Good afternoon, ladies and gentlemen. My name is Phoebe Gibbons, and I am the Chief Legal Officer for Heartland Bank. A very warm welcome to shareholders and guests present both in person and online today at the 2026 Heartland Special Shareholder Meeting. It is our pleasure to convene this meeting for shareholders to vote on the proposed merger of Heartland Bank and TSB. For those in the room, to ensure your experience at Eden Park is both memorable and safe, we would like to make you aware of the following. Please familiarize yourself with the nearest emergency exits. In the unlikely event of an emergency, the lifts must not be used in the event of an evacuation.
Please follow the evacuation instructions of the Eden Park staff members and make your way via the Gate F or G stairs, identified by the green and white exit sign, through the car park, and gather at the assembly point on the footpath on Reimers Avenue. The restrooms are located outside the World Cup lounge through the doors past the registration desk. Eden Park is a non-smoking venue. For those who wish to smoke, there is a designated external smoking area on the balcony. Should anyone require first aid, or if you see anything unusual, please notify one of our staff members or the Eden Park team, who will be wearing a white shirt and black jacket with the Eden Park logo. Finally, as a courtesy to everyone present, please ensure your phone is now on silent.
For those joining the meeting in person today, we welcome you to join the board and management for light refreshments after the meeting. For those joining online, I will shortly provide you with instructions on how to vote and ask questions. If you encounter any issues, please refer to the virtual annual meeting online portal guide or phone the helpline on 0800 -200 -220. Since a quorum is present, I declare the meeting open. I will now outline the agenda of business for today's meeting. I will shortly introduce you to the board of directors and the Chief Executive Officer of Heartland Group, and the Chair of Heartland Bank, who are joining us in person today. I will then take you through the formalities of the meeting before inviting Greg Tomlinson, Chair of the Heartland Group Board, to explain the strategic rationale for the proposed merger.
This will be followed by an address from Heartland Group's Chief Executive Officer, Andrew Dixson, and following this, there will be an opportunity to answer any questions that you have about the proposed merger. I encourage shareholders attending online to begin to submit questions now if you have not done so already. We will answer as many of these as we can at the appropriate time. Thereafter, we will move to the formal business of the meeting, including voting on the resolutions posed to you today. I would now like to introduce those on stage with us today. Rob Bell. Rob was appointed as a director of Heartland Group in June 2024. Simon Beckett. Simon was appointed as a director of Heartland Group in June 2024. Simon is also a director of Heartland Bank Australia.
John Harvey. John has been a director of Heartland Bank since establishment in 2011 and was appointed to the Heartland Group Board in April 2024. Greg Tomlinson, our Chair of the Heartland Group Board. Greg was first appointed a director of Heartland in March 2013 and was appointed Chair of the Heartland Group Board in February 2023. Andrew Dixson. Andrew was appointed Chief Executive Officer of Heartland Group in October 2024. He was also appointed to the Heartland Bank Board at the same time, and in February 2025, he joined the Heartland Bank Australia Board. Kate Mitchell. Kate was appointed as a director of Heartland Group in October 2021. Kate is also a director of Heartland Bank. Bruce Irvine. Bruce is the Chair of the Heartland Bank Board, where he has been a director since its establishment in 2011. Bruce is also a director of Heartland Bank Australia.
Returning to the business of the meeting, I advise that all valid proxies and postal votes received from shareholders within the prescribed time limits have been admitted. I can confirm that a total of 1,759 proxies and postal votes have been accepted. This represents some 542 million shares, or 57% of the total issued shares in Heartland Group. I would now like to outline the meeting procedures. This is a meeting of Heartland Group Holdings Limited shareholders. Accordingly, while guests are very welcome to witness the proceedings of this meeting, participation in the shareholder discussion and the business of this meeting is confined to ordinary shareholders present in person, online, by proxy, or by authorized representative. Regarding the voting procedures for today's meeting, the resolution will be decided on by way of a poll.
This is in line with the practice increasingly adopted by listed companies and is the preferred method of the NZX and the New Zealand Shareholders' Association. By having the resolution decided by way of a poll, we are counting all postal votes, proxy votes online, and votes from the floor. The resolutions will be put to the meeting. Shareholders joining us in the room should have received a voting card on registration. Please keep your voting card with you until the resolutions have been voted on. Our share registrar, MUFG Pension & Market Services, will then move through the room with the ballot boxes and collect all the voting cards. If you need to leave before the conclusion of the meeting, you may place your voting card in one of the ballot boxes at the exit with an MUFG Pension & Market Services staff member.
For shareholders attending the meeting online, when your online registration is validated, you will receive an electronic voting card which you can use to cast your vote. To vote, you will need to click Get Voting Card within the online meeting platform. You will be asked to enter your shareholder number or proxy number to vote. Please then mark your voting card in the way you wish to vote by clicking For, Against, or Abstain on the voting card. Once you have made your selection, please click Submit Vote on the bottom of the card to lodge your vote. Please refer to the virtual meeting online portal guide or phone the helpline on 0800 -200 -220 if you require assistance. Voting will remain open for five minutes after the conclusion of the meeting.
The notice calling this annual meeting was published electronically on August 31st, 2026, with hard copies subsequently sent to shareholders who requested a copy. That notice outlined the formal business for this meeting and also provided background information on the resolutions to be voted on. I will now invite Heartland Group Board Chair, Greg Tomlinson, to address you, followed by an address by Group CEO, Andrew Dixson. We will then move to the shareholder discussion, which our chair will facilitate. We invite online questions to be submitted now to allow us time to answer these. Thank you.
Thank you, Phoebe. Good afternoon, ladies and gentlemen. Thank you for joining us today, both here at Eden Park and online. I am pleased to present to shareholders Heartland's proposal to acquire TSB and merge it with Heartland Bank. If approved by our shareholders, and if the remaining conditions are satisfied, the merged bank will be called TSB Heartland Bank. The board has carefully considered the proposal and unanimously supported it. The proposal brings together two established New Zealand banks with different strengths, strong regional histories, and a shared commitment to customers. It would create a bank with approximately NZD 15 billion in New Zealand assets and a scale to compete, invest, and respond to customers' changing needs. Scale is important in banking. It supports investment in technology, customer service, and risk management. It also creates a strong platform to provide increased competition and choice in a market dominated by larger banks.
This is about combining complementary banks that can do more together than either could do alone. Heartland Bank has built specialist product expertise, whereas TSB brings established everyday banking capabilities together with an efficient funding base. These products are complementary. Together, they would allow TSB Heartland Bank to support customers through more stages of their financial lives while keeping the specialist products that set Heartland Bank apart. The result would be a bank with a wider mix of products and a broader base from which to serve customers and grow. Heartland also brings relevant experience. We have grown by bringing businesses together, including Heartland's own formation in 2011. Our reverse mortgage success in New Zealand and Australia has grown from acquisitions made in 2014. More recently, we acquired and integrated Challenger Bank to create Heartland Bank Australia.
This made Heartland Bank the only New Zealand registered bank to own an Australian bank. The Reserve Bank also recently reduced Heartland Bank's transitional capital overlay, which was put in place after the acquisition of the Australian bank. The reduction reflects the progress made on integration, strong oversight, and an improved overall risk profile. That track record gives us confidence that Heartland understands the discipline required through careful planning, strong governance, and continued attention to customers while change is underway. We know how to do this, and we know it must be done carefully. TSB Heartland Bank would be regionally focused. TSB was established in Taranaki in 1850. Heartland's origins trace back to Ashburton in 1875, and Canterbury remains an important part of our identity, employment, and customer base. These histories would form an important foundation for the merged bank.
TSB Heartland Bank would have a nationwide presence, with Taranaki and Canterbury remaining important operational bases. Taranaki will continue to have a customer banking hub, including a local branch network and local customer roles. The region connection with TSB will remain an important part of the merged bank's identity and future. The name TSB Heartland Bank reflects the importance of both banks' history and the trust that has been built with customers over generations. The intention is for customers to continue to be served through the TSB and Heartland Bank brands and channels they know, with any future change communicated carefully and clearly. For customers, employees, communities, and shareholders, the proposed transaction provides an opportunity to share in the growth of a larger New Zealand bank. Customers would benefit from a broader range of banking products and greater investment by the bank in technology and service.
While communities would continue to be served by a bank with genuine regional connections, including its ongoing presence in Taranaki. Heartland would remain the listed parent company with the ability to deploy capital across a more diverse banking group and benefit from greater efficiency as the bank grows over time. Being part of a listed banking group also gives customers and communities the chance to invest in the bank's success. Heartland shareholders include many everyday New Zealanders who supported the business when it merged and listed in 2011. Their investment reflects the idea that a New Zealand bank can be owned, supported, and grown by New Zealanders. As part of the proposed transaction, Toi Foundation would become Heartland's largest shareholder with a 17.5% shareholding. Toi intends to remain a long-term supportive shareholder. This would support Toi's ability to fund community initiatives across Taranaki.
Shareholders are also being asked to vote on Mark Darrow's appointment to the Heartland Board. Mark is current chair of TSB and has been nominated by Toi Foundation to join the board when the acquisition is completed. Mark is an experienced board chair and director, and the Heartland Board considers that he will be able to bring an independent view and act in the best interest of all shareholders. Mark will address shortly. On completion of the merger, two existing TSB directors are also expected to join the TSB Heartland Bank Board. Together, these appointments will bring relevant knowledge of TSB and support a well-governed integration of the merged bank. Shareholders are also being asked to approve an increase in the total fee pool for non-executive directors. The new fee pool has been proposed by the board after receiving the independent director benchmarking from Propero.
This increase is to reflect the larger and more complex banking group. The additional directors who will join the two boards and the time and expertise required for board committee work. The base fees for Heartland and Heartland Bank directors are not proposed to increase, and the base fees for Heartland Bank Australia directors are proposed to decrease. The additional fees for new director roles would only apply if the proposed merger is completed. The proposal remains subject to shareholder approval, regulatory approvals, and other conditions. I have considered this proposal carefully, both as chair and as a shareholder. I believe the proposed transaction is in the best interest of Heartland and its shareholders. It would bring together two complementary banks to create a larger New Zealand bank with a regional focus. Heartland has the experience to undertake this work and create long-term value over time.
I will now hand over to Andrew Dixson, our Chief Executive Officer, who will provide more detail of the proposed transaction. Thank you.
Well, thank you, Greg, and good afternoon, and thank you all for joining us today. Greg has outlined the strategic context for the proposed transaction. I will focus on what the proposed bank and wider group would look like, the financial benefits, the transaction structure, and how we would bring the two banks together. In terms of the proposed bank, on completion, Heartland would acquire all of the shares in TSB. Heartland Bank and TSB would then merge and be renamed TSB Heartland Bank. Heartland would remain the NZX and ASX listed parent, and the New Zealand bank, TSB Heartland Bank, would continue to own Heartland Bank Australia. There would be no impact to Heartland Bank Australia or its current strategy as a consequence of the proposed transaction.
On a pro forma basis, TSB Heartland Bank would have approximately NZD 15.1 billion of New Zealand assets, increasing the New Zealand asset base by approximately 171%. This increased scale creates a larger base to spread the cost of technology, risk management, and regulatory compliance, which disproportionately affect smaller sub-scale banks. It also gives the banks more capacity to invest, respond to customers, and compete in the New Zealand market. The merged bank would have a broader and more balanced loan book. Residential lending through home loans and reverse mortgages would be the largest component, constituting approximately 65% of receivables. This would be complemented by motor finance, commercial property lending, rural lending, and business finance. The funding base would also be more diverse and introduce a greater proportion of cost-effective interest and non-interest-bearing call deposits.
The result would be a New Zealand bank able to offer a broader range of banking services while retaining a specialist product focus and a lower risk-weighted product mix. In practical terms, TSB Heartland Bank would operate as a national bank with a clear regional commitment. Taranaki would remain a key operational hub for customer banking services, including its local branch network and customer-facing roles. Turning to synergies and financial benefits. Cost synergies are expected to provide an annual benefit of approximately NZD 34 million to profit before tax once fully realized. These estimated efficiencies are associated with bringing the two banks together, reducing duplication in activities, processes, and shared business overheads. These savings are expected to build progressively over three years after completion.
And there is potential for further benefits from funding and liquidity, including access to TSB's deposit base, the opportunity to optimize the combined liquid asset base, and the ability to leverage Heartland's existing and future technology investment across a larger bank. The estimated one-off costs of achieving these benefits is also approximately NZD 34 million, spread over the same three-year period. The transaction is expected to create material value for Heartland shareholders. Normalized earnings per share is expected to increase by more than 20% after completion based on the full run rate cost benefits. The transaction is also expected to support a stronger dividend per share profile and improve return on equity. The combined bank would remain well capitalized, and we do not expect to need to issue ordinary equity to meet future capital requirements.
TSB Heartland Bank is also expected to benefit from recent changes to Reserve Bank capital settings, including lower and more granular risk-weighted. In terms of the transaction structure, the aggregate consideration to Toi Foundation is NZD 620 million. This comprises a NZD 50 million pre-completion cash dividend from TSB, NZD 250 million of ordinary shares in Heartland, NZD 56 million of subordinated debt issued by Heartland Bank as eligible tier two capital, and a NZD 264 million vendor loan provided by Toi to Heartland. The issue of shares to Toi means existing shareholders' proportional ownership of Heartland would reduce by approximately 17.5%. However, the transaction is not expected to be value dilutive given the expected uplift in earnings and dividends per share. The vendor loan has a two-year term and can be repaid at any time during that period without a break fee.
Given Heartland's strong excess capital position, experience in and access to New Zealand and Australian debt capital markets, Heartland has sufficient options available for repaying this loan. For Toi Foundation, the structure provides a diversified portfolio of investments, which supports Toi's ability to increase its investment in the Taranaki community. For Heartland, the structure preserves flexibility to use excess capital for future growth and investment while maintaining strong capital and liquidity settings. In terms of the independent expert findings, Heartland commissioned Calibre Partners to provide an independent expert report on the merits of the proposed transaction. Calibre Partners concluded that the proposed consideration for TSB is reasonable and that, on balance, the positives of the proposed transaction outweigh the negatives for Heartland shareholders. The NZD 620 million consideration represents approximately 0.76 x TSB's book value.
Calibre Partners considered this to be within the reasonable range of approximately 0.7x to 0.8 x book value. The report also recognizes the expected cost benefits, the more diversified loan book, the improved funding mix, and the potential for the transaction to be earnings and dividend accretive. On to integration and next steps. Several conditions have now been satisfied, including confirmatory due diligence, the entry by Heartland and Toi Foundation into warranty and indemnity insurance arrangements, and Toi Foundation trustee approval of the proposed transaction. Applications to the Reserve Bank have been submitted by both Heartland and Toi Foundation, and both parties are continuing to actively engage with the Reserve Bank of New Zealand in respect of the proposed transaction. Shareholder approval, the TSB material adverse change condition, and the remaining regulatory approvals still need to be satisfied for completion to occur.
Following completion, the two banks would be integrated progressively over a period of up to three years. Detailed integration work would be coordinated through an integration management office and overseen by the TSB Heartland Bank Board. While the proposed transaction provides an opportunity to further leverage Heartland's investment in current and future technology programs, work remains ongoing in relation to technology integration costs and potential technology synergies. These are not expected to materially impact the transaction economics. Our priority will be to maintain reliable banking services and good outcomes for customers. Initially, customers are expected to continue using the brands, products, channels, and locations that they know. Any changes will be communicated clearly and with appropriate notice. We will also continue to support our people through this process. Where changes are needed, they will be managed fairly, openly, and in line with our employment obligations.
In conclusion, the proposed transaction materially increases Heartland's scale in New Zealand. Greater scale and diversification across products and locations will provide improved financial efficiency and resilience. TSB Heartland Bank would have a diversified and differentiated product set. This creates a full-service capable bank differentiated by its specialist product offerings with a lower risk-weighted product portfolio and an enhanced ability to serve customers through their financial life cycle. Material synergies are available with the potential for further upside. We believe this transaction would also create a stronger platform for the wider Heartland Group, with the potential to improve earnings, dividends, and returns for our shareholders over time. Thank you very much for your time today and your continued support in Heartland. I will now pass back to Greg.
Thank you, Andrew. Shareholders joining online who wish to ask questions on the proposed transaction can submit their questions through the online meeting platform now. We will aim to answer as many of those questions as possible. Any comments, questions, or matters raised for discussion during the meeting must be relevant to the business before the meeting. If you have other matters you would like to raise, the board and management will be available to answer your questions during refreshments after the meeting. For those online, please submit any questions you may have about other matters, and we will respond after the meeting. Shareholders were also invited to submit questions prior to the special meeting. We received five questions, which I will address now.
The first question asks, "What impact could the merger have on total deposits over the 12 months following completion once the two banks become a single deposit taker, given the customers who currently hold deposits with both Heartland Bank and TSB may choose to transfer some funds to another bank once the two banks become a single deposit taker and the NZD 100,000 Depositor Compensation Scheme limit applies across the combined entity?" Both banks have considered the potential effect of the merger on depositor behavior, and we are actively monitoring our respective depositor bases. While we acknowledge that some depositors who currently hold funds with both banks may choose to redistribute a portion of those funds, our analysis to date indicates that potential impact would be limited. We do not expect the merger to result in material reduction in deposits over the 12 months following completion.
The expected customer overlap is relatively low. The proportion of fully insured deposits is limited, and there has been no material change in depositor behavior since the scheme was introduced. However, both banks have ensured contingency funding options are available should behavior differ from expectations. The next question. "Looking across Heartland Group's business segments, is there an optimal scale and mix the group is seeking to achieve? If so, what timeframe, and would achieving it require any further significant acquisitions?" Our strategic priority is to create long-term shareholder value measured by return on equity. We are focused on investment in activities where risk and returns deliver a 12%-14% return on equity and driving efficiencies through automation. We believe Heartland is on the right path to achieve these objectives through its existing businesses.
The proposed merger with TSB would accelerate that progress by adding scale, which provides an opportunity to optimize the fixed cost base across a larger bank. Achieving our objectives does not depend on any further significant acquisition. However, acquisitions are a key part of our growth strategy for New Zealand and Australia. We currently consider a range of strategic options, including acquisitions, where there is a fit with our strategic vision and the opportunity to add scale or add value by adding scale or technology. The opportunity to merge Heartland Bank with TSB meets this criteria. The next question relates to potential cost synergies. The question is: how have these synergies been scoped and costed, and is a detailed plan available to shareholders? The NZD 34 million in estimated annual savings has been subject to detailed work.
EY was engaged by Heartland and Toi Foundation to help identify and quantify the potential synergies, the pace they could be realized, and the cost of achieving them. These savings are not assumed to be available immediately. There will be one-off integration costs, and the benefits are expected to build progressively over a three-year period as synergies are released. At this stage, these figures are management estimates prepared to evaluate the transaction rather than a final detailed plan. As with any estimates of this kind, delivery will depend on execution, regulatory requirements, market conditions, and the final integration design. Over time, we expect the proposed transaction to strengthen Heartland's earnings and create significant value for shareholders, including material growth in normalized earnings per share and an improved return on equity. The next question: How will Heartland repay the NZD 264 million loan within two years?
As Andrew described, the vendor loan provided to Heartland by Toi Foundation as part of consideration will be repayable at any time over the loan term without break fees applying. Heartland has options available for repaying this loan and a strong excess capital position with experience in and access to New Zealand and Australian debt markets. The final question asked about the ongoing dividend for existing shareholders. The Heartland Board continues to target a total dividend payout ratio of at least 50% of net profit after tax in this financial year. As always, the dividend payout ratio is subject to the board considering Heartland's capital needs, ROE, accretive growth opportunities, balance sheet flexibility, and financial performance. I will now open the meeting for questions, starting with those in the room and followed by questions online.
For shareholders in the room who wish to ask a question, please raise your hand and then wait for a microphone. Please state your name before asking your question. If you have more than one question, please ask all of your questions and then resume your seat. We will answer each of your questions in turn. This will help to ensure as many shareholders as possible have an opportunity to ask questions. Right, I am taking questions from the floor, please.
Good afternoon, Mr. Chairman. My name is Carl Trotter. Technology integration has been the Achilles heel of many a merger in financial services for many mergers. What degree of confidence can you give shareholders that the technology integration will be done successfully and on budget?
Yeah, that is a critical question. I thank you, Carl, for that question. I can convey with you that there has been a lot of uplift in our technology area. Not only have we increased that internally, we have increased it externally. You will also note Rob Bell's appointment to the board. Rob is a very experienced digital banking person. Thank you.
I have a follow-up question, if I may. Calibre Partners, you reported, were of the view that the positives outweighed the negatives of this merger. What were those negatives?
Well, there haven't really been any negatives, to be frank.
Thank you.
All right. Any more questions from the floor? Okay, thank you for that. I will now move to questions online.
Thank you, Greg. We have received a couple of questions. The first one is: What is the rationale for calling the new entity TSB Heartland and not Heartland TSB?
I do not know really, so I cannot answer that. I am not the branding expert, but I can assure you of that. But look, it is respect to both entities. TSB has got a strong brand and a very old and established brand. But thank you for the question.
Thank you. The next question: For existing Heartland shareholders, when do you expect this transaction to become materially EPS accretive after dilution and all integration and financing costs? And what ROE and dividend outcomes should we reasonably expect once the merged bank reaches steady state?
Well, I have the view, but I am probably better off to hand this over to Andrew to answer.
Yeah. Thanks for the question. I think it is well outlined in the pack. We expect this to be EPS and dividend per share accretive in the first year. And once all synergies are realized after three years, it will be materially so. Yeah, so after three years, effectively.
Thank you. We have another question here: With AI becoming an increasing worry, are you confident the process of merging won't be interrupted by a deviant actor?
Well, again, I can't answer that. This is business, and you've got issues with any business now with AI. I can assure you we've had a major upskill within our digital part of the business. Thank you.
Thanks. There are no further questions at this stage.
Well, thank you very much. I will now invite Phoebe Gibbons to take us through the formal business of the meeting. Thank you all.
Thank you, Greg. We now move to the formal business of the meeting, which is to vote on the resolution set out in the notice of meeting. As mentioned earlier, if you are attending online, you can cast your vote using the electronic voting card. Those online with questions about the resolutions can submit these online now so they can be addressed with questions from the floor within the discussion of the resolutions. The first item of business is the approval of Heartland's acquisition of TSB and subsequent merger of Heartland Bank and TSB. This resolution has the full support of the board. This resolution is a special resolution requiring approval by a special majority of 75% or more of those votes of shareholders entitled to vote and voting.
I move that the acquisition by Heartland of all of the shares in TSB and the subsequent amalgamation of Heartland Bank and TSB, with Heartland Bank being the amalgamated company under the merger implementation agreement dated 1 June 2026 between Heartland, Toi Foundation, and Toi Foundation Holdings Limited, be approved, confirmed, and ratified for all purposes, including Section 129 of the Companies Act 1993 and NZX Listing Rule 5.1.1. Are there any questions from the floor? Are there any questions online?
Yes, there are a couple. The first, PwC is the external auditor to both TSB and Heartland. What role, if any, has PwC played in this merger transaction, and who is likely to be the first signing partner of the merged bank? In terms of synergies, are we expecting to reduce the overall audit costs of the two organizations, and is there a plan to go to market and run a tender to help drive down those audit costs once the merger has completed?
Andrew, shall I pass to you for that question?
Thanks, Phoebe. PwC has not been involved in the merger transaction. They are our external auditor currently. We will go through a process to confirm PwC is continuing to be our auditor. We don't intend to go to market. We went to market a couple of years ago, and again, very comfortable with the service that we're providing and very comfortable with the commercial terms that we are receiving those services under.
Thank you. Final question for this resolution is, will the Reserve Bank review of TSB capital settings have any impact on the proposal?
Andrew, I'll pass to you.
As I said in my address, both banks will benefit from the revised capital settings that will come into place 1st of October. We will see both banks have an increase in their capital positions, and that will go to benefit the proposal in terms of the new TSB Heartland Bank having a very strong capital position.
Go to the next one. There is one more question, sorry. Could you please speak to the recent press information regarding the TSB regulatory position? I believe this question is in relation to the Section 95 notice.
That Section 95 notice is in relation to TSB, not Heartland Bank, so we will not be providing any comment on that at this time.
Thank you. No further questions.
If you can please mark your intention on your voting card by selecting for, against, or abstain at item one. For those online, please click Submit Vote on the bottom of the voting card to lodge your vote. The next resolution is for the issue of shares to Toi Foundation as partial consideration for Heartland's acquisition of all of the shares in TSB. This resolution also has the full support of the board. The resolution is an ordinary resolution requiring approval by a majority of the votes of those shareholders entitled to vote and voting.
I move that the issue of 200 million fully paid ordinary shares in Heartland to Toi Foundation at an issue price of NZD 1.25 per share on completion of, and as partial consideration for, the acquisition by Heartland of all of the shares in TSB be approved, confirmed, and ratified for all purposes, including NZX Listing Rule 4.1.1. Are there any questions from the floor? Are there any questions online?
No questions.
Please mark your intention on your voting card by selecting for, against, or abstain at Item 2. For those online, please click Submit Vote on the bottom of the voting card to lodge your vote. The next resolution is for the election of Mark Darrow to the board of Heartland Group Holdings Limited. Details about Mark's background, qualifications, and experience were included in the notice of meeting. This resolution has the full support of the board. The resolution to elect Mark is an ordinary resolution requiring approval by a majority of the votes of those shareholders entitled to vote and voting. Mark will now address the meeting.
Thank you, Phoebe, and good afternoon, everyone. It is a privilege to be considered for appointment to the Heartland Group Board as the nominee of Toi Foundation under the Merger Implementation Agreement. I genuinely appreciate the opportunity to share with you my relevant experience for the Heartland Group Board and for you as shareholders. When the merger was first proposed, the TSB Board had to consider and opine that the proposal was in the best interests of TSB Bank. That decision was straightforward. I am on public record as supporting the merger from day one, pointing out the opportunity to create a genuine Challenger Bank in New Zealand, noting the incredible change that the banking sector is currently going through, the need for scale and synergy, and the need to source growth capital which TSB does not currently have with a philanthropic shareholder.
The synergy opportunities are clear and obvious, especially in areas like technology and regulatory compliance. The DNA of Heartland and TSB is very close, with common regional origins, and the product sets are highly complementary with significant cross-sell opportunities on a merged basis. The deal simply makes sense, and the TSB Board strongly supported our shareholder, Toi Foundation, working on this transaction. TSB has made significant improvements over the last five years, stabilizing technology and addressing long-standing regulatory compliance issues, the last of which are being addressed now. All issues have been self-identified as part of our uplift. There is still some residual work to be done, but we are very proud of the results TSB has achieved, not just in compliance, but in governance, executive capability, profitability, cost-based reduction, and return on- even be considered, and I am personally excited about what this merger could provide.
If shareholders support my appointment, I will bring to the Heartland Group Board a combination of direct knowledge of TSB for important continuity and a deep understanding of the Taranaki community and its key clients. In addition, I have substantial financial services experience and broad governance experience and leadership experience across complex, highly regulated organizations. In addition to chairing TSB Bank, I also chair New Zealand's largest organization, Health New Zealand | Te Whatu Ora , and the Civil Aviation Authority, underlying central government's confidence in me personally. I am also chair of the advisory boards of Armstrong's, New Zealand's largest automotive group, and PB Tech, New Zealand's largest electronics company. In my earlier career, I spent 25 years in senior executive roles.
Most relevant to Heartland and to you, I was executive director of GE Money in New Zealand, who were a leader in automotive finance, and then chief executive of PGG Wrightson Finance. That business was essentially a full-services rural bank, and coincidentally, I was involved in the sale to Heartland back in 2011. I was also managing director of Sime Darby New Zealand and Continental Car Services, which in addition to my work with Armstrong's, has given me a lifetime of experience in the automotive sector, one of Heartland's key financial sectors. I was also CEO for Direct Broking and SCI Life, including running what was then New Zealand's second-largest reverse mortgage business. I have significant experience in all of Heartland's key banking areas, added to the more recent TSB experience.
My governance career spans nearly 20 years and have been full-time for the last 10 years, spanning a number of industries, including banking, finance, insurance, and technology. It includes chairing MTF Finance, The Lines Company, Primary ITO, and six years as chair of Inland Revenue's Risk and Assurance Committee, and have been serving on other boards like NZTA Waka Kotahi, Auckland Transport, Trustees Executors, MTA, and VTNZ. I am a qualified accountant, and I am a Fellow of Chartered Accountants Australia and New Zealand, as well as a Fellow of the New Zealand Institute of Directors. As the current TSB chair, I understand the bank's business, its people, the customers, and crucial community relationships. That knowledge will provide valuable continuity in the transition, the integration, and in the years ahead. I understand importantly that if appointed, I will act solely in the best interest of Heartland Group.
In summary, my career demonstrates deep experience in banking and finance sector, including with TSB for nearly five years. Career demonstrates deep experience in banking and finance sector, including with TSB for nearly five years. My governance experience and capability is self-evident and believe very well-suited to the Heartland Group, including having the confidence of Heartland's largest shareholder post-merger. I respectfully ask for your support for my appointment to the Heartland Group Board. Thank you for your time and consideration.
Thank you, Mark. I move that Mark Darrow, having been nominated by the board of Heartland in each director's capacity as a shareholder of Heartland, be elected as a director of Heartland with effect on and from the completion of the acquisition by Heartland of all of the shares in TSB. Are there any questions from the floor? There is one down here.
Thank you. My name is Ray Williams, shareholder. Is this merger with Taranaki Savings Bank will have any implications on the Fisher Funds, where they are a fairly large shareholder?
Given that is Toi Foundation's investment, we will not be able to comment on that today.
Thank you.
Are there any questions online?
Yes, one question here. Social issues are often the trickiest aspect of merger negotiations. It is not easy working out who will be chair, who will be CEO, and who will serve on the board. Could incoming director Mark Darrow comment on his experience of the merger negotiations? Which were the trickiest aspects, and does he have any work history with the Heartland directors that he will be serving on the board with?
Thank you for the question. Firstly, I have got little experience with the board, although I have worked with Bruce Irvine back in the PGG Wrightson days. With Simon, I think we were at GE Money at the same time, so I have some working relationship here. Look, I agree that there are some really difficult issues as you go through this sale process and the integration. The hardest part is the people. The establishment panel, which is a combination of TSB Bank directors and Heartland Bank directors, have worked extremely hard and very sensitively addressing those issues as well as all the other integration issues, whether it is people, whether it is technology, whether it is having a plan, looking at synergies. It has been a very constructive and productive process over the last five or six months as a joined-up panel.
Thank you. No further questions online.
Thank you. Please mark your intention on your voting card by selecting for, against, or abstain at Item 3. For those online, please click Submit Vote on the bottom of the voting card to lodge your vote. The final resolution is for the proposed increase in the total annual remuneration available to all non-executive directors. The notice of meeting explains the rationale for the proposed increase in directors' remuneration and was accompanied by an independent board remuneration benchmarking summary report prepared by Propero. This resolution has the full support of the board. This resolution is an ordinary resolution requiring approval by a majority of the votes of those shareholders entitled to vote and voting.
I move that the total annual remuneration available to all non-executive directors of Heartland and its subsidiaries be increased from NZD 2.4 million or AUD 2.2 million, whichever is the greater amount from time to time, to NZD 2.6 million or AUD 2.35 million, whichever is the greater amount from time to time. This is an increase of NZD 200,000 or AUD 150,000, 8.33% and 6.82% respectively, effective for the financial year ending 30 June 2027 onwards, with such sum to be divided amongst the non-executive directors as the board may determine from time to time. Are there any questions from the floor? Are there any questions online?
Yes. We do have one question here. Best practice is to disclose the proxy position to the ASX along with the formal addresses before the meeting has started to allow for a more fully informed debate. Did you consider doing that today, and were there any material protest votes against any of the four resolutions, including the proposed increase in the fee cap? Why haven't you disclosed the proxies so far?
I'll make a few comments then pass to Andrew Dixson. We did, at the opening of the meeting, disclose the number of votes received and the capital percentage. We have published materials online prior to the meeting. I'll pass over to Andrew to answer the rest.
I think you've answered it.
Great. Okay.
Thank you. No further questions online.
Please mark your intention on your voting card by selecting for, against, or abstain at Item 4. Sorry, is there a further question?
John Hume, shareholder. The company is NZD 1.25 a share, and you've got a very big, what's that? You've got 2-point whatever million to cover the directors. Why is that so high compared with the share price? Why aren't the deck chairs rearranged to accommodate another director to come onto the board? To me, your director fees seem very high.
Yeah. Thank you for the question. Look, it's quite a complex business if you consider we've got three board structures. The group board, which is required for the listings, of course, and we've got two bank boards, one in Australia and one in New Zealand. We have had all the appropriate benchmarking provided by an independent, and this is what it is. To change the structure would come at a cost to the business in terms of value moving forward. Bruce, you'd like to say something?
I think we all acknowledge the issue around the fact that with the regulatory compliance that we have, there are certain requirements for a number of independent directors at each level within the organization. The Australian bank has to have a certain number of independent directors, as required by the regulator in Australia. The same thing in New Zealand. The one thing we have done is that, I think there's three or four situations where we have replicated directors on more than one board. By doing that, we are actually achieving quite significant savings in terms of the total pool. It may not seem that great, but we actually have worked very hard to meet the regulatory requirements but reduce the directors' pool as much as possible.
Yeah, I have been a long-time shareholder. We have come from a share was over NZD 2 to NZD 1.25. I appreciate that you are trying to grow the business, but it is just disappointing to see where we are now. Let us hope that the way forward is going to have a better result.
We all hope for that. I will give you a personal example. I sit on the Australian board, and the benchmarking for a normal Australian director is something like AUD 140,000-AUD 150,000 or something like that. I get an extra AUD 30,000 for sitting on that board. I have to take a full share of the workload, and I am on all of the committees in Australia. Again, what we have tried to do is keep the fees down as much as possible. We are constrained by the regulatory requirements in the two different banking environments.
Thank you. Are there any further questions? Yeah.
Yeah. William Cairns. I just personally think this is an absolutely great deal. Well done to the board, well done to the management. I just see this adding considerable shareholder value, so well done, and I totally support what you are doing. Thank you.
Thank you, William.
Thank you, everyone. If you can please mark your intention on your voting card by selecting for, against, or abstain at Item 4, and for those online, click Submit Vote at the bottom of the voting card to lodge your vote. Voting cards in the room will now be collected. Please place your voting card in the ballot boxes as they are passed around. If you need help, please raise your hand. Online votes should now be submitted. Voting will be open until the close of the meeting. The results of the poll will be advised on the NZX and ASX tomorrow morning, Thursday, 1st of October . I will now invite our chair to address the meeting.
Thank you, Phoebe. That brings us to the end of the Heartland Group's 2026 Special Meeting. Accordingly, I declare the meeting closed. Thank you for your attendance and participation here today. You are invited to join the directors and management team for refreshments, which are being served at the back of this room. Again, thank you very much for your attendance.