Cochlear Limited (COH) Earnings Call Transcript & Summary

[ Presentation ] Good morning, ladies and gentlemen, and welcome to the 2020 Annual General Meeting of Cochlear Limited. I am Rick Holliday-Smith, Chairman of Cochlear, and it is my pleasure to welcome you to today's meeting. There is a quorum present, and I now declare the meeting open. I'd like to acknowledge the traditional custodians of the various lands on which we meet today and pay respect to all aboriginal elders, past and present, and acknowledge today's aboriginal communities who are the custodians of these lands. In response to government restrictions and the potential health risks arising from the COVID-19 pandemic, the Board determined to hold this year's meeting virtually. We very much appreciate your understanding and for joining our virtual meeting. A notice advising how to access the meeting, documents and including the Notice of Meeting has been sent to all shareholders. And we published that on our website at online -- and including an online AGM guide. I will go through the technical and procedural matters shortly. I'm joined in person by our Chief Executive and President, Dig Howitt; and our Group General Counsel and Company Secretary, Ray Jarman. Attending virtually are the other directors: Yasmin Allen; Glen Boreham, AM; our newly appointed director, Michael Daniell, who is standing for reelection today; Alison Deans; Andy Denver, who is also standing for reelection today; Abbas Hussain; Donal O'Dwyer, who is retiring at the end of this meeting; and Professor Bruce Robinson, AC, who is standing for reelection today. Also attending today's meeting virtually is Julian McPherson from KPMG, our external auditor. Julian will be available to answer questions about the audit of the financial statements later in the meeting. The prepared AGM speeches from the Chairman and the CEO have been released to the market. Before moving to these addresses, I need to run through the question and voting procedures for this virtual meeting. An online virtual meeting explanation for shareholders is on our website. As is usual, we are only taking questions from shareholders today or their properly appointed representatives. Shareholders can submit questions at any time and do not need to wait until we reach the relevant item of business. We encourage you to submit your questions as soon as possible, noting the resolution it relates to. We will try to address your questions during the discussion on the appropriate item of business. And we hope to answer as many questions as we can. [Operator Instructions] Questions sent via the online meeting platform will be moderated to avoid repetition. And if questions are particularly lengthy, we may need to summarize them in the interest of time. We have also received questions from shareholders in advance of the meeting today, and we hope they are addressed in some reasonable way during the meeting. Questions that are relevant to this meeting will be read aloud by a Cochlear staff member and will be addressed by me in the first instance. I may refer a question to another director for response, if I consider it appropriate. I also advise that there may be a slight delay between the broadcast and what you are hearing, so please remember that if you want to ask a question. Shareholders who are not able to participate in this meeting could vote directly or appoint a proxy before the meeting. I will call for a poll on each item of business set out in the Notice of Meeting. The directors voting recommendations are set out in the notice. In order to provide enough time to vote, polling is open now, and I encourage shareholders to vote early. If you're eligible to vote at this meeting, a polling icon will appear. Selecting this icon will bring up the list of resolutions and present you with the voting options. To cast your vote, simply select one of the options. There is no need to hit a submit or enter button as the vote is automatically recorded. But you can change your vote at any time until I declare voting closed. I will give you a warning before I close the meeting. Any properly appointed proxy who has been given discretion on how to vote should vote in the same manner. Any appointed proxy that has been directed to vote in a certain manner and has no discretionary votes to cast does not need to vote as those votes will be -- those votes will automatically be counted in accordance with those directions. The results of the poll will be released to the ASX after the meeting, and we'll also post the results on our dedicated AGM web page on the Cochlear website. If you experience any difficulties with the online platform, the helpline number to contact Computershare is displayed at the top of the information page as well as via the help button located on the log-in screen. The helpline number is 613 9415 4024. So if we experience significant technical difficulties during the AGM, we will adjourn the meeting until 3:30 Sydney time today, unless otherwise stated. If this occurs, a market announcement will be made and our website updated. Shareholders, proxy holders and guests who have registered to watch the meeting will be notified by e-mail. If you are a shareholder, please ensure you have registered your e-mail address with Computershare on www.investorcenter.com.au. A representative from Computershare will act as a returning officer for the purposes of conducting and determining the results of the poll. And I would now like to move to my address. I'll start today with Cochlear's mission. It's what drives the organization and focuses the strategy. It's always been important, but never more so than now as we navigate COVID-19. I believe it kept us focused on our customers, on building awareness and on our continued effort to strengthen our product portfolio. The last year has been challenging for us. After a reasonable start to FY '20, the impact of COVID-19 in the second half was substantial, involving the rapid deferral of cochlear implant surgeries across the world. As a result, underlying net profit declined by 42% for the full year. Then, after factoring in the patent litigation expenses, Cochlear recorded a net loss of $238 million. This adverse litigation outcome was the material driver of this loss. In March, the U.S. Court of Appeals affirmed the U.S. District Court award of patent infringement damages against Cochlear in this long-running lawsuit. Cochlear was ordered to pay USD 280 million in damages and post judgment interest. The award related to one patent that has long expired. We believe the damages awarded were out of proportion with the limited application of the patented feature. While very disappointing, we acknowledge that inflated damages awards are a risk of patent disputes in the U.S. We have now lodged an appeal with the U.S. Supreme Court against the judgment, and we expect to know the outcome before the end of this financial year. With the advanced litigation outcome occurring right as the global impact of COVID-19 was shutting down surgeries, we needed to respond quickly to ensure we remained strong. We raised $1.1 billion in capital from shareholders in March, and we expanded our debt facilities. These actions strengthened the balance sheet and our liquidity position, the goal being to ensure we could weather the expected extended business disruption caused by COVID-19. Unlike many other companies, we have a responsibility to be here for the next 100 years to support the children being implanted today with our devices, and we cannot put the financial security of our business at risk. We raised this new money at a time of extreme global market disruption and volatility. And we were one of the first to take decisive action. We saw this as a unique and dangerous market situation, and we adopted a conservative process that took as little risk as possible. It was good that shareholders supported us, and we were pleased to see market conditions subsequently improve, although this was not clear at the time of our raise. In the months that followed, we note that investors have been supportive of good companies with sound long-term prospects. Together with the capital raising, we took the decision to preserve cash, including the suspension of dividends until conditions improve. As a Board, we are committed to paying dividends. We will resume them once we see a clear and sustained improvement in sales revenue, and we are confident cash flow generation will be sufficient to support its resumption. Cochlear is the global leader in implantable-hearing solutions. And while COVID-19 has been incredibly disruptive, we have been clear from the outset that we want to emerge in a stronger, competitive position. We are committed to supporting our recipients and the medical professionals we work with. And just as importantly, to keeping a valuable workforce intact. At the same time, we're committed to investing in our R&D program as well as in our market growth activities. I'd now like to take the opportunity to congratulate the Australian government on its recent decision to revise the R&D tax incentive. The restructured incentive provides R&D-intensive companies like Cochlear with a greater benefit from this tax incentive. This should be important in encouraging them to maintain or increase their Australian-based R&D activities. These changes, combined with the recently announced Modern Manufacturing Initiative, have the potential to create the conditions needed in Australia to build, retain and attract medical innovation and advanced manufacturing. Cochlear will reinvest any additional benefits from the R&D tax incentive into growing our business. In FY '21, we will step up our R&D and market growth activities with the aim of emerging from COVID-19 in a stronger position. The CEO will provide more detail on our strategy and trading conditions shortly. This last year has been important in achieving key milestones to deepen the penetration of cochlear implants in adults in the adults and seniors segment of the global market. In August, we saw the publication of an independent global consensus on the use of cochlear implants as the minimum standard of care for adults with bilateral, severe, profound or moderate sloping to profound hearing loss, and this was in a leading U.S. medical journal. We think this publication is an important step forward. It provides the foundation for the development of formal clinical practice guidelines. These guidelines will play an important role in building a clear and consistent referral path for those adults who would benefit more from cochlear implants than from hearing aids. And I'd now like to share a short video that captures the significance of this publication with the views of leading surgeons and clinicians in the field. [ Presentation ]

So the significance of this document is really to establish standards of care for adults with moderate to profound or worse hearing loss that would include cochlear implantation. This includes things like establishing a proper diagnosis, making appropriate referrals and ultimately getting cochlear implants and moving on to their after care.

The significance of having the consensus statements in the public domain is that it will facilitate increasing awareness, particularly amongst both the clinicians, amongst industry and amongst potential recipients about the safety and benefit of cochlear implantation.

Based off of the literature that was reviewed for putting these statements together, what we found is there is an enormous gap in the education level for practitioners who are working with patients who have hearing loss. And the hope is that these statements will provide better awareness, increased access for patients with hearing loss and certainly increase the education of anyone who comes in contact with someone with hearing loss.

Us in the field, it's so obvious that this is effective. But I realize that it's not obvious for everyone.

Let's say, we were very happy to see a document like the consensus paper because this -- we were waiting for a long time for it, yes? Because this is really what you need, a good standard, standard of care, which you can use in all the countries.

So everybody has a part to play, and we welcome everybody to and invite them to be involved in this process. This is only the start of something that is hugely important.

The growing awareness of this need to treat severe age-related hearing loss with cochlear implants is supported by a better understanding of the cost effectiveness of these implants for adults. Payers are increasingly demanding cost effectiveness data to support funding for health interventions. We believe Cochlear is well positioned with numerous studies demonstrating the cost-related benefits of cochlear implants for both children and adults. The use of hearing aids and cochlear implants is clearly cost-effective, and this has been proven in adults and seniors with an estimated return on investment of 10:1. Dementia and other cognitive-decline diseases are some of the most expensive conditions to treat, costing an estimated USD 1 trillion globally in 2018, an estimate expected to double by 2030. Unfortunately, those with severe hearing loss are almost 5x more likely to develop dementia than people without hearing loss. Turning now to the important topic of Board renewal. Over recent years, we've implemented a Board renewal process, adding several new directors with diverse backgrounds and relevant experience. We have sought to maintain a balance of continuity and to introduce new skill sets. We are pleased with our recent appointments, with the new directors adding perspective and value to our Board discussions. Two new directors joined the Board this year, Michael Daniell and Christine McLoughlin. Michael was appointed in January and has worked in the medical device industry for over 40 years. He has extensive executive leadership experience and was Managing Director and Chief Executive of Fisher & Paykel Healthcare from November 2001 to March 2016. Christine will join in November and is a highly respected company director with domestic and international experience in financial and health services and telecommunications. She's recognized for her achievements in driving continuous improvements in organizational culture and performance and for her focus on creating value for shareholders by delivering for customers. Long-serving director, Donal O'Dwyer, will retire from the Board at the end of this meeting. Donal has provided invaluable counsel during his 15 years on the Board. His extensive experience in medical devices and health care, together with his significant global management experience, has contributed to Cochlear's performance and strategic direction. On behalf of the Board, I sincerely thank Donal for his service and contribution, and we all wish him well for the future. Turning next to diversity. Our diversity and inclusion framework was launched 2 years ago and is driving greater awareness across the organization. Achieving gender equality is one important element of this strategy. We strive for gender balance of 40/40/20, which means that 40% to 60% of either gender is represented. While over 50% of Cochlear's employees are female, the representation of females reduces as the level of seniority increases. We have set a target to achieve at least 40% female representation amongst our senior leaders within 3 years, up from 36% as it is today. At Board level, we are targeting 30% female representation over the next 2 years, and our Board representation levels will be helped when Christine joins the Board in November. Achievement of these targets is supported by focused activities in the areas of talent succession and talent acquisition, with the aim of increasing our pipeline of female talent. I think the current COVID-19 situation may increase the associated challenges we face, but we maintain our total commitment. Looking now to the future for Cochlear as we transition through the impact of COVID-19. We need to consider the global environment and challenges carefully and stay vigilant. But we remain confident about our long-term opportunity. There remains a significant unmet clinical need for cochlear and acoustic implants that should continue to underpin our long-term sustainable growth potential. As we transition from the current health crisis to understanding the long-term economic impacts of the pandemic, we must focus on what may change in the hearing implant landscape. There will be opportunities and risks, so we need to be alert, fact-driven and ready to adapt our strategy as is appropriate. Front of mind is the debt burden the global economies will face, particularly with increased competition for health funding. We expect payers to focus on health economics, including allocating spending to more cost-effective interventions, hopefully like cochlear implants. The pandemic has driven the rapid adoption of telehealth and telemedicine, which should lead to faster structural changes in health care delivery. We experienced this firsthand when the FDA in the U.S. fast-tracked the approval of our Remote Check solution. Our professional partners have shown greater interest and demand for our connected care solutions, including Cochlear Link and Remote Programming. We have invested in connected care solutions for many years. We believe they provide the opportunity to extend access to our products and to optimize outcomes for our recipients by transforming the care model, while at the same time delivering efficiencies to our associated clinical professionals. We know there will be other risks that will confront us, so we need to stay alert. At the same time, we need to be carefully monitoring business performance and exercising sensible business judgment, especially in the area of long-term resource allocations and in the shorter term, by delivering fair executive remuneration outcomes. Finally, I'd like to acknowledge the contribution of our 4,000 Cochlear employees. Their knowledge, expertise and passion are key to our future. And their continued focus on delivering excellence for our customers is important to our success and to our market-leading position. Our employees understand the importance of Cochlear being successful over the long term so we can continue to support our customers, especially our recipients. There are a few companies that start a lifetime journey with each new recipient every day. Our employees understood our recent actions: why we took the long-term view we did, why we paid no incentives in 2020 and why we need to navigate to a more stable place as we better understand the impacts and challenges of COVID-19. At the same time, the Board understands the need to be fair with them as the current environment has seen many working much harder and in unusual circumstances. On behalf of the Board, I congratulate and thank all Cochlear employees for their outstanding efforts and contributions this past year. In closing, the whole Cochlear team shares its sympathy with all those communities impacted by COVID-19. As the world responds to this pandemic, we remain committed to supporting our customers, employees and communities to ensure that the important global work of delivering our hearing solutions continues. Thank you, and I'll now hand over to our Chief Executive, Dig Howitt.

Thank you, Rick, and good morning. I'll touch on a few important topics today, our strategy and update on trading since August and how we are stepping up some of our investments in financial year '21 to strengthen our competitive position. Despite the difficult year, our strategy remains unchanged. We aim to retain market leadership with a strong product portfolio, supported by great field teams around the world, whose presence with our professional partners and recipients, particularly over the last few months, has been noteworthy. Cochlear's teams have remained focused on providing support to recipients while continuing their outreach programs with candidates through the company's direct-to-consumer marketing efforts. The rapid adoption of online and videoconferencing tools with our professional partners, candidates and recipients is to be commended and has ensured that we can continue to provide valuable education and support throughout the pandemic. We know that to be successful over the long term, we need to invest to grow the hearing implant market. We invest in building awareness with candidates and professionals in market access to broaden indications and funding, and in clinical evidence to support expanding access for hearing implants for people right around the world. And while financial year '20 was financially challenging, we continue to aim over the longer run to deliver consistent revenue and earnings growth. We are a growth company that has, until financial year '20, been able to fund all of its investing activities, dividends, capital expenditure and acquisitions from cash flows, utilizing only modest levels of debt. And we're certainly targeting to return to that funding model. The investment in R&D continues to strengthen our leadership position through the development of market-leading technology. We have a wide range of fully featured products and a broad patent portfolio that protects the company's intellectual property. Over $2 billion has been invested in R&D since listing, with 14% of sales revenue invested in R&D in financial year '20. Our implant portfolio is led by the Nucleus Profile Plus implant. Launched 15 months ago, it sets the benchmark in terms of size and reliability and is supported by a range of electrode options. It has been a key driver of market share gains made during financial year '20. The Slim Modiolar Electrode has been in the market for a few years and there's a growing body of data showing consistency of placement and improvements in hearing outcomes for our recipients. We do believe that the future lies in getting electrodes closer to the auditory nerve to deliver better hearing outcomes, with perimodiolar electrodes now representing around 60% of our implant mix in markets where it is available. The sound processes are a very important part of the portfolio. We lead in terms of size, connectivity and hearing performance. The portfolio has been strengthened this year with 7 important product approvals. You may recall me saying 18 months ago, we had a strong product pipeline. What you see here are the results of some of those products in that pipeline getting approval and coming to market. The Osia 2 System has had a very strong reception from both patients and surgeons in the U.S. over the last few months. The Slim 20 Electrode is rolling out now and is being well received. With Kanso 2, both our behind-the-ear and off-the-ear processes have a full range of connectivity with Apple and Android devices, and that connectivity is an enabler of our growing connected care solutions. The Remote Check solution was approved this year and is now rolling out around the world, making care easier and simpler and more convenient for our professional partners and recipients. And connected care solutions, like Remote Check, have the ability to lower overall cost of care for payers and consumers. We're also adding clinical and surgical tools for audiologists and surgeons to make their jobs easier, with Nucleus SmartNav being able to provide the surgeon with more information on the electrode insertion. And we know that there is a clear link between the electrode insertion and hearing outcomes. A key strength of our market leadership is that we are able to innovate across all areas of the portfolio with meaningful benefits for our recipients and our professional partners and that builds our relative competitive position. You may recall that in August, we advised that we will not be providing earnings guidance due to the difficulty in forecasting revenues with so much uncertainty surrounding the timing of a global recovery from the pandemic. And until we regain that confidence, we have committed to providing more regular trading updates to investors. So how are we seeing market conditions during the first quarter of financial year '21? For the first quarter, Q1 of financial '21, cochlear implant revenue in constant currency was 94% of Q1 last year. For developed markets, cochlear implant unit volumes experienced low single-digit growth, which we believe reflects a return to surgery, including new and rescheduled surgeries and market share gains. Now trading activity continues to be mixed, with the U.S., Germany and Korea showing good growth on last year; while many European markets, including the U.K., Italy and Spain, have been regaining momentum more recently as clinics reopen and surgical throughput grows. The new candidate pipeline is rebuilding quickly with clinical assessments close to pre-COVID levels in many markets and a solid lead generation from Cochlear's direct-to-consumer activities. While current developed market surgery momentum is positive, we do caution that there is still risk, noting that second waves of COVID-19 cases are likely to remain a reality for some time and may result in new restrictions to elective surgeries, complicating recovery plans and timing. For emerging markets, unit volumes for Q1 were down 40% on Q1 last year. Surgeries in China are growing, but most other countries remain well behind last year. There continues to be uncertainty over the time it will take for some emerging markets to recover. Services revenue continues to recover, with Q1 constant currency revenue at around 86% of Q1 last year. The launch of the Kanso 2 Sound Processor, the growing recipient base and the adoption of Remote Care tools are expected to underpin demand for upgrades. Acoustic revenue run rates have also been improving since May, with Q1 constant currency revenue at around 89% of Q1 last year. Acoustics revenue is largely generated from the U.S. and the U.K. Surgery volumes have been recovering in the U.S. since May with strong demand for the Osia 2 system, while acoustic implant surgeries only recommenced in the U.K. during the quarter. So overall, we continue to be pleased with the pace of recovery across our developed markets. We have a suite of new products that are just starting to be launched and are generating excitement and great feedback. One of the important deliberations for our leadership team and the Board has been how much to invest in financial year '21 to drive future growth opportunities, given the uncertainty we still see around near-term revenue generation. We have taken the decision to invest this year to strengthen our competitive position and stimulate growth to set ourselves up for financial year '22 and beyond. So we will continue to invest in R&D. We very clearly have a strong portfolio and continue to have a strong pipeline of products and services coming through that pipeline. With the rapid changes in the operating landscape during March to May, including clinic closures and access to telemedicine in some markets, we are scaling up our connected care efforts even further. We'll also continue investing in awareness and referral channels in developed markets. There are significant numbers of people with hearing loss that meet the indications for our products, but the awareness is still low and the referral channels are not clear and consistent. So investing in both of these areas will continue. With the consensus paper that Rick spoke about now published, we have the platform to work with industry to drive the development of clinical practice guidelines. It makes sense to drive these investments while professional engagement is heightened. We'll continue to invest in our direct-to-consumer marketing programs around the world to build grassroots awareness with consumers. In emerging markets, our growth depends on building awareness and deepening our presence. We continue to expand our presence in emerging markets through financial year '20, and we will continue to do that in selected markets into financial year '21 and beyond because we know that putting people on the ground, building relationships, driving awareness, getting governments on board, supporting implants for children is very, very important part of our growth. Thank you, and I'll pass back to the Chairman.

Okay. Thank you, Dig. I'd now like to move to consider the formal motions of the meeting. Resolution 1.1 deals with the receipt and consideration of our financial report, directors' report and auditor's report for the financial year ended June 2020. They are incorporated in the 2020 annual report, which has been sent or made available to all shareholders. The motion is now displayed on screen. The company has received direct votes and proxies in relation to the resolutions before the meeting today, and I intend to display the number of direct votes and proxies held for and against each resolution on the screen before any discussion on each resolution. Proxies for the Chairman's discretion have, where applicable, been applied in favor of resolutions 1 to 3 inclusive, and 5 to 7 inclusive and against for resolution 4. I now ask that the direct and proxy votes be displayed on the screen. Thank you. This item provides shareholders with an opportunity to ask questions on the company's financial and general performance. Shareholders have already raised a number of questions directly with us. I've answered some of these in my address, but others I have regrouped and now answer them. Any shareholder who has any other question or comment on these reports or on our business in general or on the management of the company should raise them now. This is also appropriate time to raise any questions you may have of the auditor, including questions on the conduct of the audit and the preparation and content of the audit report. Any questions will be directed through me in the first instance. I may refer a question to another director to respond if I consider it appropriate. We have received questions and comments on the capital raising, mostly demonstrating support and for that, we are grateful. We've been asked about the timing and why we needed to raise equity at what has been shown with hindsight to be one of the most volatile times in the market for many years. There is no doubt that the market conditions at the time Cochlear raised equity were far from ideal and extremely dangerous. In more normal conditions, the company would have time to prepare for such a large capital raising, which would provide a range of options in terms of what style of raising you could consider the due diligence requirements and the discount issues that would go with each alternative. In our case, we were witnessing the initial effects of COVID-19 in our key markets, with surgeries dropping around 80% in a matter of weeks. We then had the adverse decision in the U.S. court case, which involved a material patent settlement to be paid in the near future. This double whammy occurred at a time when global capital markets were collapsing. The ASX 200 had dropped over 30% in the month before we raised capital. As a Board, we determined we needed to take a conservative approach and to act decisively to shore up the long-term future of the company. We determined we needed to raise equity quickly. We contemplated various options, including an accelerated entitlement offer, but as we felt we needed an underwritten process to ensure success, we opted for the private placement and SPP route. We know it could be structured to approximate an entitlement of a pro rata offer. It was also a process that could be underwritten, had manageable due diligence requirements and could allow fast execution that we thought was better suited to volatile markets. We also hoped it might allow for a lower discount given the shorter offer period. We were pleased with the final outcome, which we believe was balanced and fair. Shares were only allocated to current shareholders. All shareholders who chose to participate, whether they were institutional or retail, were allocated their pro rata allocation at a minimum, subject of course to any legal caps as was the case with the $30,000 cap that affected some retail shareholders. And most importantly, the mix of institutional and retail shareholders remained around the same post the raising. And for retail shareholders, they had the added advantage of being able to participate on the same terms as a private placement and with full visibility of the equity market response to the private placement and with the knowledge that Cochlear had already raised $880 million. So liquidity risk, the main reason for the raising, was no longer a concern for Cochlear. So did we raise too much? A few pundits have suggested we have. I think it's just too early to say. But if we did, we protected the company and all its stakeholders. We took a long-term view at a very dangerous time. And we did all we could to ensure a clear and decisive outcome and then ensure the shareholder groups, as a whole, were treated as fairly as possible. There were different fairness issues and the outcome was not perfect, but we tried hard to be balanced and fair. In the review process, we adopted a funding review that spanned several years. It considered a conservative forward outlook, and we sought to ensure we would survive on that basis. It seems once the long-term future risk was taken away, the equity market strongly supported us. That is good for all stakeholders and for all our shareholders. Unlike many other companies, we have a responsibility to be here for the next 100 years, to support the children being implanted today. We cannot put the financial security of our business at risk. As a Board, we err on the side of conservatism when it comes to the balance sheet. We've also been asked -- we have also been asked by shareholder questions about why we allocated a large number of shares to one institutional shareholder. The Board required the placement to be underwritten to give Cochlear certainty that when publicly announced the quantum of funds to be raised and the price were both known. Otherwise, there was risk the raising might fail, which would have a big negative impact on the stock price. It would also be highly unusual for a top 100 company to not underwrite a major raising. When in the process, we talked to a number of Australian institutions the day before the raising, which is a process of seeing what level of support there was, you may be surprised to hear that there was little to no interest in the placement at $140. Many of the Australian fund managers approached were very clear they would only consider participating at a price well below $140. In terms of the allocation made to one institution, it was a fund we know very well. They had previously been substantial shareholders and had been buying Cochlear shares in the year leading up to the raising. Their decision to support a large position at $140 provided the confidence needed for JPMorgan to underwrite the deal and for the Board to proceed with the placement. Once the underwriter had agreed, then many more wanted to participate and the market became positive. From that point, institutions with interest and who gave support received at least their pro rated participation. We've also received some question from a shareholder who is an Australian cochlear implant recipient wanting to know why Cochlear did not advise consumers and audiologists that the Bluetooth connection of COVID-19 -- of the COVID-19 safe app can interfere with medical devices. They would also like to know why Cochlear does not use a transport company that will deliver the spare parts for speech processes to post office boxes. Given the operational nature of these questions, I'm going to hand these over to Dig for comment.

Thanks, Rick. And before I answer the question, firstly, I'd like to say thank you for raising these questions with us. We do set ourselves a very high standard for the service that we want to deliver to our customers right around the world. And one of the ways that we can measure and improve that service is by getting feedback and getting questions such as these. So let me deal with each of these in turn. First with COVID safe app. So when we did receive a query on the potential of the COVID safe app to interfere with communication between iPhone and our sound processor, we did, as you would expect, investigate. And we do have a very formal investigation process around any customer queries with respect to our product. In that investigation, we seek to do 2 things. The first is we seek to determine if this were to happen, is it a safety issue, and we were able to determine that it wasn't a safety issue; the second thing we seek to do is try to replicate the issue, can we recreate that -- the circumstances that lead to this interference? Now in this instance, we weren't able to do that. However, subsequent to our investigation, the Australian government did notify that there was potential for the COVID safe app to disrupt some Bluetooth communication with other apps. And they also advise, as you say in your question, that if that disruption interfered with the performance of a medical device, then you should stop using the COVID safe app. So with that advice, we did incorporate it into our troubleshooting, and we used that troubleshooting with our customers. And that can mean with our customers asking them when they have communication connectivity problems, to look at apps that have recently been installed. We also took that advice and incorporated it into our clinical troubleshooting as well. So we do understand that connectivity issues can be frustrating and certainly disruptive, and we work hard to build stability into our system to minimize those instances. So I hope that helps clarify the issue with respect to the COVID safe app in Australia. On the second issue, regarding our transport company and deliveries to post office boxes. Let me first start by just talking about our transport companies. Obviously, we select transport companies in many, many countries around the world. And we select those companies based on their ability to deliver our products in a timely manner, with clear tracking based on their reputation and the breadth of their distribution and a range of other factors to again ensure that we provide the service that we aspire to. We then work with those transport providers to provide the best service we can in a whole range of different circumstances. Now with respect to the specifics of your question. Our transport company in Australia can deliver most of our spare parts to a post office box. Now there is an exception to that, and that exception is a rechargeable lithium-ion battery, which is shipped separately. And shipped separately means not shipped as part of an integrated product or a system like a phone or an iPad. Now the reason that they can't ship a rechargeable lithium-ion battery separately to a P.O. box is because that rechargeable battery is regarded as a dangerous good, and that's both an international and an Australian regulation. And obviously, our transport companies must comply with those regulations. It's one of the reasons we choose transport companies is on the basis they do comply with regulation. So it's really a regulatory issue here, and it's a bit of a quirk. But it's only separately distributed rechargeable batteries where this becomes an issue. Now we do understand that, that can be inconvenient for some people and certainly for you, in this case. And in those cases, we do try to provide alternative solutions, whether that's shipping direct to a clinic. They can ship, as you know, directly to a physical address. But we do understand there are times when shipping to a P.O. box would be more convenient, but also there are restrictions, as I've said, on our carriers in some instances. So I hope that helps clarify those 2 questions. I hand back to you, Rick.

Okay. Thank you. I'll now check whether we've received any additional questions.

Yes, Chairman. The Australian Shareholders' Association has asked the following question. We note that the Board should attain 30% female once foreshadowed changes take effect. While this is certainly a significant proportion, it doesn't reflect the overall proportion of staff nor is it the only valid indication of diversity in general. Likewise, the 40% target for senior managers is currently not reflected by the proportion of females with their pictures in the annual report as part of the executive team, which is only 1 out of 13. Do you really expect to attain your target of 40% females as senior managers within 3 years as stated in your corporate guidance statement? And if not, when?

I think I might ask, are you happy to answer that, Dig?

I am. I may make just a comment on the -- I'll talk about the senior management part, just to comment on the Board. Our target for the Board is, as Rick said, for senior management is 40 -- it's 40% for senior managers of men, 40% women and 20% open, i.e., between 40% and 60% of both genders. For the Board, it's between 30% and 70% of both genders on the same basis. Now with respect to senior managers, we do aim to achieve this target of 40% of senior managers being female in the next 3 years. We are currently at 36%. Our senior management -- managers represents senior leaders in the organization. It's a group of about 350 people. So it's obviously a broader group than just the executive team. And as Rick said in his speech, we have been working very hard on diversity inclusion over a long time and particularly over the last two years. And the key to increasing female representation in our senior management groups is several of the programs that we are working on. They include being very focused in our talent and succession planning, on developing women and ensuring that we are assessing on the basis of potential. They include making sure that we have flexible work practices to suit people from a whole range of different backgrounds and experience. They also include making sure that we focus on gender pay equity and remove inequities where we see them. But very importantly, it's about inclusive leadership and making sure that we develop inclusive leadership across the organization and particularly raising the awareness of unconscious bias and removing unconscious bias. And we've seen over the last few years of implementing those sorts of procedures that we're having already increased the proportion of women to 36% in our senior leadership roles. We expect to get that to 40% over the next 3 years. And you noted that we only have 1 woman on our senior executive team. Clearly, over time, we aim to get more diversity into that team. But the key to doing that is working on diversity right across the organization and particularly across the senior management group, so that each time we have an opening on the executive team, we have a diverse group of very well-qualified candidates to be able to choose from. And it's doing that over a sustained period that will enable us to reach 40% and go beyond for the organization. Thank you, Rick.

Okay. Thank you. Are there any other questions?

The Australian Shareholders' Association has contributed the following comments as well. We noted the prompt actions of the Board in the initial reactions to COVID-19. Indeed, the number of additional Board meetings showed that the Board was very active at that stage. We commend the prompt actions to ensure the financial stability of the company in the light of stoppages of private surgery and thus cochlear implant surgery for an unknown period. While all shareholder allocations in the SPP were cut back to some extent, it was good that there was a decision to enlarge the offer to retail shareholders so very significantly and allocate them proportionately to current shareholdings. Would it be possible for you to ensure more shareholders were reminded, in good time, of any such offers in future, presuming the offer is at a discount to then current prices?

Okay. Thank you. Look, thank you for those positive comments, and it is good. I think you do understand the seriousness of the situation that we were dealing with. I think it was always intended, as we had always said, that the SPP could be increased. And that we would be looking carefully at proportionate-type issues as we did that, and that's what, in fact, what we did. And about reminding, I'm happy for us to do whatever we can on that front. We will look at it. But this was in the public domain. It was in the press. It was well explained. But we will -- if we can do better, we will and we will take that on board and consider it. So thank you very much. Are there any other questions?

The following question is being asked by Stephen Mayne, who is offering himself for election as a director of Cochlear. Of the 16,651 shareholders who participated in the Share Purchase Plan, how many shares in -- how many shared in the 197 million scale back? Alternatively, how many received the full amount they applied for?

Yes. Okay. Look, we're getting down into the weeds of this, and I don't intend to actually go there. Clearly, Stephen will be giving us his thoughts in a little while, and his platform is around the capital raise. But I am happy to confirm, which I've already said, that we tried very hard to make sure that the mix between the institutional shareholders and the retail shareholders was the same before and after the capital raise. We did try to ensure small shareholders were disproportionately and positively treated, with the smaller shareholder getting at least 10 shares and 41% of those applicants received an average increase in their shareholding. So I think this was something that was fair to all, and the outcome for us was good. And if I look at this whole thing in the context of the 100-year journey of Cochlear and protecting the company, particularly for our key stakeholders who are the children that rely on us every day as we implant them, the medical professionals and our staff, and I look at the full explanation of the process the Board went through and the judgments we caught -- we made, then it is transparent in terms of what we did. It doesn't mean that others can't have different views and different judgments, but we have been clear in what we've done. I've explained it in full several times through this meeting, and I think that is the extent to which we will be dealing with that particular issue because we're not going to go down into micros on it. So thank you. Any other questions?

We have another question from Stephen Mayne. London-based fund Veritas was allocated 300 million shares at the 140 in the placement, which was more than the 220 million allocation to all 16,651 applicants in the scaled back SPP. What is Cochlear's history with Veritas? And why were they given such a large disproportionate allocation?

Two things. Cochlear -- over many years, Veritas has been a large shareholder in Cochlear, but like most of the investors, they come and go. Why did they get a large placement? They got a large placement,because as we sought to get support that would enable the underwriter to be comfortable to underwrite the issue, there was no support coming out of Australia. And they came forward and saw an opportunity, and they took it and good luck to them. And it allowed us to then have a fully underwritten offer. And once we had that fully underwritten offer, all the positive things then flowed from that. So they took a unique position, and they were rewarded for that. We then made sure that all institutional shareholders beyond them that wanted to participate got at least their pro rata share, which is why we increased the placement. And then we made sure beyond that, that once we knew what the institutional portion was, we made sure there was enough money allocated to the retail portion to create the same balance in terms of before and after raise percentages. So Veritas was in an unusual position, and they took an unusually strong position, and they were rewarded for that. But the outcome from that was very positive for the company, in our view, the capital raise and all stakeholders. Are there any other questions?

The following question was submitted ahead of the commencement of the meeting and is as follows. Can we have a summary and update on: One, the U.S. patent infringement case; two, FY '21 and outlook for EPS and DPS; three, COVID-19 impact, permanent and temporary; and four, dividend update?

Okay. Well, look, I think the -- each one of the -- I note that, that has come in before this meeting. I think we've given a reasonably fulsome response to the patent. Dig has talked at some length to FY '21, which is still unclear. COVID is clearly still unclear, and there are second and third waves that none of us understand yet. And we've been clear in terms of our view about dividend, which we support subject to some caveats that were clearly spelled out in the address I gave. Are there any other questions?

Yes. The next question. Mr. Chairman, my name is Dan Steiner. With regard to the new Cochlear constitution. If you consulted with regulators and/or major shareholders, were there any issues or concerns raised? What were these and how did Cochlear respond?

I'm not sure we consulted with regulators, but we certainly consulted with our legal advisers. And the clear goal was to make the new constitution contemporary. And as you will see shortly, the support of all our shareholders is unresounding and, to my knowledge, there were no issues. Are there any other questions?

Yes. With regard to the planned expansion of the Board, will there be any need to increase the director's fee pool?

At the moment, the first thing we've got is the option to have more directors to allow a more orderly changeover as we rotate people in and out. There is -- there has been no proper consideration of what that might look like and whether there might be a fee adjustment required. If it is, it will be not material because the intention is not to increase the size of the Board but to allow for orderly transitions. Are there any other questions?

What steps are being taken to ensure Cochlear as a company has sufficient business diversity and skills for an ongoing sustainable future in a highly competitive, technology-driven world?

Well, firstly, I'd refer back to the comments that the Chief Executive has made. And I might ask him to add a few extra comments after this if he wants to. I mean Cochlear is the world-leading company in terms of the most innovative hearing solutions in the world. We're committed to substantial R&D spend in the long term. And we're committed to be around for 100 years based on that R&D and a commitment to leading-edge technology. So I'm not sure what more I can add. We have a leading product portfolio. We have a leading pipeline. We spent a lot of time looking at adjacent technologies that may be coming forward and what they may do to us. But I don't think there's much more we could do. But I might ask the Chief Executive to make comment if he'd like to.

Thanks, Rick. I think just to add one thing to that. And that is that we do have close to 100 research partnerships around the world with universities. We have an extensive process of scanning changes in technology, technology trends and ensuring that we're across those trends as well as we can be and incorporating that into our development and our long-run technology plans.

Okay. Are there any other questions?

We've received a question about the current low interest rate environment. How has this impacted Cochlear? And what are the advantages and disadvantages of Cochlear operating in a low interest rate environment? For example, the impact on borrowing costs, assessing goodwill and other aspects of Cochlear's business operations.

Okay. Well, I mean, obviously, a low interest rate environment, to the extent that you have debt, lowers the cost of debt. But we try to have very modest amounts of debt. A low interest rate environment, particularly where the risk-free interest rate is low, tends to lower the cost of capital. And for a long-term company like Cochlear, that tends to have a very positive impact on the estimated terminal value, which is the long-term present value of the business. So it has some valuation positive impacts. Lowering the cost of money, obviously, allows governments to borrow more. And that can be a double-edged sword because they can obtain more money to support initiatives that they want to support, which could include health care. But at the same time, as they do that, they've still got to be able to pay back at some point in the future whatever it is they borrow. So there are a number of very long-term issues there. I would say the biggest impact for Cochlear is the valuation impact as lower interest rates tend to be driving the value of our forward cash flows up in terms of net present value terms. Any other questions?

Yes. With regard to COVID-19. If a vaccine is found or not found, can you tell me what adjustments Cochlear would make in the operations of the business? Like more use of cloud technology. And also, what advantages and disadvantages did COVID-19 present to Cochlear?

Do you want to have a go with that?

Yes.

I'm happy to. But you're living it.

Thanks, Rick. So I think just a few comments on that question. First, with respect to a vaccine. We're running the business on the base, obviously, now without a vaccine and as we look forward, continue to run it on that basis. Clearly, a vaccine would help free up society and health care systems, depending on the effectiveness of that vaccine. So if when perhaps one becomes available, it will be positive in taking us back to how the world used to work to some degree. But I think it's still some way off and we continue to work now. In terms of cloud and virtual work. I mean, that is how we've been working since March, is working virtually both internally and very importantly, connecting with professionals, with candidates and with our recipients. And that has worked exceptionally well. And obviously, we can continue that on for as long as we need to. And even after, if a vaccine does come, we will continue to communicate more virtually than we did in the past because there's a range of circumstances where that is very effective, particularly for the global company.

Yes. And I would comment that, I mean, what we would call connected care, we've been committed to for many years, and we've been investing heavily in those activities. They are largely digitally based. And obviously, the things that we're seeing at the moment, that they are having a bigger impact quickly and are being adopted faster and probably this will lead to a acceleration in the modernization of the health care models. And we're well positioned for that. Any other questions?

Yes. Will the Board commit to holding future AGMs with a face-to-face component when it is safe to do so?

Well, personally, I have no problem with us making every effort to have meetings face-to-face. I think they're far more productive. And -- but obviously, it's going to depend on a lot of things that we don't know the answer to as to when that might happen and what other things could be happening in the norm. But our intent is to go back to face-to-face AGMs as soon as we can. Any other questions?

This is the final question in the queue and as follow-up to a prior question on gender diversity and the number of senior managers. Are you suggesting that 1 in 12 of Cochlear staff are senior leaders? Isn't this top-heavy?

I'll answer that one. So yes, it's 340 out of 4,000 are senior leaders, and I don't think that is at all top-heavy, actually 1 in 12. Our -- we have customers in over 130 countries around the world. We have our people, our own people, in 40 countries around the world. We are a very diverse company in terms of the range of functions and operations that we need to perform in places right around the world. We're obviously a very technology-heavy company. I think it's very important that we have a significant number of senior people who are both generalists in areas and specialists across a broad range of geographies and functions. So no, I don't think at all that we are top-heavy, not actually. I would expect that as the organization grows over time, that the number of senior leaders will continue to grow approximately in line with the total organization.

Okay. Thank you, Dig. Are there any other questions?

Chairman, there are no further questions.

Good. Thank you. Thank you for those questions. Please cast your votes now on this item. [Voting]

The next item of business is to vote on the adoption of the remuneration report set out on Pages 40 to 57 and of the 2020 Annual Report, which is available on our dedicated AGM website. The motion is now displayed on screen, and this is a nonbinding resolution. Voting exclusions apply to this resolution as set out in the Notice of Meeting. I now ask that the direct and proxy votes be displayed on the screen. And I intend to vote all available proxies in favor of the resolution. Are there any shareholder questions?

There are no questions on this resolution.

Okay. Thank you for that. Can you please cast your vote now on this item? [Voting]

The next item of business is the reelection of directors. As I mentioned earlier, in accordance with our constitution, Andy Denver, Professor Bruce Robinson and Michael Daniell,are retiring at this AGM and standing for reelection. The Board considers that all directors are independent nonexecutive directors, and the Board recommends them to you. Andy Denver is the first director standing for reelection. His background has been set out in the Notice of Meeting. And I now move the motion for the reelection of Andy Denver. The motion appears on the screen, and we will now hear a prerecording from him to his reelection.

Good morning. My name is Andrew Denver. I'm a current director and first elected in 2007. For most of my time on the Board, I have been Chairman of the Technology and Innovation Committee, during which time we have faced a number of challenges, key of which was the recall of the CI500, the root cause determination and resolution and successful relaunch of that particular product. We've also expanded significantly our electrode product offering, and we introduced our first wireless streaming product with the iPhone. The enhancement of ability of clinics and recipients to interact with each other and the company through such innovations as Remote Check and myCochlear were also highlights during this period of time. Significant new product developments were made in the Baha product range. And for a short period of time, I served as the Chairman of the Audit Committee during the last Chairman of the Board transition. I continue to serve on the Audit Committee. In addition to these 2 Board committees, I'm a long-term member of the Medical Committee and Nominations Committee (sic) [ Nomination Committee ]. By way of my background, I spent most of my career in new product development, manufacturing and the building of businesses in the health care market derived from these activities. I worked in the U.S. for Baxter Healthcare, where my last position was President of Medical Devices. I have extensive experience in international business, having worked in Europe, the United States and was responsible for all business activities in Asia Pacific for Pall Corporation, where the largest business was in Japan, but the fastest-growing was in China. I believe my experience and background allow me to contribute positively to the Board and to represent you, our shareholders, as Cochlear continues to grow and develop. It's a company I'm very proud to serve and believe with your support, we can continue to bring life-changing medical devices to a greater number of hearing impaired. I thank you for your support.

Okay. Thank you. I now ask that the direct and proxy votes be displayed on the screen. And I intend to vote all available proxies in favor of the resolution. Are there any questions on the motion? Are there any questions?

Yes. Thank you for disclosing the proxies early. And could you please explain why there was a 13% vote against Andrew's reelection? Which of the proxy advisers recommended against? And was this due to tenure concerns? After 13 years of service, why didn't Andrew retire?

The first part to that question is, I believe, is correct. I believe it is a function of tenure and there are some places where they are recommended. Not all shareholders follow those recommendations, but obviously, some do. The second issue is why doesn't Andrew retire. I guess the question is orderly transfer of seniority and also the expert knowledge that is acquired over many years on this Board that is not normal in terms of the global role it plays and the things it does. So I think as everybody is aware, we're transitioning a number of people off the board at the moment. And this is part of an orderly transition process and has the full support of the Board. Are there any other questions?

There are no more questions.

Okay. I'd ask you to please cast your vote on this item. [Voting]

Professor Bruce Robinson, AC is the next director standing for reelection. His background has been set out in the Notice of Meeting. And I now move the motion for the reelection of Professor Robinson, and the motion appears on the screen. We will now hear a prerecording of Bruce speaking to his reelection.

Ladies and gentlemen, thank you very much for your time today. It has been my great honor to represent Cochlear shareholders over the past 4 years, and I hope to be able to do so again. As a researcher and a clinician myself, and in my role as Chair of the Medical Committee, I have focused on 3 main areas during my tenure. The first has been to ensure that our products are safe and effective and that they meet the needs of people with hearing impairment. The second has been to support management to develop the important standard of care document, which was published in the Journal of the American Medical Association this year. This document will lead to broader acceptance of cochlear implantation in the elderly population and establish a global standard of care for people with hearing impairment. And thirdly, I wanted to apply my basic scientific knowledge to support management to stay abreast of the biological and drug approaches to hearing loss, which are being developed to ensure that cochlear implantation technology is not [ gazonked ] by something that we were not aware of. I believe that my experience and expertise complements that of others on the Board, and I remain very committed to Cochlear's goals and mission. Thank you.

Thank you, Bruce. I now ask that the direct and proxy votes be displayed on the screen, and I intend to vote all available proxies in favor of the resolution. Are there any shareholder questions?

There are no shareholder questions.

Okay. Thank you. I'd ask that you please cast your vote on this item. [Voting]

Michael Daniell is the next director standing for reelection. His background has been set out in the Notice of Meeting, and I now move the motion for reelection of Michael Daniell. The motion appears on screen. And we'll now hear a prerecording from Michael speaking to his reelection.

Good morning. Thank you for the opportunity to address you today. I look forward to meeting in person in the future. Late last year, I was honored and privileged to be invited to join the Board of this great Australian company and now offer myself to shareholders for reelection. I have been involved in the medical technology field for more than 40 years and have very much enjoyed being able to contribute, in some way, to the care and outcomes of millions of people around the world. Over much of that time, I have followed the development of Cochlear and have consistently been impressed by the company's purpose, culture and innovative technology. Being able to help so many people to hear and be heard is a wonderful achievement and a great responsibility. I led Fisher & Paykel Healthcare for 25 years, a New Zealand-based medical device company with sales in more than 130 countries. I believe I have a breadth and depth of skills and experience to contribute to the ongoing strategic development and growth of Cochlear. My experience spans a full range of research and development, clinical, regulatory, quality, manufacturing, marketing, international sales and customer and shareholder engagement. More recently, I have extended that experience as a Board member of the Melbourne-based Medical Research Commercialisation Fund and as Chair of the New Zealand Medical Technology Center of Research Excellence. I'm also a member of the Council of the University of Auckland; and a nonexecutive director of Fisher & Paykel Healthcare; as well as Tait International, a mobile radio communications company. Of course, the ongoing COVID pandemic presents unique challenges, which none of us have previously experienced. However, over the course of my career, I have been through some difficult economic cycles and complex events and believe that I am well equipped, as are my fellow Board members, to support the very capable Cochlear team as we navigate through this. Integrity, excellent governance and innovation to support our mission are fundamental to our ongoing success. With your support, I look forward to being able to contribute to the achievements of this exceptional company and to creating value for you, our shareholders. Thank you.

Okay. Thank you, Michael. I now ask that the direct and proxy votes be displayed on the screen, and I intend to vote all available proxies in favor of the resolution. Are there any shareholder questions?

There are no shareholder questions.

I note there are no shareholder questions. Thank you very much. Please, I'd ask that you please cast your vote now on this item. [Voting]

The next item of business is to vote on the election of a nonBoard-endorsed external nominee, Stephen Mayne, as a director. His background has been set out in the notice of meeting. I now move the motion for the election of Stephen Mayne. The motion appears on screen, and we will now hear a prerecording of Stephen speaking to his election.

Thanks for the opportunity to address the shareholders, chair. I'm a 51-year-old Walkley award-winning business journalist and shareholder advocate, who spent much of the past 20 years pushing hard to improve governance at public companies whilst also advocating for the fair treatment of retail shareholders, particularly in capital raisings. What Cochlear did with its $1.1 billion capital raising this year was one of the worst examples I've seen of directors using their Board discretion to needlessly dilute retail shareholders as a class. The $880 million placement at $140 in March was unnecessarily large and overly discounted by 16.7% to the previous close of $168. Shareholders didn't need to waste almost $20 million having it underwritten by JPMorgan when the Board could have simply launched a competitive auction through a book build and sold the stock to highest bidders. The institutional placement was bad, but then the share purchase plan which followed was even worse because the Board discouraged participation by unfairly capping the amount to be raised at just $50 million, equivalent to only 5.6% of the $880 million placement. If all 36,724 of Cochlear's eligible retail shareholders had taken up the full $30,000 SPP offer, they would have raised $1.1 billion, but the directors only set aside 4.5% of this amount. Knowing that it was inevitable there would be a massive oversubscription, I formally asked the Board to lift the $50 million SPP cap after the placement announcement but before the SPP documentation was distributed. They ignored this request, thereby suppressing demand. In the end, only 16,651 shareholders applied for a collective $417 million worth of shares, and the Board could have used their discretion to uncap the SPP and accept all applications. Instead, whilst lifting the ridiculous $50 million cap to $230 million, they still imposed a heavy $197 million scale-back, and the funds raised represented less than 2% of the current market capitalization of more than $13 billion. Being generous to retail shareholders and fully uncapping the SPP was immaterial to Cochlear's balance sheet, and many other companies in this situation have uncapped their SPPs completely when receiving oversubscriptions. In alphabetical order, this includes the likes of ANZ in 2009 and 2015, Bendigo Bank in 2014, 6 different Charter Hall entities over the past 3 years, Dexus in 2015 and 2019, Transurban in 2019, Westpac in 2019 and WiseTech in 2019. The decision to scale back SPP applications by 47% was particularly egregious because one London-based shareholder, Veritas Asset Management, was allocated an astonishing 34% of the institutional placement or some $300 million worth of stock at $140. Why should a single foreign shareholder, which owned negligible Cochlear shares at the start of 2020, be selectively allocated more shares than all of the 16,651 retail shareholders who attempted to participate in the SPP? The Board has never properly explained this. When Cochlear announced the outcome of the SPP, the Board expressed concern about the small number of high net worth retail shareholders, which includes some of the directors, who received the full $30,000 SPP allocation but were still diluted by the $880 million placement. There was no mention or concern expressed for the 20,073 retail shareholders, 55% of the total, who didn't bother applying at all for the SPP, presumably in part because they feared getting scaled back or weren't properly advised by their brokers, super fund or financial intermediary who handles their affairs. Retail shareholders who don't participate in the money capital raisings are the biggest losers in Australia's anything-goes capital raising system. Their interest in property rights can only be properly protected by a renounceable entitlement offer with a competitive book build at the end to compensate for their lapsed rights. This is what the Board should have done, and I'm seeking your support today to emphasize that point because once Cochlear, which is chaired by ASX Chair, Rick Holliday-Smith, set the tone in early April with a poorly structured placement and SPP capital raising, we saw a flood of other companies follow their lead, causing more than $1 billion of retail shareholder dilution across the market over the past 6 months. We need to stop the practice, and contesting Board positions is the path I've chosen to affect change. Thanks for listening, and I'd be happy to answer any questions.

I now ask that the direct and proxy votes be displayed on the screen, and I intend to vote all available proxies against the resolution. Are there any relevant shareholder questions on the motion?

A question about adding long-term value for shareholders. Stephen says he owns 500 companies in his portfolio. Is it $40,000 in total or $40,000 in each company? You participated in more than 300 capital raisings. Do you sell your current holdings and purchase or just purchase if you have, say, less than $1,000 worth of shares in each company? How are you adding value to shareholders in the long term?

Look, I think given where we are on this matter, that, that conversation is irrelevant. I do understand from a comment that Stephen Mayne has made that he owns 1 share only in the 500 companies, but he might own a few more. But that's the intent, and I don't intend to discuss this anymore on -- at this time. Are there any other questions?

There are no further questions.

Okay. Look, I'd ask you to cast your vote on this item. [Voting]

Okay. We now move to agenda item 5, approval of securities to be granted to the Chief Executive and President under the Cochlear Executive Incentive Plan. The motion appears on screen. As noted in the notice of meeting, while the terms of the plan mean that any exemption to ASX Listing Rule 10.14 applies, the company is seeking approval for the grant of the CEIP long-term incentive awards to the Chief Executive and President as it is the company's practice to do so and for good corporate governance. Voting exclusions apply to this resolution as set out in the notice of meeting. I now ask that the direct and proxy votes be displayed on the screen, and I intend to vote all available proxies in favor of the resolution. Are there any shareholder questions?

There are no shareholder questions.

Okay. Thank you. There are no shareholder questions, so please cast your vote now on this item. [Voting]

The next item is item 6, which is the special resolution to replace the constitution of the company. The motion appears on the screen, and I am tabling a copy of the new constitution, which I have now signed for the purposes of identification, and it is here in front of me. I intend to vote all available proxies in favor of the resolution. Are there any shareholder questions on the motion?

There are no shareholder questions.

Okay. Thank you. I would ask that you please cast your vote on this item. [Voting]

The next item of business is to vote on the special resolution to insert proportional takeover provisions in the proposed constitution. The motion appears on screen, and I now ask that the direct and proxy votes be displayed on the screen, and I intend to vote all available proxies in favor of the resolution. Are there any shareholder questions on this motion?

There are no shareholder questions.

Thank you. Okay. So please cast your vote now on this item. [Voting]

So ladies and gentlemen, that concludes our discussion on the items of business, and I will shortly close the voting system so please ensure that you have cast your vote on all items of business. So you know how much time you've got, I'm giving everyone 2 minutes. So there's another 1.5 minutes. And if it seems slow, 5 minutes, giving them -- no? 5 questions. Okay. So we've got some other questions. Okay. Okay. So while we're waiting, are there any other questions?

Yes. We have 4 additional questions. As a comment, I like the online AGM format as it allows for inclusion of out-of-state investors. Can we please continue to have an online option?

Okay. We will -- we note that, and we will see if we can include that. I mean with the technology changes that are coming through, there may be a possibility for that to happen. Any other?

The next question is with regard to item 3.2. Why wasn't the full notice of meeting sent to shareholders so that as many shareholders as possible could see the full CV of director candidates such as Professor Bruce Robinson? I received a printed copy of the 114-page annual report and don't understand why this wasn't accompanied by the notice of meeting with shareholders instead directed to read this online.

I mean my understanding would be the notice of meeting would have been sent to all shareholders. So is that correct or not?

Mr. Chairman, maybe I can answer that.

Yes, okay.

So there have been some COVID regulations that apply temporarily, which enabled the company to not send out the notice of meeting in hard copy but distribute it electronically, and the company decided to avail itself of that opportunity.

Okay. All right. So the answer there is there was an exemption, which didn't require a hard copy, and we exercised that exemption. So in future, we hope this will not apply. I'd also suggest that all shareholders, if we're still in a COVID environment, pay attention to that. And we should make sure that it is properly spelled out in a clear way in the annual report if, in fact, that's the case next year. So apologize for that.

Next question. My question, because of COVID-19, would Cochlear implement a free cash flow and net debt target so it can focus on financial strength and prepare us for pandemic?

I don't know exactly what that means. The ability -- the liquidity of the company and the cash flow of the company are actually vital and are managed carefully at all times and are maintained in an extremely conservative financial structure. Obviously, free cash flow is a key part of long-term ability to pay dividends. And so we monitor that, and that will be one of the considerations as we look at our dividend policy. So I don't know quite how to unpack that question, but we will take it away and think about it. But I think cash flow and free cash flow and long-term free cash flow are vital items that we track and manage very carefully, too, at all times, and we think they are very important to our long-term value.

The following is a comment. Steve is right. I only applied for $10,000 because I would not receive any more with a $50 million cap. As it turned out, I would have received full $30,000 if I knew the retail cap would have been raised.

Okay. Thank you for that question. The SPP documents did say, I believe, that we could consider increasing the amount of the SPP. And they did say clearly the words that we would be minded to look at the proportional prorated aspects of that, which is exactly what we did. I apologize if that was to your disadvantage.

The next question, could the Chair undertake that a transcript of today's AGM is published on the Cochlear website? The capital raising discussion, including the Chair's prepared remarks, was not included in the formal addresses lodged with the ASX.

What do we normally do, Ray?

The -- Mr. Chairman, the webcast will be displayed on the website. We don't normally provide a transcript because it can be viewed in real time on the website.

Okay. So at the moment, our practice is for the full webcast to be available on the website so anyone can listen to all the comments made. But as a practice, we do not provide a transcript. Are there any other questions?

There's one final comment. The Chairman will not promote online meetings. He does not like shareholder participation, as is evident by the way he answers questions.

Sorry, could you ask that again?

The final is just a comment. The Chairman will not promote online meetings. He does not like shareholder participation, as is evident by the way he answers questions.

Okay. I note that comment. Thank you.

There are no further questions.

There are no further questions. Okay. I now advise that voting is now closed. And as I indicated previously, the poll results will be released to the ASX as soon as they're available. This brings us to the end of the 2020 AGM, and I thank you for your participation. A webcast of the meeting will be made available on our dedicated AGM web page on the Cochlear website, and I now declare the meeting closed. Thank you very much.