In 2008, IMB’s Board sought a report from PricewaterhouseCoopers Securities Ltd (PwC Securities) on the relative contribution Shareholder Members have made to the permanent funding of IMB compared to the contribution made by IMB’s other Member classes (Contributed Funding).
PwC Securities provided its report to IMB’s Directors on 4 September 2008 and this report was made available to Members (the 2008 Report). The 2008 Report and the covering Explanatory Memorandum issued by IMB in conjunction with the 2008 report are located under the 2008 Market Announcements on IMB’s website.
In 2012 IMB undertook the first of a series of off-market buybacks of ordinary shares on issue (the Buybacks). As a result, 2.9 million ordinary shares were bought back and cancelled. A second Buyback was undertaken in 2013 with a further 2.1 million ordinary shares bought back and cancelled.
Following the Buybacks, the Board considered it appropriate to understand the effect of the Buybacks on the allocation of Contributed Funding. The Board commissioned PwC Securities to advise on how Buybacks could be incorporated into the Contributed Funding framework developed in 2008. The results of PwC Securities’ review are contained in the report made available to members on 26 June 2014 (the 2014 Report). A further Report was commissioned in 2015 to include the 2015 off-market share buyback completed in March 2015 (the 2015 Report), which was released to Members on 27 August 2015.
The Board has again commissioned PwC Securities to update their report to include the results for the 2015/16 financial year and to incorporate the merger with Sutherland Credit Union Ltd (included as at 1 July 2016). The Board also asked PwC Securities to provide an assessment as to which of the two potential approaches to allocating Contributed Funding (Approach 1 or Approach 2) identified in the 2014 Report and the 2015 Report is more appropriate to the current structure of IMB.
The results of PwC Securities’ update are contained in the attached report (the 2016 Report).
With regard to the assessment of the more appropriate approach for the current structure of IMB, PwC Securities advise that they consider Approach 2 is the more appropriate approach to consider the allocation of Contributed Funding. The Board have considered this assessment and agree with PwC Securities rationale and conclusion.
Following the release of the 2014 Report, when referring to the contributed funding interest pertaining to Shareholder Members, the Board have referenced a mid-point interest which averaged the interest under Approach 1 and Approach 2. As a result of the Board’s view that Approach 2 is the more appropriate approach based on the current operations of IMB and the continuing off-market buyback programme, the Board will now reference only Approach 2. Under Approach 2, the full year dividend for 2015/16 represents 95% of the profit after tax attributed to Shareholder Members.
If you have any questions or comments in relation to these documents, they should be directed to IMB’s Company Secretary at (02) 4298 0211 or cosec@imb.com.au.
