ADLS SPECIAL GENERAL MEETING 4 JULY 2018 FAQs Why are you proposing to sell the Chancery Chambers building? We believe the decision to sell the building is in the best interests of our members across New Zealand. ADLS has been growing and evolving over the last few years, defining who we are and our role within the legal profession. As part of that journey we have more clearly articulated our purpose and vision – we exist to benefit our members and the legal profession through our pragmatic tools, thought leadership and ongoing education, and by offering strong support and collaboration. We’ve invested in a number of improvements for members over the last five years, including in technology innovations – our leading CPD programme available via live streaming, webinar and on-demand, and Webforms Digital Signing. As a result of our growth and change of focus we are re-evaluating some things that we may not have considered a few years ago, including whether it’s sensible for us to own a commercially tenanted heritage building. It makes sense that all areas of the way we operate align with our vision and renewed focus, and help us to achieve this. What has changed since the building was purchased? The Chancery Chambers building is large. When it was purchased 29 years ago ADLS was the regulator and its employees occupied the entire building. Today, ADLS has fewer employees and to provide services to our members we only need to occupy and use about a quarter of the space. This means that resources are spent in the non-core areas of being a landlord, and managing the property – time and money that we now feel would be better spent serving our membership. A heritage building such as Chancery Chambers, while beautiful, does unfortunately also have compliance conditions and requirements that can add to the usual costs of maintenance and repair. What are ADLS’ future plans? We want to continue to invest in improving our member offering, and provide high levels of innovation and thought leadership in the future. We feel that continuing to own the building may jeopardise this because of the costs and risks of ownership. Is Chancery Chambers fundamental to ADLS? Since 2012 we have been a national organisation. Our membership outside Auckland is increasing year on year, and currently almost half (44%) of our members are outside Auckland. Our goal is to offer as many as possible of our products and services across New Zealand, in many cases enabled by 1 technology. Having all of our investment resources in a building based in Auckland does not fit with our overall strategy for all of our members. To provide the best service to our members across the country, and ensure that our focus is entirely on this, and with consideration to the potential benefits of owning the building versus the associated risks, we believe that the best course of action is to sell the Chancery Chambers building. How did you come to this decision? This decision has been made by our ADLS Council, the body of elected lawyers and appointed representatives who are responsible for the governance of ADLS. The Council have reviewed many reports on the building, including the long-term maintenance plan prepared by specialist property consultants, and have carefully discussed and considered the pros and cons of making this decision, including the financial and social impacts. They are also aware of how much time is spent, both by the Council and ADLS staff, on building related issues. The Council unanimously agree that this is the best course of action to take for the future of ADLS, but as this is a significant step, are seeking your endorsement of this decision. Is this a good financial decision for the organisation? We believe it is. ADLS Council is responsible for the strategic financial stewardship of the resources of the organisation. The overall strategy is to minimise risk while maximising return. Currently the building is ADLS’ principal investment. Ownership of the building was not a strategic investment decision as it was originally purchased to house a larger organisation in the regulatory days. The sale of the building would provide ADLS with the opportunity to strategically plan its investment portfolio, with the benefit of expert advice. While generally property is a sound investment over time, the age and heritage status of this building does require a reasonable annual investment, both financial and time, to keep it maintained to the required standard, including any applicable legislation. These will likely increase the risks in the future of the building as an investment. Generally, it is a sound investment principle to avoid concentration of risk in any one asset class. Why is a portfolio of investments a good idea? Ideally, we would like to avoid having the majority of our investments in one asset class (ie property). We believe that it is in ADLS’ best interests to have a more diversified and balanced investment portfolio. Other investment classes, for example managed funds, also require less intervention and management than the building does currently. 2 In the medium term, the portfolio may also include property, but this would be a smaller proportion of the overall portfolio, and the building would be selected with current and future needs for ADLS members in mind. How will you go about the sale of the building? ADLS Council would review the best options for the sale of the building to achieve the best outcome for members. What do you plan to do with the proceeds of the sale? ADLS intends to commission a suitably qualified professional to prepare a strategic investment plan to ensure that the proceeds are managed effectively, in line with our risk profile. Any investment decisions would be made by the ADLS Council in line with agreed principles of investment strategy and risk profile. In the future, ADLS may purchase a smaller property to house the ADLS team and provide on-site services to members including collegial and CPD events. What happens if the members don’t agree to the proposal? We hope that our members agree that this proposal is a sound one that is in their best interests. If, however, members do not endorse the proposal the building will not be sold by this Council. This will mean that ADLS will need to continue to invest time and money in the building, including the ongoing costs associated with repairs and maintenance of the building (both planned and unforeseen), and tenant management. This would likely require ADLS to borrow for the upkeep and repairs to the building. As a consequence of this we may be unable to continue with the level of investment into our service offering, and improvements, that we have enjoyed over the past five years. This combined with the rate of change that the world is now experiencing with technology – the technology disruption – we believe may ultimately negatively impact our level of innovation and leading position in the market, and the service proposition for our members. Where would ADLS move to if the building is sold? In the first instance we would seek to remain in the building for a fixed number of years as a tenant. We don’t want to make any rushed decisions, and to keep our options open, if this was not possible, we would likely rent for a period of time. We would endeavour to relocate in the nearby vicinity in Auckland’s CBD. We would seek to find a more suitably sized premise, which also enables us to host collegial and CPD events. 3 Why are you holding a Special General Meeting (SGM) to discuss this issue? As this is a significant decision for ADLS we wanted to give all members the opportunity to ask questions about this proposal, and to vote on whether this proposal should go ahead. Members who attend the meeting, in person or online, will be able to vote. Can I vote if I don’t come to the SGM? Members who attend the SGM, either in person at Link Market Services, Level 11, Deloitte Centre, 80 Queen Street, Auckland, or online, will be able to vote on this proposal. If you are unable to attend you may pass a proxy vote to the President, or another member attending the meeting, who will be able to vote on your behalf. We encourage out of Auckland members, and anyone who is unable to attend the SGM in person, to attend the meeting online. How do I register to attend the SGM online? You don’t need to pre-register to attend the SGM online. Simply login here, before the meeting commences at 5:30pm on 4 July. The online meeting platform opens at 5:00pm, prior to the meeting’s commencement. 4 Factsheet SGM details and voting process • ADLS Council has called an SGM on 4 July 2018 for members to vote on the potential sale of Chancery Chambers • Given the significance of this issue and the level of importance it has for members, an SGM to decide the outcome has been called • The SGM has been called under Rules 22.1 and 22.3 by which the ADLS Council may convene such a meeting at any time • Members can attend the meeting in person or online. • Members who are unable to attend can pass a proxy vote to the President, or another member attending the meeting, who will vote on their behalf • The decision will be final and binding after the member vote • If members do not endorse the proposal, the building will not be sold by this Council Chancery Chambers • Chancery Chambers is a heritage building (Category Two) built in 1924 • A heritage building is defined as buildings, objects or spaces of such quality and character that they should not be removed, damaged or altered significantly. Generally they are places of historical or cultural heritage value. • ADLS has owned the Chancery Chambers building for 29 years • The building size is 3,800 square metres over 8 levels and excludes airspace above • There are 29 tenants, including ADLS, over 39 tenancies • The building is currently ADLS’ principal investment • The 2017 CV for Chancery Chambers is $14 million • The building is presently unencumbered 5