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Report on Inquiry into Trading in the Shares of McCollam Printers Limited

SUPPLEMENTARY STATEMENT

1. Relevant parts of a draft of the covering report were sent to affected parties for comment. Following this, Eric Watson sought a meeting with the Commission's quorum. The purpose of this meeting was to seek the Commission's reaction to a proposal by Eric Watson. The Commission decided that any such proposal should be set out in writing to the Commission for consideration. The Commission subsequently received a letter setting out the proposal which Commission Members have considered.

2. The proposal, and the Commission's consideration of it, has not affected the conclusions or comments of the Commission contained in the covering report. It does, however, give rise to some separate comment.

3. Eric Watson stated that he had already supplied detailed submissions to the Commission on areas where he strongly disagreed with many of the observations and factual conclusions in the report. However, he wished to approach the report constructively.

4. To address the concerns raised by the Commission and to bring issues to finality Eric Watson suggested making a proposal:
   1. to establish a fund equalling all profits made on the share dealings covered by the report to be available for claims by any seller of MPL shares, with any unclaimed balance being donated to charity,
   2. to outline steps he has taken and will continue to develop and maintain to clearly delineate his personal holdings in listed securities,
   3. to outline steps he has taken and will continue to develop and maintain to ensure that personnel within the Blue Star group are educated in and mindful of their obligations in trading in listed securities.

   Eric Watson wished to pursue this proposal through dialogue with the Commission.

5. The Commission supports any proposal which provides compensation in appropriate cases without claimants having to endure long, costly and uncertain Court procedures. The Commission also supports any steps taken by market participants to ensure compliance with rules relating to disclosure of interests and to ensure that organisations with which they are associated also are educated in and mindful of their obligations in trading in listed securities.
   The Commission would encourage Eric Watson to progress and develop the proposal set out in his letter to the Commission. This, however, will be a matter for him. It will be up to him to make whatever arrangements he thinks are suitable in the circumstances and for possible claimants to assess any such proposal.

6. While the Commission would regard any such steps, particularly the meeting of claims, as a positive move, the Commission does not have powers to effectively take further steps itself to give effect to such arrangements, to bind affected parties or to alter the nature of its report as a result.

7. It is beyond the scope of this report to explore the role which the Commission could play in such cases given wider powers. These could include, for example, the ability to levy administrative sanctions and penalties, to be able to give binding rulings on administrative matters and to clarify its ability to receive binding undertakings from market participants. As it is, the Commission's powers are, for present purposes, limited to reviewing practices relating to securities and commenting on those practices to any appropriate body.

8. That said, however, the Commission would encourage any appropriate arrangement that Eric Watson wishes to make for dealing with any possible claims in a simple and cost effective manner and which may be acceptable to any possible claimants.

   Euan H Abernethy
   Chairman of the Securities Commission
   18 December 1998

Appendix A

Terms of Reference : McCollam Printers Limited

1. Pursuant to sections 10 and 18 of the Securities Act 1978, the Securities Commission has decided to undertake an inquiry into trading in the previously listed shares of McCollam Printers Limited (MPL). The period of the inquiry is 1 January 1995 down to the time the shares were de-listed in August 1997. The inquiry is being undertaken to consider:
   1. whether any person who was an insider of:
      MPL
      Blue Star Office Technology Limited
      Blue Star Investments Limited
      Blue Star Group Limited
      U.S. Office Products Company,

      may have traded in the shares of MPL while in possession of inside information in respect of one or more of the companies;

   2. the nature of the trades and the facts and circumstances in which the trading was done;

   3. whether any person may at any time have been a substantial security holder of MPL, other than as disclosed in a substantial security holder notice given under and in accordance with the Securities Amendment Act 1988 and the Securities (Substantial Security Holders) Regulations 1989;

   4. whether the Commission should comment on these matters or take any other action.

2. For these purposes the Commission wishes to receive evidence as to:

   1. any trading in the shares of MPL undertaken by:
      Kitchener Nominees Limited
      Seahunter Investments Limited
      Eric J. Watson (both for or on his behalf)
      any related persons
      any other persons;

   2. the takeover in 1997 of MPL by Blue Star Investments Limited including the associated agreement for the sale and purchase of shares in MPL between Steven B. McCollam, the McCollam Family Trust, Hector Lang Investments Limited and Intermezzo New Zealand Holdings Limited (as sellers) and a related company of Blue Star Investments Limited (as buyer);

   3. all other matters material to the inquiry.

   Subject to the Commission's discretion to amend the Terms of Reference as it may consider fit.

   20 March 1998