than $40 million in front, possibly more, on all the options packages that were approved for him over the last six or seven years. Now, to his credit, Don Argus did a great job managing the bank and should be rewarded but it certainly is a huge reward to have a banker approaching the "Rich List" qualification levels. My question, I guess, for Mr Cicutto is that is it correct to say we are issuing 500,000 options to him at a 30 per cent discount to the current price? Is that right? Is it 21?

CHAIRMAN: No.

STEPHEN MAYNE: Twenty-nine?

CHAIRMAN: No, no.

STEPHEN MAYNE: Right, that's 500,000 from last year, is it?

CHAIRMAN: Yes.

STEPHEN MAYNE: Right, okay. It's a simple question this - he will now have, I think what is it in total, 1.3 million options - - -

CHAIRMAN: He has (indistinct)

STEPHEN MAYNE: I'm sure this is an answer that he would know straight away. Looking at his overall package and deciding whether to approve this we know that he's getting $1.92 million in cash - well, he got that last year, what will be his average strike price on his total options package going forward? In other words, he's already $5 million in the money on last year's 500,000 options. So I guess my point is is that he's already rich enough, really, isn't he? Does he really need any more? And I suspect the other 800,000 are actually more cheaply priced so it's a very simple question. I asked this at the Commonwealth Bank and they fudged it and they know the answer. What is the average strike price of Mr Cicutto's 1.3 million options that have been issued if they're approved today and going back over previous issues?

CHAIRMAN: I don't know the answer to your question Stephen - - -

STEPHEN MAYNE: Frank will know.

CHAIRMAN: It can be calculated from the data in the annual report and I see Frank looking it up at the moment. I would doubt that he would have it off his cuff either. I never had when I was working as a full-time executive. I think the reality is that options are granted in tranches, they each have a fixed exercise period, and if the executive is successful in improving performance then every shareholder benefits and so does he. I am not at all sure that the average strike price is relevant, and as I say, I think you can look at the strike prices of each tranche of options in the annual report and you get that figure yourself, but I don't have it.

Can I just comment on another issue? I think it's a bit difficult in a competitive employment world to say, he's got enough, he shouldn't have any more. It seems to me that's subjective judgment and I know a variety of people who would say it's one of the problems of Australian attitudes today is this sort of almost envy syndrome, but the reality is that we are trying to employ the best executives in the world to run what we hope will be the best financial services organisation in the world, the first of our vision statements on the first page of the annual review. If we want to do that we have to compete all around the world to get the best people and that means we have to pay competitive packages. We certainly don't hand out any excess packages, we take great care, we use not one but several external consultants in looking at what the market is paying, and that's the reality. It's not a question about whether these guys have enough, or whether they should get some more or not, it's a question of what do we need to pay to obtain their services and keep this organisation moving forward? Do you happen to know what your average strike price is Frank?

FRANK CICUTTO: Unfortunately, not. The options last year were issued at around about $21 and it's in the annual report. I think the year before they were issued at around about $28 or $29 if I recall correctly - some of my colleagues are nodding. The year before, around about $19 or $20 - would that be correct - and the year before that around about $16.

CHAIRMAN RAYNER: So there you are, and as I say it is not an issue about what the average strike price is because each tranche has separate exercise conditions, separate hurdles to be met and is exercised as a separate block of options, usually at different times. Do I have a question in the middle here? No. 2.

STEPHEN MAYNE: Thanks, Chairman, just a couple of quick issues. The Financial Review had chapter and verse a few months ago on our so-called $21-a-share offer for the AMP. I know that it's standard practice not to comment on sort of market speculation, but it appeared from what we read in the press that the former AMP Chairman, Ian Burgess, opened up to The Financial Review journalist and we had details of which airport lounges people met in and meeting up at the Sofitel, so in other words, chapter and verse was thrown into the public arena, and I think in this context, the shareholders are probably deserving of the National's interpretation of what really happened, and what's been reported to as what happened. I mean, did we really you know - was the problem that we made our offer too conditional, as was reported in the press, and therefore the board was able to reject it because it was too conditional? Is it correct as one AMP director said, it did never go to the full board of the AMP?

A couple of other issues. On the Ausmaq case, I've read in the press that our legal fees are likely to be $100 million fighting this case. Is it correct that we've actually been doing our defence for the entire last three months? Which I think is a record in any Australian court that a party to an action spends three months doing the first responding statement. I guess, the only concern from a shareholders point of view is that in terms of risk management, we seem to have left ourselves exposed to the lottery of the courts. We've given an unlimited guarantee to this outfit. They've sued us for $50 billion and it is up to a judge, and we're spending $100 million along the way. I know you're probably limited in what you can say, but can you just reassure shareholders as to what the strategy appears to be here, and how we finished up in this situation?

On Michigan National, wholehearted congratulations, probably the best foreign takeover ever undertaken by an Australian company. To make more than $2 billion in five years is just outstanding. I guess the question is, on the currency play, did we manage to lock in most of that $5 billion at the US51 cents when the dollar was trading at the time, and have we brought it all back into Australia, or are we putting it aside for a big acquisition in the UK?

And, lastly, why is the ACCC picking on us so much on credit cards? I've read in the press this week that we have joined the other major banks in fighting that action. Why were we singled out, and what's the strategy in joining the other banks?

And, lastly, I'd like to ask again if you can put the proxies up on the screen before we leave the meeting, it would be appreciated, so we have an idea as to - we've come to the meeting and we have an idea how the votes are gone. Because a lot of people who can't access the Internet, the ASX's website is often all clogged up, so the press don't report the votes, so you are literally proposing something here whereby shareholders will never know what the proxy votes are. And by law, you are required to tell the meeting what the proxy votes are, so I'd ask you again to do that, now that we have all voted. Thanks for your time.

CHAIRMAN: Thanks for that spate of questions. I'll do the easy one first. By law we are not obliged to announce proxy votes. There is a replaceable rule in the Corporations Law which I think the majority of companies have indeed replaced. We will of course, having called a poll on Items 1 and 5, put up the voting on those two, or announced the voting on those two items. I don't think we've got preparation made at this point to put the proxy details on a screen here, but if anybody can't access the ASX then they can certainly with a quick phone call to the company secretary, get the proxy voting report in full.

The second issue, you know I have obviously read all the speculation and the breathless accounts in the papers at the time of whether NAB did or did not bid for the AMP. I'm not going to comment on any of that. You know, it was entertaining reading, and I think we'll just leave it at that. On Ausmaq, I obviously anticipated there would be a question on Ausmaq, and in reply to your question on the Ozmac case which obviously is of very major significance to the bank; what I propose to do is confine my comments to a prepared statement and I am sure everyone here understands the reasons for this. I will say before I do that, that it is true that the plaintiffs opening lasted for several months, I think, eight weeks probably, running up to the closure of the courts for the Olympic Games. We then began our opening after the Olympic Games when the courts resumed, and have been interrupted a number of times as the court has needed to address other peripheral matters, but we've almost completed our opening. But the extent of the plaintiffs opening required an extended response from the defence. Let me now read the statement that I have prepared, as I say, I'm sure everyone here understands the reason for it. Basically, while the hearing of the claim has been going since July, and both sides have opened their case, the court has not yet heard any evidence from witnesses. As a result for legal reasons you would understand I am fairly constrained in what I can say. What we have been able to say so far about this case, and what I am able to say today is either publicly available or bank information. So now I'll read the following statement.

As you know, we bought the Ozmac System and all of its intellectual property from interests related to Mr John McConaghy for $7m in 1996. Ozmac is a partly automated system for trading in units in managed funds. Two companies associated with Mr McConaghy are making a number of claims, including that the bank did not develop the Ozmac system to its full potential after we bought it. One of those companies, Market Holdings, has recently been put into voluntary liquidation. Mr McConaghy's companies finished their opening address to the court in September. It held no surprises for us. We are now well into our opening for the defence. The judge has also started dealing with a number of preliminary issues. Witnesses are due to be called early next year, and we are pleased when I say to finally have the opportunity to put our side of the story. We have put before the court in detail, the reasons we believe the plaintiff's case is misconceived and its damage claim extravagant. We've outlined the evidence we'll be presenting to demonstrate those positions. You will understand that the defendant has limited influence over the conduct of a case of this kind. While the plaintiff was able to outline its case in some detail in July 1999, and received wide publicity at the time, it's only now that we're able to outline our defence. And I would certainly encourage anybody considering the case to review the transcript of the opening for the defence, to ensure that they do have a balanced understanding of the proceedings. Since the hearing began five months ago, Mr McConaghy's companies have again increased their claim. This is for the fourth time. The claim now includes damages they say flow from our acquisition of the MLC Group, notwithstanding the fact that the acquisition of MLC only occurred in June 2000, some four years after we bought Ozmac. Mr McConaghy's lawyers have recently also foreshadowed expanding the claim even further to cover a proposed venture between this bank, Westpac, CBA, and ANZ, to be known as Ozmarkets.com. As I mentioned a moment ago, one of Mr McConaghy's companies, Market Holdings, has recently been placed into voluntary liquidation by its members who are associated with Mr McConaghy. The bank has been found by the court to be a creditor of Market Holdings and is attempting to participate in the winding up of that company in accordance with its view as to its rights as a creditor. Those rights include the right to attend meetings and to receive information. It's been necessary for the bank to recently commence separate court proceedings in relation to the conduct of the winding up of that company, including seeking the appointment by the court of a new independent liquidator of that company. The claim against us has always been extravagant and it's even more extravagant now. It's something exceeding 50 billion Australian dollars. From the time the case began, we've said we believe this case is misconceived and will fail. Nothing has changed that view. Our auditors have once again carefully examined the Ozmac case for the purposes of completing this year's accounts.

Following consultation with them, no specific provision has been made in our accounts for this case. Costs incurred for the Ozmac case have been expensed as incurred, and thus written off against profit in each of the years to date. There's no doubt the costs of any long running litigation are very substantial. This case is no exception. You'd expect us to take the defence of this case seriously, given the size of the claim, and resource it appropriately, and that's what we've done, and what we'll continue to do to protect the company. It's common in the United States for some big legal cases to be financed by external funders. This is relatively uncommon in Australia, however, Mr McConaghy has made it clear that he has financial backers for his case. Because the case is costly, we are of course taking every step we can to identify all funders to let them know that we consider them to be individually and collectively responsible for our costs. Our major costs so far have been in preparing the case and obtaining expert evidence from a number of different countries. Those costs are fully deductible, have been expensed, and could be looked at as sunk costs. Now that the hearing has begun, and with the plaintiff's significantly expanded case, our costs our expected to run in the order of about 1 to 1.5 million a month, on average. Now, of course, this is a very significant cost. Particularly given our expectation that the case could run for another 12 months, or even more. Let me assure you that your board keeps the case under constant review at each of its meetings, and has in place a case management system to ensure the case is conducted as cost effectively as is possible in the circumstances. We remain convinced that the case is being managed in the most appropriate way possible. There is occasionally speculation as to whether Ozmac may have a bearing on our growth strategy. I can assure you it will not. The litigation has not, and in our view, will not, impact on our ability to make acquisitions or enter into ventures in Australia or overseas. As with many big cases, people from time to time suggest that settling may be a sensible option. Based on our view of the strength of our case, the size of the claim and the nature of the claim made against us, we do not consider we have any alternative but to seek a resolution through the court process. We remain determined to see this case through. Nothing has changed our view. The claim against us is misconceived and will fail, and will not have a material financial impact on the bank. Next year, the first of many witnesses will be called to give evidence in the case. It could go on for 12 months or more. We have today posted an update on the case on the National's website. If you require more information. Now, as I've now given you a detailed view of where we are in Ozmac, and I'm constrained in saying any more, I propose we move on to the many other questions I know shareholders have on other topics. I'm very happy to take those. I think that's really all I can say on Ozmac. You may have other issues you'd like to raise, but I have to tell you that on legal advice, I am not prepared to make any more statement on Ozmac.

Stephen, you also raised the issue of the ACCC, and the alleged price fixing on credit card interchange. The ACCC alleges that the National has breached the Trade Practices Act by price fixing credit card interchange fees. It alleges that it's done this by entering into agreements with the 35 other members of the three card schemes. These are Mastercard and Bankcard. The National strongly disputes the allegation and believes it has a strong case. Number one, because the Trade Practices Act specifically provides for organisations who combine together in joint ventures to provide services, to set fees jointly for those services. In the provision of credit card services, the National, in common with the other members of the card associations, falls squarely within the ambit and intent of the legislation. And I have to say this is not a legal technicality, it is the National conducting its business as always fully in accordance with the law. The National has not acted with other members of the card schemes to create a floor for merchant service fees. At present the ACCC is suing only the National. We believe we've been unfairly targetted by the ACCC since the claims being made clearly apply equally to all members of the credit card schemes in Australia. Should the matter ultimately go to trial, we believe our confidence will be borne out by the courts. I should stress that the National did not seek to be in court and rejects the contention of the ACCC that the present legal situation is as a result of our failing to co-operate with them. As has been reported on Monday this week, we asked Justice Branson in the Federal Court, to order that the joint venture defence be heard as a separate issue before the main action on price fixing commences. The National wanted to do this in the interests of a speedy resolution to the case, and without the need to join the other members of the credit card associations and Visa and Mastercard to the action, which of course, would be necessary if the National was obliged to make restitution to merchants. In the course of argument, Justice Branson found that it would be better if all other members of the schemes, including the schemes themselves, were in fact joined to the action immediately since they all have a clear interest in the outcome. We view the judge's decision as a positive outcome for the bank which reinforces our view that it is appropriate and advantageous to have the joint venture defence determined as a preliminary point, prior to any trial in the price fixing matter.

Finally, it's important to understand that the court action is on the narrow point of price fixing and quite different from the wider issues on interchange fees and access to the debit and credit card payment system which issues were raised in the RBA ACCC joint study recently. Whatever the outcome of the trial, the public issues about fee setting, transparency and access will remain. And that's why we say the ACCC's court action is unnecessary and an impediment to resolution of the important public issues. I should point out that the National has long been a proponent of opening up the payment system in Australia, including the credit card associations, provided there's a level playing field for all participants, and that's to say provided we all contribute to the past and future cost of building the card network. We're all required to comply with the same regulatory framework, and that the credit worthiness, security and integrity of the schemes are maintained.
I should also point out the National was the only bank to propose those reforms and reforms to the fee setting methodologies in its public submission to the Wallis Review three years ago.
Perhaps as a closing note, Australia's credit card interchange rates, it should be known, are amongst the lowest in the world. Thank you.

Go here for a full chronological list of edited AGM transcripts available from the past decade of shareholder activism.

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