Telecom Corporation of New Zealand Limited

Transcription

1 Deloitte House 10 Brandon Street PO Box 1990 Wellington New Zealand Tel: Fax: Telecom Corporation of New Zealand Limited Appraisal Report In Respect of the Chief Executive Officer s Share Scheme 20 August 2007 The Independent Directors Telecom Corporation of New Zealand Limited PO Box 570 WELLINGTON 1.> Introduction 1.1. Background Telecom Corporation of New Zealand Limited ( Telecom or the Company ) provides telecommunication services in the areas of domestic and international telephone services, including services such as cellular phones, enhanced network services, electronic paging, offshore communications services and electronic commerce. Telecom is New Zealand s largest listed company, with a market capitalisation of approximately NZ$9 billion dollars as at 31 July Telecom is proposing to issue Dr Paul Reynolds, Telecom s new Chief Executive Officer and Managing Director ( CEO ), in aggregate up to 750,000 Restricted Ordinary Shares ( Restricted Shares ) and in aggregate up to 1,750,000 Share Rights (collectively, the CEO Share Scheme ) over three years, on the terms and conditions set out in the Notice of Annual Meeting of Shareholders dated September CEO Share Scheme In structuring Dr Reynolds remuneration package, as part of his terms of employment as CEO, the Board decided: The remuneration package should reflect the scope and complexity of the role; More than 50% of the package offered to Dr Reynolds should be linked to Telecom s and Dr Reynolds performance; and A component of the package should be structured to align the interests of shareholders and the CEO and to enhance his long-term commitment to Telecom. Based on the above, Dr Reynolds proposed remuneration package for the period from 27 September 2007 to 30 June 2008 (the Initial Period ) comprises: Fixed cash remuneration of NZ$1,750,000 per annum (pro-rated for the 9 months); An incentive award (the Performance Incentive Scheme ) delivered 60% in cash and 40% in Restricted Shares with a target value of NZ$1,750,000 per annum (pro-rated for the 9 months) and a maximum value of NZ$3,062,500 per annum (pro-rated for the 9 months); and A long term incentive ( LTI ) grant of Share Rights (the Performance Rights Scheme ), the number of which will be calculated by dividing the LTI amount of NZ$1,750,000 by the volume-weighted average price ( VWAP ) of Telecom shares reported on the New Zealand Stock Market ( NZSX ) for the twenty trading days immediately preceding the effective date of issue. The precise terms of Dr Reynolds remuneration for the following two full years ending 30 June 2010 have not yet been formalised. However the pool of 750,000 Restricted Shares and 1,750,000 Share Rights for which shareholder approval is sought is anticipated to cover the equity securities to be issued over the three-year period to 3 October Telecom may determine that the incentive award received under the Performance Incentive Scheme in any given year may be paid entirely in cash. If shareholder approval to issue shares is not obtained, the entire incentive award will be paid in cash. Dr Reynolds ability to divest any shares received under the Performance Incentive Scheme will be restricted for three years from the date of issue, subject to certain termination conditions. Share Rights will be issued if Telecom s Total Shareholder Return ( TSR ) meets or exceeds the performance hurdle based on a global peer comparator group. Share Rights will be issued for no Appraisal Report 1

2 consideration with a nil exercise price. For the Initial Period, one-third of the Share Rights will be eligible for vesting at the anniversary of each of the next three years from the date of the grant. Subsequent annual grants of Share Rights are expected to be eligible for vesting on the third anniversary of the grant Regulatory Requirements As Dr Reynolds will be a director of the Company (subject to shareholder approval), the issue of shares or options to him must be approved by an ordinary resolution of shareholders. Approval is being sought pursuant to NZSX Listing Rule and Australian Stock Exchange Limited ( ASX ) Listing Rule NZSX Listing Rule states that no issue of equity securities shall be made by an Issuer unless the precise terms and conditions of the issue have been approved by an ordinary resolution of the Issuer. While there are a number of exceptions to this requirement, NZSX Listing Rule requires the issue to be approved by an ordinary resolution of the Issuer if directors participate in any employee share issue. ASX Listing Rule requires any securities issued to a director as part of an employee incentive scheme to be subject to the approval of shareholders. ASX Listing Rule requires the notice of meeting to approve the issue of securities to include the terms and conditions under which the securities will be issued, as described in ASX Listing Rule Annual Meeting of Shareholders Telecom is holding its annual meeting on Thursday 4 October 2007 whereby the shareholders not associated with Dr Reynolds ( the Non-Associated Shareholders ) will vote on an ordinary resolution in respect of the Performance Incentive Scheme, and an ordinary resolution in respect of the Performance Rights Scheme Purpose of the Report Deloitte Corporate Finance has been requested by the independent directors of Telecom to advise the Non-Associated Shareholders whether in our opinion the consideration and the terms and conditions of the issue of Restricted Ordinary Shares and Share Rights is fair to the Non-Associated Shareholders. Deloitte Corporate Finance was approved by the New Zealand Exchange Limited ( NZX ) Regulation Special Division on 26 July 2007 as being independent and appropriately qualified to prepare this Appraisal Report. Deloitte Corporate Finance issues this Appraisal Report to the NZX Regulation Special Division to assist the Non-Associated Shareholders in forming their own opinion on whether to vote for or against the resolution in respect of the CEO Share Scheme. We note that each shareholder s circumstances and objectives are unique. Accordingly, it is not possible to report on the fairness of the CEO Share Scheme in relation to each shareholder. This report on the fairness of the CEO Share Scheme is therefore necessarily general in nature. This Appraisal Report is not to be used for any other purpose without our prior written consent. 2.> Evaluation of Fairness of the CEO Share Scheme 2.1. Basis of Evaluation NZSX Listing Rule requires an Appraisal Report to consider whether the consideration and the terms and conditions of the CEO Share Scheme are fair to the Non-Associated Shareholders. In our opinion, the consideration and the terms and conditions of the issue of Restricted Ordinary Shares and Share Rights under the Terms will be fair to the Non-Associated Shareholders if: The level of Restricted Shares and Share Rights issued represents a fair level of incentive remuneration to Dr Reynolds when viewed as part of a total remuneration package; The Restricted Shares and Share Rights are issued at fair value; The issue of Restricted Shares and Share Rights achieves the objectives of the Board in aligning Dr Reynolds interests with the interests of the Non-Associated Shareholders; and There is no material negative impact on the Non-Associated Shareholders. We have therefore evaluated the fairness of the CEO Share Scheme with reference to: The rationale for the scheme; The value of the scheme to Dr Reynolds; The scheme s terms and conditions; The impact of the scheme on shareholding levels; and Accounting issues arising. This opinion must be read in conjunction with, and is subject to and qualified in its entirety by, each 2 Appraisal Report

3 individual section of this report Evaluation of Fairness of the CEO Share Scheme In our opinion, after having regard to all relevant factors, the consideration and the terms and conditions of the CEO Share Scheme are fair to the Non-Associated Shareholders.The basis for our opinion is set out in detail in the remainder of this section. In summary, the key factors leading to our opinion are: The rationale for the CEO Share Scheme is sound; The overall remuneration level for Dr Reynolds is reasonable given; The use of a mix of financial and non-financial measures is appropriate for the purposes of delivering compensation to reward short-term performance, including the issue of Restricted Shares, under the Performance Incentive Scheme; The performance measure of TSR is appropriate for the purposes of delivering compensation for long term performance and alignment with shareholders, via Share Rights issued under the Performance Rights Scheme; The performance target based on the relative performance of Telecom compared to the independently calculated performance of a selected group of global comparator companies is appropriate for the purposes of the Performance Rights Scheme; The dilutionary impact of the CEO Share Scheme on Non-Associated Shareholders is relatively limited, at approximately 0.12% for the total of the Restricted Shares and Share Rights for which approval is being sought 1 ; and The Performance Incentive Scheme and Performance Rights Scheme will only have value based on the degree to which the performance targets are met. These factors are discussed in more detail in the following sections Rationale for the CEO Share Scheme In general terms, companies provide equity-based executive incentive remuneration to align executives remuneration to the financial performance of the company and therefore to the interests of the shareholders. This approach: Helps to attract and retain top executives; Enables executives to build equity ownership in the company; and Aligns executives interests with those of shareholders. For the Initial Period, Telecom has structured the remuneration offered into three components of approximately equal value: A base salary of NZ$1,750,000 per annum (pro-rated for the 9 months); A Performance Incentive Scheme, delivered 60% in cash and 40% in Restricted Shares, with a target value of NZ$1,750,000 per annum (pro-rated for the 9 months); and A Performance Rights Scheme of Share Rights with an LTI amount of NZ$1,750,000. The structure of the remuneration package was designed to attract a suitably experienced CEO and to provide him or her with suitable short-term and long-term incentives to enhance the value of Telecom in a challenging regulatory and operating environment. In our view, the rationale for the CEO Share Scheme as a component of Dr Reynolds remuneration package is appropriate, as it: Provides short-term internally focussed performance targets; Provides long-term performance targets which take into account international conditions and returns in the telecommunications industry; and Explicitly aligns Dr Reynolds remuneration with the returns received by Telecom shareholders Remuneration Package Although the focus of our evaluation is primarily on the CEO Share Scheme, consideration needs to be given to the overall level of remuneration for Dr Reynolds. Dr Reynolds employment agreement with Telecom takes effect from 27 September For the Initial Period Dr Reynolds annual remuneration amounts to a base remuneration of $1,750,000, a Performance 1 The actual dilutionary impact will depend on the Telecom share price at the point Restricted Shares and Performance Rights are issued, the quantum of compensation determined by the Board in relation to the Performance Incentive Scheme and Performance Rights Scheme in each year, and the quantum of Restricted Shares and Share Rights that vest as a consequence of Telecom s performance against the targets specified for the respective scheme. Appraisal Report 3

4 Incentive Scheme delivered 60% in cash and 40% in Restricted Shares with a target value of $1,750,000 and a maximum value of $3,062,500 and a Performance Rights Scheme with a maximum LTI amount of $1,750,000. Dr Reynolds target remuneration is expected to consist of approximately 53.3% delivered in cash and 46.7% in Restricted Shares or Share Rights, assuming the Board delivers 40% of the Performance Incentive Scheme payment in Restricted Shares. The shares issued under the Performance Incentive Scheme are restricted in nature, with Dr Reynolds unable to sell these shares for three years from the date of vesting. The performance measurement targets provided for in the Performance Incentive Scheme have not yet been agreed between Dr Reynolds and Telecom. In the event shareholder agreement is not received for the issue of Restricted Shares under the Performance Incentive Scheme, any performance bonuses would instead be paid 100% in cash. Telecom may elect to pay any performance bonuses under the Performance Incentive Scheme 100% in cash rather than issuing shares. The Board proposes that the maximum number of Restricted Shares to be issued to Dr Reynolds over the next three years (4 October 2007 to 3 October 2010) for which approval is sought is 750,000 shares. Dr Reynolds has consented to the share component of the Performance Incentive Scheme being met by payment in cash of the relevant after-tax amount to Dr Reynolds and the application of that amount to the subscription for new shares. The number of Restricted Shares awarded will be calculated by dividing the percentage of the value of the award to be issued in shares by the VWAP of Telecom ordinary shares reported on the NZSX for the twenty trading days immediately preceding the effective date of issue of the Restricted Shares. The Board proposes that the maximum number of Share Rights to be issued to Dr Reynolds over the next three years (4 October 2007 to 3 October 2010) for which approval is sought is 1,750,000 Share Rights. The number of Share Rights awarded annually will be calculated by dividing the annual LTI value received by Dr Reynolds by the VWAP of Telecom ordinary shares reported on the NZSX for the twenty trading days immediately preceding the effective date of issue of the Share Rights. The number of Share Rights that vest will ultimately depend on Telecom s relative TSR performance against the comparator companies. When considering the value of Dr Reynolds remuneration, Telecom sought external advice from John Egan (remuneration consultant) before commencing negotiations with Dr Reynolds and throughout the negotiation process. John Egan has advised Telecom that the remuneration being offered to Dr Reynolds is reasonable in the context of both the Companies Act 1993 (New Zealand) and the Corporations Act 2001 (Australia). No form of financial assistance has been provided by Telecom to Dr Reynolds other than reimbursement of relocation expenses and tax advice. No signing bonuses were paid to Dr Reynolds. Dr Reynolds remuneration is considered to reflect his abilities, previous experience, standing in the telecommunications industry, and salary comparisons with similar organisations internationally, particularly Australian companies. Based on the advice Telecom received from Egan Associates, we are of the view that the level of remuneration for Dr Reynolds is reasonable Performance Measures Performance Incentive Scheme The performance targets relating to the issue of Restricted Shares under the Performance Incentive Scheme have not been set. We have been informed by Telecom that any targets are likely to reflect internal performance measures, potentially including, but not limited to: Earnings; Strategic imperatives; Corporate governance; Leadership and management measures; and Telecom s brand strength or market reputation. Performance Rights Scheme For the Initial Period, the performance targets relating to the issue of Share Rights under the Performance Rights Scheme are based on Telecom s performance relative to the performance of twenty international telecommunications companies. The peer group of companies was selected on the basis of a range of criteria including the nature of the companies operations, the market in which they operate, and their position within that market. Companies selected for the peer group tend to: 4 Appraisal Report

5 Operate as an integrated telecommunications provider; Operate in developed economies with broadly similar growth prospects to New Zealand; Operate in markets with relatively high levels of telecommunications penetration; Have significant market positions in the key markets in which they operate; and Reflect some geographical diversification. Performance is measured by TSR, a combination of capital gains (or losses) derived from share price appreciation (declines) and dividends paid by the company. The TSR of the peer companies and Telecom will be calculated by an appropriately qualified external party, which is initially expected to be Standard and Poor s ( S&P ). At the relevant vesting date Telecom s TSR compared to the peer group will be used to determine Dr Reynolds eligibility to receive Share Rights. If Telecom s TSR is below the median performance for the peer group, Dr Reynolds does not receive any Share Rights. A TSR equal to the median comparator company will result in Dr Reynolds receiving half the Share Rights available under the Performance Rights Scheme. Dr Reynolds receives the full allotment of Share Rights if Telecom s TSR is at or above the 75th percentile of the peer group. Between the 50th and 75th percentiles, Dr Reynolds Share Rights are allocated on a straight-line basis with respect to Telecom s performance against the peer group. Testing to determine whether the performance hurdle has been met will occur at the end of the vesting period of the grant and, if the maximum performance hurdle is not met, once more twelve months later. If the percentage of share rights that would be exercisable on the re-test is greater than the percentage that were exercisable on the initial test date then that percentage of additional share rights will become exercisable following the re-test. If Dr Reynolds fails to meet the 50th percentile at the time of the initial test, upon retesting, the maximum LTI payment receivable would be 50% of the Share Rights, regardless of how well Telecom subsequently performs compared to the peer group of companies. All TSR calculations will be performed in the local currency of the relevant home exchange of each peer group company. For the 2007 grant, one-third of the Share Rights will be eligible for vesting at the anniversary of each of the next three years from the date of the grant, with testing against the peer group occurring annually on or about the 27th September. Subsequent annual grants of Share Rights are expected to be eligible for vesting on the third anniversary of the grant. The Board may amend the performance hurdle, specify a different performance hurdle, or specify a different re-test date for future grants of share rights under the Performance Rights Scheme if it determines that the existing performance hurdle ceases to be appropriate. The performance hurdle for a particular grant of share rights cannot be changed after those share rights have been granted Impact on Shareholding Levels Telecom has 2,020,027,498 fully paid ordinary shares on issue 2 as at 27 July The names, number of shares and percentage holding of the ten largest shareholders of fully paid shares are presented in the following table. Top Ten Shareholders in Telecom Holder Details 27/07/2007 Holding % of Total ANZ Nominees Limited 449,003, National Nominees New Zealand Limited 199,548, HSBC Nominees (NZ) Limited 155,269, J P Morgan Nominees Australia Limited* 123,581, HSBC Custody Nominees (Australia) Limited* 121,379, HSBC Nominees (New Zealand) Limited 109,461, Citibank Nominees (New Zealand) Limited* 80,329, National Nominees Limited* 77,613, ASB Nominees Limited 70,100, Premier Nominees Limited - Armstrong Jones Cash Fund 54,010, Other 579,729, Total 2,020,027, Source: IRG (accessed 3/8/07), Telecom 2 Source: Telecom 6 August 2007 Notes: * refers to overseas registered holder Appraisal Report 5

6 Telecom is seeking shareholder approval for the issue of up to 750,000 Restricted Shares and 1,750,000 Share Rights during the period to 30 September The maximum dilutionary impact of the restricted shares and share rights for which approval is sought is 0.12% Accounting Issues Accounting for the CEO Share Scheme will be governed by the requirements of International Financial Reporting Standard 2 Share-Based Payments ( IFRS 2 ). The total expense to be recognised in Telecom s Statement of Financial Performance will be the fair value of each CEO Share Scheme share (using techniques consistent with generally accepted valuation methodologies for pricing financial instruments) multiplied by the number of shares which are expected to vest. The fair value of each share will be established as at the grant date, which will be the date of shareholder approval. The total value of shares granted will be determined by multiplying the fair value of each share by the number of shares initially granted. The conditions under which Restricted Shares are issued are likely to be non-market conditions in IFRS 2. The intention of IFRS 2 is that the amount recognised is based on the number of shares that eventually vest. Therefore, on a cumulative basis, no cost is recognised if the shares granted do not vest because of failure to satisfy a non-market vesting condition. Telecom will be required to recognise the expense during the vesting period based on the best available estimate of the number of shares likely to vest. Telecom will be required to revise the estimate as events occur if subsequent information indicates that the number of shares expected to vest differs from previous estimates (while not changing the fair value of each share). Furthermore, on the vesting date, Telecom will be required to revise the estimate to equal the number of shares which are expected to vest. The TSR condition under which Share Rights are issued is likely to be considered a market condition under IFRS 2. Market conditions are taken into account when estimating the fair value of the equity instruments granted. Therefore, all goods and services received from a counterparty that satisfies all other vesting conditions are recognised, irrespective of whether the TSR condition is ultimately satisfied Implications of the Resolutions Not Being Approved In the event that the resolutions in respect of the CEO Share Scheme are not approved, the Telecom Board will need to re-enter into remuneration negotiations with Dr Reynolds. This is unlikely to be a desirable situation for the Telecom Board as it gives rise to a number of risks: Increased costs to the Company arising from the potential distraction and lack of focus on Company operations as further negotiations are entered into; A greater proportion of Dr Reynolds remuneration being in the form of cash, with reduced alignment to shareholders interests; and Additional costs to the Company if the alternative remuneration package requires shareholder approval. If the issue of Restricted Shares under the Performance Incentive Scheme is not approved, payments would be made solely in cash rather than as a mixture of cash and shares Voting For or Against the Resolutions in Respect of the CEO Share Scheme We consider that Telecom has provided sufficient information for shareholders to make an informed decision with respect to Dr Reynolds remuneration. Voting for or against the resolutions in respect of the CEO Share Scheme is a matter for individual shareholders based on their own views as to value and future market conditions, risk profile and other factors. Shareholders will need to consider these consequences and consult their own professional adviser if appropriate. 3.> Restrictions, Reliance on Information, Disclaimer and Indemnity 3.1. Restrictions This report is not intended for general circulation or publication, nor is it to be reproduced or used for any purpose other than that outlined in the introduction without our prior written permission in each specific 6 Appraisal Report

7 instance. We do not assume any responsibility or liability for losses occasioned to Telecom, its directors or shareholders or to any other parties as a result of the circulation, publication, reproduction or use of this report or any extracts there from contrary to the provisions of this paragraph. In any event, our total liability to all and any parties for any reasons whatsoever is limited to one times the fee charged for this assignment. We reserve the right, but not the obligation, to review all calculations included or referred to in this report and, if we consider it necessary, to revise our opinion in the light of any information existing at the appraisal date which becomes known to us after the date of this report Reliance on Information In preparing this report we have relied upon and assumed, without independent verification, the accuracy and completeness of all information that is available from public sources and all information that was furnished to us by Telecom. We have evaluated that information through analysis, enquiry and examination for the purposes of forming our opinion. However, we have not verified the accuracy or completeness of any such information nor conducted an appraisal of any assets. We have not carried out any form of due diligence or audit on the accounting or other records of Telecom. We do not warrant that our enquiries have identified or revealed any matter which an audit, due diligence review or extensive examination might disclose. We have received all available information from Telecom required to prepare our report and make an informed recommendation Disclaimer This report has been prepared with care and diligence and the statements and conclusions in this report are given in good faith and in the belief, on reasonable grounds, that such statements and conclusions are not false or misleading. However, in no way do we guarantee or otherwise warrant that any forecasts of future profits, cash flows or financial position of Telecom will be achieved. Forecasts are inherently uncertain. They are predictions of future events that cannot be assured. They are based upon assumptions, many of which are beyond the control of Telecom and its management. Actual results will vary from the forecasts and these variations may be significantly more or less favourable. We assume no responsibility arising in any way whatsoever for errors or omissions (including responsibility to any person for negligence) for the preparation of this report to the extent that such errors or omissions result from the reasonable reliance on information provided by others or assumptions disclosed in this report or assumptions reasonably taken as implicit Indemnity Telecom has agreed that to the extent permitted by law, it will indemnify Deloitte and its partners, employees and consultants in respect of any liability suffered or incurred as a result of or in connection with the preparation of this report. This indemnity will not apply in respect of any negligence, wilful misconduct or breach of law. Telecom has also agreed to indemnify Deloitte and its partners, employees and consultants for time incurred and any costs in relation to any inquiry or proceeding initiated by any person. Where Deloitte or its partners, employees and consultants are found liable for or guilty of negligence, wilful misconduct or breach of law, Deloitte shall reimburse such costs. Telecom has also agreed to indemnify Deloitte and its partners, employees and consultants for time incurred and any costs in relation to any inquiry or proceeding initiated by any person. Where Deloitte or its partners, employees and consultants are found liable for or guilty of negligence, wilful misconduct or breach of law, Deloitte shall reimburse such costs. 4.> Qualifications and Expertise, Independence, Declarations and Consents 4.1. Qualifications and Expertise Deloitte is one of the world s leading professional services firms. Deloitte Corporate Finance is the corporate finance practice of Deloitte, providing corporate advisory, mergers and acquisitions, capital raising, valuation and transaction support services. The person in the firm responsible for issuing this report is Alan J Dent, BCA, CA. Mr Dent is a Partner in the Deloitte Corporate Finance practice in New Zealand. He specialises in providing corporate finance advice on acquisitions and divestments, the valuation of shares, businesses and intangible assets, undertaking financial investigations and providing litigation support services. Deloitte Corporate Appraisal Report 7

8 Finance has significant experience in the valuation of shares, businesses and intangible assets for merger, acquisition and divestment purposes Independence Deloitte Corporate Finance does not have any shareholding in, or other relationship with, Telecom that could reasonably be regarded as capable of affecting our ability to provide an unbiased opinion in relation to this transaction. Deloitte Corporate Finance will receive a fee for the preparation of this report based on its normal time charges. This fee is not contingent on the outcome of the valuation assessment. Deloitte Corporate Finance will receive no other direct financial benefit for the preparation of this report Declarations Advance drafts of this report were provided to Telecom. Certain changes were made to the drafting of the report as a result of the circulation of the drafts. However, there was no material alteration to any part of the substance of this report, including the methodology or conclusions as a result of issuing the drafts. Our terms of reference for this engagement did not contain any term which materially restricted the scope of the report Consents We consent to the issuing of this report in the form and context in which it is to be included in the notice of meeting to be sent to Telecom s shareholders. Neither the whole nor any part of this report, nor any reference thereto may be included in any other document without our prior written consent as to the form and context in which it appears. 20 August 2007 Deloitte brings together over 700 specialists providing New Zealand s widest range of high quality professional services. We focus on audit, tax, technology and systems, risk management, corporate finance and business advice for growing organisations. Our people are based in Auckland, Hamilton, Wellington, Christchurch and Dunedin, serving clients that range from New Zealand s largest companies to smaller businesses with ambition to grow. Deloitte s local experts draw on best practice and innovative methodologies from around the world as part of Deloitte Touche Tohmatsu, whose 135,000 people globally serve over 80 percent of the world s largest companies. A long track record and a wealth of international research into the needs of growing organisations has made Deloitte the world s leading advisor to emerging businesses. For more information about Deloitte in New Zealand, look to our website Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, its member firms, and their respective subsidiaries and affiliates. Deloitte Touche Tohmatsu is an organization of member firms around the world devoted to excellence in providing professional services and advice, focused on client service through a global strategy executed locally in nearly 140 countries. With access to the deep intellectual capital of approximately 135,000 people worldwide, Deloitte delivers services in four professional areas audit, tax, consulting and financial advisory services and serves more than 80 percent of the world s largest companies, as well as large national enterprises, public institutions, locally important clients, and successful, fast-growing global growth companies. Services are not provided by the Deloitte Touche Tohmatsu Verein, and, for regulatory and other reasons, certain member firms do not provide services in all four professional areas. As a Swiss Verein (association), neither Deloitte Touche Tohmatsu nor any of its member firms has any liability for each other s acts or omissions. Each of the member firms is a separate and independent legal entity operating under the names Deloitte, Deloitte & Touche, Deloitte Touche Tohmatsu, or other related names. 8 Appraisal Report